Legislative UpdateNCLGBA Winter Conference

Pinehurst, NC

Wednesday, December 10, 2014

Chris Nida

Director of Research & Policy Analysis

N.C. League of Municipalities

Agenda

• 2014 Wrap-Up

• Election Results

• Looking Ahead: 2015

• Upcoming Events

• Questions & Discussion

2

NCLM Government Affairs Team

• Rose Williams, Government Affairs Director (Jan. 5)

• Erin Wynia, Legislative & Regulatory Issues Manager

• Whitney Christensen, Government Affairs Associate

• Scott Mooneyham, Advocacy Communications Strategist

• Chris Nida, Director of Research and Policy Analysis

• Sarah Collins, Regulatory Affairs Associate

• Cara Bridges, Government Affairs Assistant

• Vacant, Grassroots Coordinator

3

2014 Wrap-Up

2014 General Assembly

• Session began with a rapid pace; legislators promised a true “short” session

• As budget negotiations stalled in July, it became a wait-and-see game as bills were displaced and skeleton sessions held

• Most large disagreements were between House and Senate Republicans, not the two parties

5

End of 2014 General Assembly

• Weeks of adjournment speculation and around the clock voting

• House and Senate finally adjourned sine die Wednesday, August 20th

• Were rumors of Governor potentially calling the General Assembly back for a special session; Gov. McCrory has said he likely will not

6

2014 Session By the Numbers

• 2,162 bills filed over biennium

– 411 in 2014

• 468 bills in League tracking system

– 128 from 2014

• 117 bills passed by legislature in 2014

7

2014 Legislative Issues

E-Verify Requirements• Bill passed last session required cities and counties to

obtain affidavits of E-Verify compliance from all entities they do business with

• Led to unanticipated burden upon local government purchasers particularly

• League worked with legislators to clarify statute and have requirement apply only to purchases over a certain dollar threshold

• Clarifying language inserted in HB 369 Criminal Law Changes; bill passed both chambers and signed by Governor Sept. 18

• Went into effect Oct. 1

9

Final Budget Agreement

• Film Tax Credit converted to a grant totaling $10 million; funding levels in Senate proposal were double the amount

• Historic Tax Credit extension not included

– Speaker Tillis said he was “optimistic” during a press conference that credits would be examined as part of a grant program next year

– House Finance Committee later added extension of credits to a separate bill

– Senate adjourned before considering bill

10

Historic Rehabilitation Tax Credits

• After extensive debate in session’s final days, various bills had different historic rehab tax credit positions

– SB 763 Revenue Laws Tech. Changes and Other Changescontains extension of credits similar to Governor’s proposal

– HB 1224 Local Sales Tax Options/Econ. Devpt. Changescontains a study of the tax credits and language allowing local governments to give historic rehab grants

• Unless the House or Senate addresses the credit during a special session, the credits will expire on Jan. 1

11

Final Budget Agreement

• Other budget provisions of note to cities

– Language requiring local governments applying for water or wastewater loans or grants to certify no funds transferred from utility to general fund, except for those “reasonably allocable” to operations

– $1 million for Main Street Solutions program

– Study of development factors used in making county tier designations

– Additional Dept. of Revenue positions to assist in audit requests from local governments and nonprofits

12

HB

1224

JMACJDIG

Catalyst

Fund

Local

Sales Tax

Option

UI Confidentiality

Technical

Changes

Crowd

Funding

Historic

Rehab

Study

Election Wrap-Up

Election Wrap-Up

• As a surprise to many national pundits and pollsters, Tillis (former NC Speaker of the House) won the US Senate seat, defeating incumbent Kay Hagan– Outside money played a major role in the election; campaign

cost approx. $38.48 per vote cast

– His 48.87 percent victory is the lowest in state history

• All NC legislature up for re-election in November

• Republicans held veto-proof majorities in both NC House & Senate– Senate – 34 Republicans; 16 Democrats. Republicans had a net gain of 1

– House – 74 Republicans; 46 Democrats. Republicans had a net loss of 3

• 14 NC legislators ran in the general election unopposed (5 Senators, 9 Representatives)

Election Wrap-Up

• NC HOUSE for 2015-16 biennium:– 74 Republicans (72 needed for supermajority); 46 Democrats

– -3 Republican seats from last election cycle

– 15 new Representatives elected

• NC SENATE for 2015-16 biennium:– 34 Republicans (30 needed for supermajority); 16 Democrats

– +1 Republican seats from last election cycle

– 6 new Senators elected

Election Wrap-Up

• In the Senate, only one incumbent was defeated –Democratic Senator Gene McLaurin (former Rockingham Mayor)

• Four incumbent Republican representatives lost:– Rep. Tim Moffitt (defeated by Brian Turner)

– Rep. Tom Murry (defeated by Cary Mayor Pro-Tem Gale Adcock)

– Rep. Nathan Ramsey (defeated by John Ager)

– Rep. Mike Stone (defeated by Brad Salmon)

• Other tight races – Sen. Chad Barefoot versus Sarah Crawford; John Alexander versus Tom Bradshaw; Rep. Gary Pendleton versus Kim Hanchette; Rep. Jonathan Jordan versus Sue Counts

Election Wrap-Up

• Election results from state races show voter frustration with individual legislators rather than the party:

– Rep. Jonathan Jordan (R) lost Watauga County, while Sen.-elect Tillis won the majority of county’s vote

– Rep. Mike Stone (R) lost Lee County; Tillis won fairly easily

– Sen. Apodaca (R) won about 54% of Buncombe County. The county covers much of Rep. Tim Moffitt’s district, who lost reelection. BumcombeCounty also voted for Hagan in the US Senate election.

Election Wrap-Up

• Just a few bills and study committees impacting cities that were sponsored by incumbents who lost re-election:– HB 773 Local Gov’ts Bldgs/Structures/Inspections – Moffitt

– HB 104 Charlotte Regional Airport Authority – Moffitt

– HB 150 Zoning/Design & Aesthetic Controls – Moffitt

– HB 224 Asheville ETJ and Annexation – Moffitt, Ramsey

– HB 488 Regionalization of Public Utilities – Moffitt, Ramsey

– HB 632 Property Owners Protection Act/Study – Moffitt

– HB 659 County and City Ethics – Moffitt

– HB 708 Study Public Enterprise Systems/Use of Funds – Moffitt, Murry

– HB 814 Study Water & Sewer Service Districts – Moffitt, Stone

– HB 1247 Asheville Regional Airport – Moffitt, Ramsey

Election Wrap-Up“There’s a great movie from a few years back called Mean Girls. It’s about a clique of spoiled, rich elite high school girls who look down on

the other kids and who bully and connive to get their way...We allowed city governments to be North Carolina’s mean girls.”

– Tim Moffitt; Metro Mayors Interview

“City governments are not homeowners’

associations — sometimes some our mayors

forget that. Government bureaucracies and

busybody urban planners with too much time

on their hands shouldn’t be telling private

property owners what color they can paint their

house...” – Tim Moffitt; Metro Mayors Interview

Election Wrap-Up

Rep. Tim MooreSpeaker-Elect

Rep. Mike HagerMajority Leader

Rep. Skip StamSpeaker Pro Tem

Rep. David LewisHouse Rules Chair

Election Wrap-Up

• Get ready – now the Gubernatorial campaign begins!

– Pundits expect a close race between Gov. McCrory and likely candidate Attorney General Roy Cooper; outside spending likely to be a factor again

– Wednesday after election Cooper sent out emails to supporters – “The results at the polls yesterday have strengthened my resolve to make big changes in Raleigh…We must fight every day to ensure we don't give up on the North Carolina we know and love.”

2015 Legislative Preview

FY14-15 Forecast

• General Fund revenue was $149 million below a $6.6 billion target (down 2.2%)

• Sales Tax collections were $64 million above target

– 5.7% baseline growth

• Personal Income collections were down $178 million

• Total Tax revenue down $131 million

Source: NCGA Fiscal Research

24

FY14-15 Forecast

25

Target Actual Target Actual Y/Y Pct.

Net Tax Revenue 2014-15 2014-15 Difference 2013-14 Change

Individual Income $3,377.0 $3,198.7 ($178.3) $3,675.8 -13.0%

Sales and Use $2,087.2 $2,151.0 $63.8 $1,887.3 14.0%

Corporate Income $299.6 $325.1 $25.5 $374.3 -13.1%

Franchise $94.3 $75.5 ($18.8) $185.0 -59.2%

Other Tax Revenue $429.8 $406.7 ($23.1) $422.9 -3.8%

Total Tax Revenue $6,287.8 $6,157.0 ($130.8) $6,545.4 -5.9%

Nontax Revenue & Transfers $327.8 $310.0 ($17.8) $301.9 2.7%

Total General Fund Revenue $6,615.6 $6,467.0 ($148.6) $6,847.3 -5.6%

FISCAL YEAR-TO-DATE (millions)

Source: NCGA Fiscal Research

FY14-15 Forecast

• More Upside Risks than Downside

– Economic Growth strengthens

– Employment gains stabilize

– Company and industry surveys remain mostly positive

– Inflation low• Energy prices –short-term stimulus, long run problem?

– Global demand remains weak, could worsen

– Slack in labor markets limits wage growth

Source: NCGA Fiscal Research

26

FY14-15 Forecast

• Collections are down 2.2% - income tax still underperforming

• Slow start means pressure increases on April 15th

• More upsides than down makes economy less susceptible to mild economic shocks

• First months of fiscal year are too early for prognostications on how the fiscal year will end

Source: NCGA Fiscal Research

27

Privilege License Tax

• Likely to be additional tax reform efforts in 2015

• League goal is to have a replacement revenue method developed by start of 2015 legislative session

• General Assembly may still not act quickly enough that any replacement revenue will be known before FY2015-16 budget development

28

Tax Reform 2.0• Senator Bob Rucho has said he will pursue further tax

reform in 2015

• Stated goals include expansion of the sales tax base and reduction in income tax rates

• Sen. Rucho told League committee he was looking at sales tax distribution between cities and counties

• Could urban/rural issues factor into tax reform?

29

Key Issues for 2015• Privilege license: Continue discussions with your

legislators regarding the privilege license fiscal cliff– Legislators have promised to find a replacement revenue

• Control of municipal utilities– Interim study committee was to be examining transfers between

utility and general funds, among other issues

• Transportation funding– Likely a conversation coming regarding generating increased

revenues for transportation projects in the future

30

Key Issues for 2015

• Ridesharing – currently before Revenue Laws Study Committee

• Pension Issues – 1,000 Hour Rule, rate smoothing

• Historic Tax Credit and Film Tax Credit

• Transportation project prioritization• P4.0 Workgroup to make recommendations to DOT Board

• Legislative tweaks to STI

31

Possible Issues for 2015

• Rental Registration

• Gang injunctions

• Graffiti penalties

• DOT utility relocation

• Small town Powell Bill/STI issues

• Municipal broadband

• Moped insurance

• Electronic notice

32

Tax & Finance Advocacy Goal Proposals

• Local tax system modernization and expansion

• County/city sales tax distribution incentives

• Film & historic rehab tax credit programs

• Municipal payment for services funded through county property tax

• Legalization of electronic notice

• Additional options for delinquent payers of property tax

• Funding for state-level incentive programs

33

Upcoming Events

Upcoming Events

• Wed.-Thurs., Dec. 10-11: Advocacy Goals Conference and Reception, Raleigh

• Wed., Jan. 14, 2015: General Assembly convenes 2015 Session

• Wed. March 18, 2015: Town Hall Day, Raleigh

35

Questions and Discussion?

36

Chris NidaDirector of Research & Policy Analysis

cnida@nclm.org

O: 919-715-3945 M: 919-609-8671