Our Informer

The General Assembly has approved a three-cents increase for the hotels-motels occupancy tax in Burke County, bringing the total to six cents. Revenue from the assessment will be divided with 45 per cent going to Morganton, 35 per cent to Burke County and 25 per cent to Valdese. According to the bill, of the first three per cent, two-thirds must promote travel and tourism in Burke County and the other third spent for “tourism-related expenditures in Burke County.”

In many other counties across the state, occupancy tax funds are used to support performing arts centers, museums and other entities that can be interpreted as tourism-related. This could include the Morganton auditorium, which has attracted national touring shows.

The Hickory-Conover Tourism Development Authority receives revenue from a five-cents levy on hotel and motel rooms. Part of the money is used to pay debt service for the convention center and the balance for the Hickory Convention and Visitors Bureau.
Proponents of a performance center in Hickory have talked about possible revenue from the occupancy tax or a prepared meal tax collected from restaurant patrons.

PAYING FOR THE FUTURE: Counties in the Hickory Metro area have raised taxes or dipped into reserves to continue public services. Catawba County taxpayers will see a six cents increase on the ad valorem rate—boosting it to 53 cents per $100. This is still far lower than the 68 cents for Wake County and comparable rates for urban counties.

Proponents for lower taxes argue that businesses are attracted to areas with low taxes. But the growth rate for Wake, Mecklenburg, Buncombe and other urban areas far exceeds that for Hickory and Catawba County. Those areas with higher rates invest more heavily in education, transportation, recreation and other services that appeal to employees of 21st century companies. The Hickory area has depended on the philanthropy of a shrinking pool of donors. The SALT block is an example. More public support will be needed if the current quality of life is maintained.

SHELL GAME: County commissioners have faced a huge uncertainty as they prepared budgets for 2007-08. Medicaid. Promises of relief out of Raleigh have not materialized as House and Senate conferees have tried to hammer out a state budget.

How much should counties continue to budget for rising Medicaid costs that in some poor counties exceed expenditures for education. And will counties have traditional revenue—i.e. sales taxes—to pay for healthcare for the needy? Maybe some of the answers are emerging.

House and Senate negotiators have now agreed to continue the quarter of a cent sales tax levy that the Senate wanted to retire. That revenue would be used by the state to pay for the counties’ share of Medicaid. Now the plan does not involve a swap—state withholding the counties’ share in return for authorization to levy a one-cent sales tax at the local level. This year, the counties share of Medicaid is around $500 million. But that figure will grow. Also, withholding taxes from counties would penalize the wealthier ones where a smaller percent of the population qualifies for Medicaid.

In the Legislature, plans can change within the hour. But some form of Medicaid relief from the state coffers is in the works.

CLOSING TIME: Members of the Legislature and staff persons now are looking for signs of adjournment. In some pools, the money is on dates between August 1 and September 1. The Senate rather reluctantly approved a House-sponsored continuing resolution that authorizes the state to operate at current levels until August 1, meaning a budget should be adopted before August. The July 4 observance will delay negotiations for a few days. The House is scheduled to work over the weekend and the Senate planned to be in session on July 4.

YOUR THOUGHTS: Comments and responses from readers of the Informer are welcome. You are invited to join in the discussion. Inform provides professional lobbying services for clients and covers the activities of the General Assembly.

Several hundred people—Democrats and Republicans—gathered in Hiddenite last week for an old-fashion barbecue and chicken rally for State Rep. Ray Warren. The $50-a-person event attracted supporters from Alexander and Catawba Counties, along with House Speaker Joe Hackney, House Majority Leader Hugh Holliman, and several Democratic legislators throughout western North Carolina.

Among those in the audience was former Rep. Charles Preston of Conover, who has been a Republican activist. He resides in a district represented by GOP Rep. Mark Hilton who has announced he will be participating in a campaign to elect Mark Hollo who was unseated by Warren in 2006. He faces a challenge.

With the full support of the House leadership, Warren has introduced over 100 bills this year. Among them are bills to give $600,000 for operation of the engineering center in Hickory, $250,000 for a seamless industry laboratory at the Hosiery Technology Center, a one-cent local option sales tax for Catawba and Alexander Counties, and a $25,000 exemption on property tax assessments for people over 65 years of age.

Warren is the first Democrat to represent Alexander County and Hickory in three decades. Speaker Hackney noted the benefits to citizens of Alexander and Catawba Counties. Appearing on the program with Hackney was Catawba County Democratic Party Vice Chairman C. Jane Johnson.

ONE MISSING: Some 49 of the 50 state senators traveled by chartered bus to Dare County to attend the funeral of Mrs. Marc Basnight, wife of the Senate President. Also attending were Gov. Mike Easley, Lt. Gov. Beverly Perdue and other state officials. Sen. Austin Allran reportedly explained that a temporary leg injury prevented him for attending.

MEDICAID AND BUDGET: It seems everyone in Raleigh has a plan for the state to take over all costs related to Medicaid. At present, counties pay 15 per cent of their costs, amounting to $500 million a year. In some counties, more than 40 per cent of the residents qualify for the program which provides healthcare for low income families.

Every plan has counties giving up some revenue rebated from the state, including a quarter per cent of sales tax. One plan would also have the state retain corporate income tax now dedicated to school construction, but would give counties a menu of revenue options including a land transfer tax and sales tax. The N.C. School Boards Assn. has opposed the corporate tax feature and the N.C. Realtors Assn. is spending hundreds of thousands of dollars to fight the land transfer tax.

CASH FLOW SURPRISE: Tax collections in North Carolina have produced a $256 million surplus. That’s the good news that was announced last week. But most of that money is non-recurring revenue, according to legislative economist David Crotts. In the past, most non-recurring has been earmarked for the state savings account known as the “Rainy Day Fund.”

The Senate version of the proposed 2007-08 budget would reduce the House version by $500 million through reduction of the corporate income tax on wealthiest taxpayers and a sunset on a half-cent sales tax. House appropriation chairs and the leadership are opposing the tax sunsets, arguing education priorities depend more funding. The House has offered a compromise to go along with income tax cut, but the Senate negotiators are standing firm.

WATER BASIN TRANSFERS: House Speaker Joe Hackney has said a bill putting tighter controls on Interbasin Water Transfers will be approved in the waning days of the current session. Authorization by a state commission to allow Concord to pull 10 million gallons of water a day from the Catawba River inflamed municipal and county leaders in the Catawba Basin. Concord actually lies within the Yadkin River Basin. News that Concord had recruited a water park operation which demands a lot water added to the furor. South Carolina officials are pursuing court proceedings.

The 2007-2008 spending plan for North Carolina government agencies is coming together as House and Senate conferees iron out their differences. The first step for the $20 billion package was agreement on spending targets which is broken down as follows: education, $11,121,244,657; health and human services (including Medicaid), $4,535,809,879; justice and public safety, $2,037,210,134; general government (including cultural resources, capital improvements) $424,590,451; and natural and economic resources (agriculture, commerce, environment), $526,879,953. Some $500 million also is earmarked for savings—the rainy day fund.

When the Senate version of the budget was rolled out in late May, it appeared that differences would keep lawmakers in session until Labor Day. But that may not happen, as agreements among subcommittees are falling into place quicker than expected.

AREA ISSUES: House and Senate conferees have approved $100,000 for a new laboratory at the Hosiery Technology Center which also gets $500,000 from the recurring budget for operations. Rep. Ray Warren has pushed the hosiery appropriation with help from the House leadership.

While the $600,000 annual appropriations for the Hickory Engineering Center was omitted from the Senate budget, it is expected conferees will reinstate the item. Representatives and senators have informally agreed this should be included. Rep. Phil Haire of Waynesville, a senior chair, has Western Carolina University in his district. WCU will have a leading roll with CVCC in the staffing of the center.

Some legislators have taken note of the fact that the engineering center would represent the first presence of a UNC entity in the Unifour region.

BUT HOW DO WE PAY FOR IT ALL? While the spending plan comes together, putting together a revenue program is still a long way off. The Senate plan eliminates a half cent off the sales tax and reduces the income tax rate for wealthiest taxpayers by a quarter of a percent (strongly supported by Republicans). This create a $500 million budget hole and Gov. Mike Easley who has veto power is not happy.

In the meantime, Senate and House leaders are working on concepts to take Medicaid costs off the backs of counties. Sen. Tony Rand has been playing with a half-cent swap—withholding half cent of the sales tax levy rebated to counties in return for counties having the authority to levy a local half-cent assessment. An issue is how to hold cities harmless.

Legislators are being reminded that an overhaul of the state revenue system is long overdue. But somehow the money to run the state must come from somewhere. There is a growing perception in Raleigh that more local-level initiatives must be in the future, with a list of options.

LAND TRANSFER TAX: Legislators are looking seriously—very seriously—at a land transfer tax for counties. Realtors are spending hundreds of thousands of dollars to oppose such a tax, arguing that it will slow down development. But Rep. Bill Owens, chairman of the powerful House Rules Committee and an Elizabeth City developer, says such fears are ungrounded.

Owens says he vigorously fought a land transfer tax for Pasquotank, his home county. But he says he was wrong. Because of the revenue, property taxes have been reduced.

The land transfer tax is a one-time assessment when property is sold. If you don’t sell your home you don’t pay the tax. With lower property taxes, there is an incentive for new businesses.

Veteran legislators think that local voters will reject a land transfer tax on first pass. But when the option carefully is thought out, and property taxes continue to climb, the transfer tax will become an attractive option.

Rep. Debbie Clary has announced she will be running for a seat in the N.C. Senate. The six-term House Republican from Cleveland County has been a strong pro-business advocate and was part of the inner circle of former Co-Speaker Richard Morgan. As a result, she was co-chair of the House Appropriations Committee in 2002-03.

On Wednesday, Rep. Clary met with Senate GOP leaders Phil Berger and Tom Apodaco to confirm she will be a candidate. “You’re our girl,” Apodaco was quoted as saying.
“No…I’m your Senate candidate,” Clary replied.

HICKORY A PAWN?: The Senate version of the state budget is not kind to Hickory. Omitted were House appropriations of $1.2 million for the Western Carolina Engineering Center and $225,000 for the new seamless industry laboratory at the Hosiery Technology Center. Still, Sen. Austin Allran of Hickory joined the majority of Senate Republicans to approve the budget. This is the first time in many years that Allran has endorsed the budget. (Republicans liked the elimination of a quarter cent on the sales tax and a reduction of top-level income tax from 8 to 7.75 percent.)

But the appropriations are not buried forever. Senate and House conferees must hammer out a state budget that is acceptable to both Chambers. Top Senate and House leaders have said they would respond to initiatives to have the engineering center and hosiery laboratory appropriations restored. Also, the new version could include funds for the Textile Technology Center in Belmont.

KEY ROLE FOR WARREN?: Insiders say Rep. Ray Warren who represents Hickory and Alexander County could be a House conferee. In such a role, Democrat Warren could have enough clout to have the funds for the technology centers restored.

Warren also has a bigger challenge: to restore a large prison facility that would bring 225 jobs to Alexander County. At the last minute, the Senate appropriations committee approved an amendment that would move the prison to Tabor City, home of powerful Commerce Chairman R.C. Soles.

Warren and Rep. Walter Church are the lone Democrats from the Hickory Metro area and they have the ear of House Speaker Joe Hackney. Senate President Pro-Tem Marc Basnight and Speaker Hackney have continuous dialogue. This bodes well for Warren in budget negotiations.

FUZZY PICTURE: The City of Morganton was among the first cities to offer cable television services to its citizens. But now many other cities are looking at cable and broadband computer services as part of their programs. The private sector has taken notice and has rallied behind a bill sponsored by Rep. Drew Saunders, Mecklenburg Democrat, that would make cities adhere to some of the same issues faced by private cable providers.

Under House Bill 1587, cities would be required to factor in tax expenses even though they would pay no taxes. They would have to have a business plan that requires a profit within four years. Two public hearings would be mandated. The cities would be required to offer same terms and conditions as offered to local government-owned communications providers access to private communication service providers (their competitors) on a first come-first served basis to rights-of-way, utility poles, conduits and other distribution services of local government.

Cities such as Morganton that already provide cable services would not be subject to the new rules.

The debate before the House Utilities Committee recently featured some strong comments from the cable industry and the League of Municipalities which oppose the regulations. The industry argues that cities have an unfair advantage because they can underwrite losses with funds from other government entities The bill is supported by the North Carolina Chamber (formerly NCCBI).

Opponents, including Bill Thornburg, mayor of Mooresville, said private companies are not willing to provide services in low-income or sparsely-populated areas—especially with broadband services. “This bill is a pig with lipstick on it,” said Thornburg.
Further debate is expected to be heard in the future.