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League Bulletin

June 12, 2015

After weeks of discussion, rumors, and speculation, the Senate on Wednesday unveiled a revised version of its sales tax redistribution plan. That plan was rolled into HB 117 NC Competes Act, which included state-level job incentives funding when it was passed by the House but on the Senate side now includes incentives changes, income tax reductions and revisions, and changes to the state's sales tax system. The latter portion is the part of the bill of most interest to cities and towns. Here is a brief rundown of HB 117 and what it means for North Carolina's municipalities:

What HB 117 Does

  • Alters distribution of sales tax revenue, converting it from the current 75% point of sale/25% per capita distribution to an 80% per capita/20% point of sale distribution over four years;
  • Expands the sales tax base to include installation, repair, and maintenance of tangible personal property as well as veterinary and pet care services;
  • Phases in a reduction of the cap on sales tax refunds that nonprofits receive; and
  • Provides most counties with the authority to levy, by referendum, an additional 1/2-cent in local sales tax, while also placing a cap on the total local sales tax rate at 2.5 cents for all counties but Durham and Orange. None of this additional sales tax would be shared with cities.

What HB 117 Does Not Do

  • Does not convert the locally levied sales tax to a state revenue;
  • Does not make anything besides technical changes to the existing city hold harmless formula;
  • Does not make any changes to the current system that allows counties to choose the formula for distributing sales taxes to municipalities within its borders; and
  • Does not provide cities with any additional revenue options beyond the sales tax.

The League thanks Senators for listening to cities' concerns regarding their initial sales tax proposal and making changes in this version of the bill, particularly in terms of not converting the local sales tax to a state revenue. Thank you to all of the cities that reached out to your legislators and expressed this concern. Your voices were heard.

Estimates produced by legislative staff that detail county-by-county and city-by-city estimates of the effect of this proposal can be found at this link. Those estimates foresee a number of urban and tourist-area counties and cities losing tax revenue as a result of this proposal. The revised plan also does not provide any additional revenue options for cities, while counties are authorized to levy additional sales taxes that are not shared with cities. Please continue to reach out to your legislators and discuss with them the importance of flexible revenue options for cities and towns.

All of the legislative documents related to this proposal can be found here. Please note that the fiscal projections assume a flat statewide growth percentage of 3.5%, so depending on your jurisdiction's typical rate of growth, these estimates may under- or over-estimate the gains and losses you are projected to see as a result of this bill. The far-right column titled "Change From Current Law to Total Potential Revenue" in the "Modify Local Sales Tax Option Distribution Formulas" file will show you your city's projected gain or loss as compared to what you would be projected to receive under current law for each year of the phase-in, assuming a 3.5% growth rate statewide.

Other portions of HB 117 address state-level incentives funding, including developing a separate incentives category for Mecklenburg, Wake, and Durham counties. HB 117 was presented in committee on Wednesday afternoon but was neither discussed nor voted on, so the next steps for the bill are unknown at this time. It may be that some or all of the bill is incorporated into the Senate budget that is expected to be released next week. We will continue to work with legislators on this legislation and we would urge you to reach out to your Senators and Representatives as well. Thank you for your work on this important issue. Please let us know how we can help you. Contact: Chris Nida

After receiving favorable House committee and floor votes earlier this week, SB 25 Zoning/Design & Aesthetic Controls heads to Governor Pat McCrory for his consideration. League members sought reasonable amendments to the measure and appreciated the efforts of Rep. Bill Brawley to add those provisions to the bill. While the League staff spoke in support of those amendments during committee debate, the committee voted not to incorporate the changes after a representative of the N.C. Homebuilders Association spoke in opposition to the proposal. Among other things, those changes would have allowed cities to require building design standards for infill projects in existing neighborhoods that did not have private covenants, thereby protecting the property values of surrounding property owners.

However, House members of both political parties spoke in support of the private property rights of the owner seeking to build. After the 98-17 floor vote, Speaker Tim Moore stated, "This bill is a triumph for property owners of all shapes and sizes, and affirms the General Assembly’s conservative commitment to stand up for limited government." Bill primary sponsor Rep. Nelson Dollar elaborated, stating, "Government does not have the authority to tell homeowners what they can and cannot do aesthetically on properties that they privately own and maintain. Today we were able to return more personal liberties to the people of North Carolina." The Governor has until Sunday, June 21, to take action on the bill.

The Senate gave preliminary approval Thursday to HB 44 Local Government Regulatory Reform 2015, wide-ranging legislation that would affect local government environmental regulation, local zoning and other local regulations. Originally a one-page bill affecting how cities provide notice to owners regarding overgrown vegetation, the bill expanded considerably in a proposed committee substitute before the Senate Agricultural Committee on Wednesday. The revised bill is 18 pages and becomes the Senate’s omnibus package on local government regulatory reform.

Senators included a provision in the new omnibus package that was originally seen in SB 397 - Open & Fair Competition/Water & Wastewater. That provision would prohibit public entities who sought state funding for water, wastewater, or stormwater projects from using their judgment in the selection of piping materials. The League successfully spoke in committee on Wednesday in opposition to this portion of the bill, and as a result, committee members voted to remove the provision. 

The Senate measure also included a provision the League supported that would modernize and clarify the preaudit certification statute to ease compliance without weakening financial controls. Specifically, the provision reflected advances in technology to accommodate credit cards, gas cards, procurement cards, and other electronic means of remitting payment for obligations.

The League will continue to work with legislators to address remaining provisions of concern to municipalities. These include:

  • Section 2. Prohibits local governments from requiring compliance with state regulations that are voluntary.
  • Section 3. Allows an owner of a tract of land lying partly within municipal corporate limits and partly within the county (with more than half of the tract is outside the municipal limits) to choose to apply the county land use planning ordinances to the entire tract instead of the city ordinances that are authorized through G.S. 160A Article 19.
  • Section 5. Extends the permit choice provision to include zoning permits, allowing a permit applicant to choose which version of a rule or ordinance would apply if there is a change between the time the application was submitted and the time the decision on the application is made.
  • Section 12.  Requires a local government to provide notice to property owners and adjacent property owners of “any construction activity” 30 days prior to commencement of that construction, unless the construction is of an emergency nature.  However, “any construction” is not defined and therefore is vague.

The Senate is scheduled to take its final vote on the bill on Monday. Read more here. Contact: Sarah Collins

The Senate Finance Committee held a hearing on a city-supported electronic notice bill Wednesday, though it did not ultimately take a vote on the measure. Because no vote was taken, the Senate's proposed revisions to HB 156 Legal Notices/Require Internet Publication are not available on the N.C. General Assembly website; instead, click here for the proposed bill text. Under this new Senate proposal, counties with a population over 150,000 and the cities within those counties would have the option to publish required legal notices electronically rather than in print publications.

The Senate proposal does retain features of a press industry-supported bill that passed the House earlier this session, including requiring website publication of notices at no additional charge when a governmental entity paid for the print version of the notice, and a discounted rate for subsequent required publications. Without the additions proposed by the Senate to allow governmental units to publish these notices on their own websites, the House version of the bill would continue a monopoly for the press regarding electronic notice while providing little or no financial relief for taxpayers. Senate leadership has not announced when they might bring the bill back before the committee. Contact: Rose Vaughn Williams

Both the House and the Senate signed off on a public safety measure this week that would assist cities in curbing gang activity. SB 60 No-Contact Order/No Expiration contained a provision that would allow time extensions of a legal tool -- a gang nuisance abatement injunction -- when good cause is established by the city. Without this provision, such an injunction would expire after one year. This statutory change was needed because slow court calendars, in some cases, meant that a one-year injunction was not sufficient time to allow resolution of these legal actions. The League membership thanks legislators for supporting this bill, which now moves to the Governor for his consideration. Contact: Erin Wynia

The Senate Transportation Committee this week considered legislation that would create a framework of state regulation for digitally dispatched transportation services like Uber and Lyft. The proposed committee substitute to Senate Bill 541 Regulate Transportation Network Companies now being discussed is the  result of stakeholder discussions. It continues to include original provisions of the bill that would establish permit requirements, grant permitting authority to the N.C. Division of Motor Vehicles, and prevent local governments from regulating these companies.

Also included are provisions regarding insurance requirements and language that gave airports some authority over these companies. The bill was drafted with the assistance of Uber and other stakeholders. Sen. Floyd McKissick stated that the legislation was "based upon that national model." The bill was only in committee for discussion purposes and therefore no vote was taken. Read more here. Contact: Sarah Collins 

The House Finance Committee has approved a controversial de-annexation bill that would remove the homes of 13 residents of the Town of Maggie Valley from its corporate limits. The House committee voted to approve HB 131 Town of Maggie Valley/Deannexation even though the affected property is a long-established annexed area whose annexation was supported by some residents at the time and despite the fact that the town has invested money extending city services to the area. The bill now goes to the full House for consideration. The bill's sponsor, Rep. Michele Presnell, unsuccessfully attempted to have another piece of property de-annexed from Maggie Valley during the last legislative session.
The Senate this week added its plan to restructure the Greensboro City Council to a House bill intended to do the same to the City of Trinity. HB 263 City Elections/Trinity and Greensboro had moved out of the House back in March and initially only would have altered how elections were held in the City of Trinity. Rep. Pat Hurley filed the bill in response to some dissension among local officials, although current Mayor Jesse Hill criticized the measure and urged legislators to allow residents to vote on the changes. The Senate had approved a separate bill, SB 36 Greensboro City Council Changes, which was opposed by Mayor Nancy Vaughn and had little local support. The move this week means that the Greensboro changes now go back before the House, in a second legislative vehicle, with the Trinity changes in tow. The Senate approved the measure in a party-line vote.
A House bill that would have provided some regulatory relief for local government was stripped this week to focus on broader election changes. HB 836 Local Government Regulatory Reform moved out of the House back in April with provisions eliminating some pre-audit requirements and helping cities retain easements in some situations. The revised bill, passed in the Senate this week, focuses on election technological changes and is now entitled, HB 836 Election Modifications. Meanwhile, the pre-audit changes are now being considered by the Senate in the separate HB 44 (see above). HB 836 now goes back to the House for consideration.
The Senate Insurance Committee this week approved legislation requiring that moped owners carry liability insurance. HB 148 Insurance Required for Mopeds has already been approved by the House and is expected to be voted on by the full Senate next week. The legislation follows the approval last year of a requirement that moped owners register the vehicles, a proposal which had been a League Municipal Advocacy Goal.

Governor Pat McCrory signed two bills this week supported by the League.

In addition, legislative action this week also saw the House Finance Committee take up SB 682 Modify Sunset Re: Contingent Audits. This bill would make permanent a prohibition on local governments' use of contingency fee-based audits, which local governments had used to ensure proper valuation of property subject to taxation. Like the Senate, this House committee approved the measure unchanged, and it next moves to the House floor.