Presentation for Winter 2014 NCLM Legislative Update, presented during Winter 2014 NCLGBA Conference on December 10, 2014.

1. Legislative Update
NCLGBA Winter Conference
Pinehurst, NC
Wednesday, December 10, 2014
Chris Nida
Director of Research & Policy Analysis
N.C. League of Municipalities

2. Agenda
• 2014 Wrap-Up
• Election Results
• Looking Ahead: 2015
• Upcoming Events
• Questions & Discussion
2

3. 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
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4. 2014 Wrap-Up

5. 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

6. 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

7. 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

8. 2014 Legislative Issues

9. 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
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10. 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

11. 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 Changes
contains extension of credits similar to Governor’s
proposal
– HB 1224 Local Sales Tax Options/Econ. Devpt. Changes
contains 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
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12. 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
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13. HB
1224
JMAC
JDIG
Catalyst
Fund
Local
Sales Tax
Option
UI
Confidentiality
Technical
Changes
Crowd
Funding
Historic
Rehab
Study

14. Election Wrap-Up

15. 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)

16. 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

17. 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

18. 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. Bumcombe
County also voted for Hagan in the US Senate
election.

19. 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

20. 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

21. Election Wrap-Up
Rep. Tim Moore
Speaker-Elect
Rep. Mike Hager
Majority Leader
Rep. Skip Stam
Speaker Pro Tem
Rep. David Lewis
House Rules Chair

22. 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.”

23. 2015 Legislative Preview

24. 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
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25. FY14-15 Forecast
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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

26. 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
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27. 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
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28. 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
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29. 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?
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30. 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
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31. 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
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32. 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
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33. 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
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34. Upcoming Events

35. 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
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36. Questions and Discussion?
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Chris Nida
Director of Research & Policy Analysis
cnida@nclm.org
O: 919-715-3945 M: 919-609-8671