public policy advocacy for the professional engineer                                       April 9, 2013

Last week, several significant legislative bills, which could have an impact on the Engineering Industry, were heard in committee - with one being narrowly approved in its first committee stop.

BACKGROUND:  House Bill 298, sponsored by Representative Mike Hager, was given a two hour hearing in the Regulatory Reform Committee and eventually passed by a very narrow 11-10 vote. This controversial bill would rollback the requirement that NC electric utilities generate a portion of their power supply from alternative energy sources. 

Representative Hager has been a critic of the original legislation (SB 3) in 2007 which he claims subsidizes the renewable energy industry placing an additional cost on the ratepayer.  Critics of his proposal, including many in the renewable energy business, tout the positive impact the original legislation has made citing a RTI International study that found NC’s clean energy and efficiency programs:

  1. Spurred 1.5 billion in project investment statewide between 2007-2012
  2. Contributed an estimated $1.7 billion during the same time period to the gross state product, including secondary effects
  3. Created or retained 21,163 jobs

An analysis of the bill can be found here.

What It Means for Engineers:  Many private consulting engineering projects resulted from the Renewable Energy Portfolio Standards enacted in SB 3. If the rollback provisions in HB 298 are signed into law, the renewable energy sector for engineering projects in NC would suffer as there would no longer be a REP requirement after 2018.  Other surrounding states, like SC where they are now considering legislation modeled after the 2007 NC law, would likely reap the benefits.

NC Could Lose Solar Lead as Neighbors Promote Development
Read Article Here.

ACTION ALERT:  If you are opposed to HB 298 please e-mail your member in the NC House explaining the impact this rollback would have on your business and the renewable energy projects you are working on.  Please copy in your e-mail so a comprehensive summary can be compiled. 

BACKGROUND:  Senate Bill 394 – Lower Tax Rates for a Stronger NC Economy.
This version of tax reform is a bipartisan bill that would make fairly small changes to the tax code, lowering the income tax to 6% (currently ranges from 6-7.75%) and the corporate income tax to the same level (currently 6.9%).  The sales tax base would be expanded to include some services that are not now currently taxed i.e., landscaping, pest control, event tickets, etc.  A tax on professional services is not included in this proposal. The franchise tax would be replaced by a business privilege tax.  The Senate Finance Committee discussed the bill a day after co-chairs Bill Rabon S-Brunswick and Bob Rucho, R-Mecklenburg, introduced bills to create a single personal income tax bracket, which would be lowered to 4 percent over three years, and to lower the corporate tax rate from 6.9 percent to 6 percent, also over three years. Senate leader Phil Berger, R-Rockingham, signed on as a primary sponsor of the bill to lower the personal income tax.

What It Means for Engineers:  It is impossible to know what affect any of these tax proposals will have on your business or on you as an individual as much will depend on your current tax liability, the type of business you have (Corporation, Sole Proprietor, LLC), the services that are ultimately taxed, etc.  Also, the Governor’s office has revealed that they are developing their own tax reform proposal and the House will have legislation as well.  We will continue to monitor this issue to ensure that the tax burden is fairly and equitably shared and that your business interest is represented and heard in this debate.

NC Liens
A new NC Lien Law took effect April 1.  Do you know the new requirements?

Find answers to these questions in Melissa Brumbach's latest blog post where she has previously discussed the ABCs of Lien Laws for those making claims on a project (that is, architects, engineers, contractors, subcontractors, and suppliers) and the 123s of Lien Laws for project owners.  Now, time to learn some new tricks:  enter, the Lien Agent. Read More Here.

Will NC Lien Law Delay Construction Projects?
North Carolina’s new construction lien law went into effect on Monday, and it changes many of the rules required before a construction project can start. Read More Here.

Bills Scheduled for Hearing this Week (subject to change)

Senate Committees:

SB 547 – (Hunt) – Energy Savings Contracting Amendments – Commerce with referral to Finance if approved. Read More Here.

SB 32 – (Hartsell) – Periodic Review and Expiration of Rules – Program Evaluation – Read More Here.

HB 222 – (Moffitt) – Buncombe County/Use Design Build Methods – Engrossed in the House. Scheduled for Senate Local Government – Read More Here.

SB 677 – (Rabon, Rucho) – Corporate Income Tax Reduction and Reform – First hearing, Senate Finance. Read More Here.

SB 163 – (Jackson) – Protect Landowner’s Water Rights – First Hearing, Senate Agriculture/Environment/Natural Resources – Read More Here.

House Committees:

HB 488 – (Moffitt) – Regionalization of Public Utilities – First Hearing, House Finance – Read More Here.

HB 301 – (Arp) – Clarifying Changes – Engineers and Surveyors Laws – Favorable report Regulatory Reform and Referred to Finance. Read More Here.

HB 476 – (Hager) – Rewrite Underground Damage Prevention Act – First Hearing, House Committee on Public Utilities – Read More Here.

In other News:

McCrory Wants Nonprofit to Lead Economic Development
Gov. Pat McCrory proposed Monday the creation of a private nonprofit corporation to spearhead North Carolina's economic development and tourism efforts that he says will make the state become more competitive in the economic development game with other states. Read More Here.

North Carolina environmental agencies are renewing daily air quality forecasts for ozone pollution in the state's metropolitan areas. The state Department of Environment and Natural Resources says the ozone season began Monday. Air quality has been good so far this year due to cool, wet weather. State and local air quality programs issue air quality forecasts for ozone from April through October in the Asheville, Charlotte, Fayetteville, Hickory, Greensboro, Raleigh and Rocky Mount areas. Daily air quality forecasts focus on the pollutant likely to reach the highest level on a given day, which could be ozone or particle pollution. The forecasts are color-coded. Green means good air quality, yellow means moderate quality, orange indicates the air is unhealthy for sensitive groups, and red warns the air is unhealthy for everyone.(THE ASSOCIATED PRESS, 4/01/13).

State Control
Local governments are on the defensive, fighting to keep prized assets and local control against a legislature that appears intent on taking them. Three cities – Charlotte, Asheville and Raleigh – face the loss of signature assets. Senate bills would redraw school board districts in Wake and Guilford counties and change the way members in each are elected. "It has been an amazing array of bills that add up to more restrictions on cities and on urban counties to govern themselves," said Ferrel Guillory, a political analyst at UNC Chapel Hill. Despite having a governor in Republican Pat McCrory who was the longtime mayor of the state's largest city, some GOP members are openly wary of cities. "There is a definite feeling that cities have too much power and want to control everything," said Sen. Tom Apodaca, R-Henderson. "Cities are getting too big and too powerful. We have to look after counties."

The tensions have been marked by three battles:

  1. Lawmakers would transfer control of Charlotte Douglas International Airport – the world's sixth busiest based on takeoffs and landings – from the city to an independent, regional authority. Sen. Bob Rucho, a Matthew Republican, says city officials want control "for their personal agenda rather than what is best for the economic future of airport, the city and the region."
  2. The Senate negated a lease of the former Dorothea Dix hospital property to the city of Raleigh, which plans a park. The bill would require the state to get fair market value. The lease had been approved in December under former Democratic Gov. Beverly Perdue. The measure, now in the House, sparked tense debate. At a hearing, Capitol Broadcasting president and CEO Jim Goodmon said nobody would trust doing business with the state if it breaks the lease.
  3. A long-anticipated bill filed last week would put Asheville's water system under control of a Metropolitan Sewerage District, without compensating the city.

Dozens of other bills would affect cities. House Bill 150, for example, would limit their ability to make homebuilders adhere to design standards. House Bill 79 calls for a constitutional amendment eliminating extraterritorial jurisdiction, a tool that helps cities control development on their borders. Tax reform bills would end revenue sources such as the franchise and business privilege license taxes. That would cost cities $320 million, according to the N.C. League of Municipalities, though bill supporters say it would be balanced by broadening the sales tax base. House Bill 252 would prevent Asheville from using part of its water utility revenues for street repairs that result from installing underground water lines.

All these follow last year's major changes in North Carolina's annexation laws that made it harder for cities to grow through annexation. "The legislature has created a threatening environment for cities, forcing cities to legitimize and justify their role in North Carolina and its economy," said Esther Manheimer, vice mayor of Asheville and a former legislative attorney. "Past legislatures have understood the role of cities in the overall health of the state, and that was never questioned." In the legislative auditorium last week, public officials from around the state gathered for Town Hall Day, organized by the N.C. League of Municipalities. After listening to Republican Rep. Ruth Samuelson of Charlotte outline issues, councilman Tony Stimatz of Elizabeth City rose. "The impression is (legislators) don't want to let us do our jobs," he said. "You're identifying a genuine tension in our philosophy," Samuelson replied. "On one hand we believe in local government. On the other hand we might be more sensitive to over-reach(ing) at the local level." House Speaker Thom Tillis says the tensions with cities reflect philosophical differences. "A part of the conflict is a different world view of the role of government," he said. "We're putting more power in the hands of the individual property owner."(Jim Morrill, THE CHARLOTTE OBSERVER, 3/31/13).

Renewable Energy
A plan to rollback requirements that North Carolina's electric utilities generate a portion of their power supply from alternative energy sources has cleared a House committee after a debate that saw two of the chamber's more powerful Republicans take different sides of the issue. Rep. Mike Hager, R-Rutherford, the bill's sponsor, said dropping what is known as the renewable energy portfolio will protect consumers and taxpayers, who are footing the bill for the alternative energy industry with subsidies. Rep. Ruth Samuelson, R-Mecklenburg, said the alternative energy industry is bringing jobs and improving the tax base in rural areas of the state. She dismissed the idea of subsidies in a market already controlled by regulated monopolies and state regulators.

The legislation comes six years after North Carolina lawmakers approved the renewable energy requirements. The first of those requirements went into effect in 2012, with power companies required to generate 3 percent of their supply from renewable energy sources and energy efficiency savings. By 2021, the requirements would reach 12.5 percent of the supply. Hager's bill would scale the renewable requirements back to 6 percent, but environmental groups say it essentially caps alternative usage at its current level by redefining what the power companies are allowed to consider.

Members of the House Commerce Committee heard from a variety of solar energy sellers and developers, green energy advocates and farmers who warned repeal of the requirements would damage a burgeoning industry in the state. "We will grow. The question is whether we grow in North Carolina," said Benjamin Schneider of PowerSecure, a Wake Forest energy consulting and solar firm. Tom Butler, a Harnett County hog farmer, said the legislation could mean an end to a hog waste-to-energy project that has been being developed at his farm for the last four years.

A handful of speakers from conservative advocacy groups said economic gains cited by supporters of the renewable energy requirements have come on the backs of ratepayers. "The ratepayer was left in the cold. The person who had to pay the bill was never at the table," said Dallas Woodhouse of Americans for Prosperity. As it is currently assigned, the bill must be approved by three other House committees before a floor vote. (Scott Mooneyham, THE INSIDER, 4/04/13).

NC House Subcommittee Amends, Approves Bill to Eliminate Green-Energy Rules
An N.C. House subcommittee narrowly approved Rep. Mike Hager’s bill that would eliminate the state’s renewable-energy requirements, referring it to full Commerce and Jobs Committee. Read More Here.

Tax Reform
The Senate Finance Committee continued to look at tax reform on Wednesday, hearing an explanation of a bipartisan, comprehensive plan that would lower income tax rates and expand the sales tax base to include some services not currently taxed. Sen. Dan Clodfelter, D-Mecklenburg, one of the bill's sponsors, said the plan is intended as a starting point for debate. "We are amenable to all good ideas," Clodfelter said. The legislation touches on nearly every aspect of the state's taxing structure. It would replace the current three personal income tax brackets with a single, 6-percent rate, while lowering the corporate income tax rate to 6 percent for all businesses. Currently, the top personal income tax rate is 7.75 percent, and the corporate tax rate is 6.9 percent.

Several tax deductions would be eliminated, and the definition of state income would be tied to the federal adjusted gross income. It also would lower the state sales tax rate from 4.75 percent to 4.5 percent, while expanding the base to include some services -- including things like landscaping, pest control and event ticket sales -- not currently taxed. Like legislation sponsored by Sen. Andrew Brock and already presented to the committee, state and local privilege license taxes would be eliminated and changes would be made to the state's franchise tax. The local government's money would be made up by distributing some of the new franchise tax -- called a business privilege tax -- to cities and counties.

Sen. Bill Rabon, R-Brunswick, asked if the bill sponsors had any plans to lower income taxes further over time. Clodfelter responded that they couldn't make the numbers work. The plan is largely revenue neutral, meaning it would neither lower or increase the amount of tax revenue generated. Sen. Fletcher Hartsell, R-Cabarrus, another of the bill's sponsors, said he believed the bill would improve economic activity in the state simply by simplifying the tax code. One critic spoke up at the Wednesday meeting, where no votes were taken. Alexandra Sirota of the N.C. Budget and Tax Center said her analysis showed the bill resulting in a slight tax increase for the bottom 80 percent of taxpayers and decrease for the wealthiest 1 percent of taxpayers. She said the elimination of a progressive income tax would erode over time the ability to pay for schools and health care.

The committee discussed the legislation a day after co-chairs Rabon and Bob Rucho, R-Mecklenburg, introduced bills to create a single personal income tax bracket, which would be lowered to 4 percent over three years, and to lower the corporate tax rate from 6.9 percent to 6 percent, also over three years. Senate leader Phil Berger, R-Rockingham, signed on as a primary sponsor of the bill to lower the personal income tax.(Scott Mooneyham, THE INSIDER, 4/04/13).

Next for NC – Elimination of the Franchise Tax?
RALEIGH — With a welter of tax reform bills already introduced in the General Assembly, and more to come, one proposal by Mocksville Republican Andrew Brock to eliminate the state’s franchise tax is likely to get a hearing. Read More Here.

Environmental Regulations
A new Senate bill would strip away a number of environmental regulations. SB 612 would, among other things, prohibit cities and counties from enacting ordinances that are more stringent than state or federal regulations, eliminate riparian buffer protections that prohibit development on private property along the Neuse River and the Tar-Pamlico River basins, and fast-track some stormwater management system permits. It would also extend water and air quality permits from eight years to 10 years, and allow third parties to contest state regulators' decisions. The primary sponsors are Sen. Harry Brown of Jacksonville, Sen. Brent Jackson of Autryville, and Sen. Andrew Brock of Davie County.(Dome, THE NEWS & OBSERVER, 4/05/13).

Asheville Water
The House has approved a bill stripping the city of Asheville of its ability to use up to 5 percent of water revenues each year for street and sidewalk improvements related to water projects. But the modified version of the measure will allow the city to use $3.65 million in such revenues for 11 projects already in the pipeline. The bill, sponsored by Republican Reps. Tim Moffitt and Nathan Ramsey of Buncombe County and GOP Rep. Chuck McGrady of Henderson County, passed the House 74-40 almost entirely along party lines. The measure now goes to the Senate for consideration. City planners estimate the legislation will cost the city about $1.8 million a year in lost revenues and contribute to a budget deficit in the coming fiscal year estimated at nearly $6 million. Council members and staff blame a raft of new state laws pushed by Republicans, including a bill introduced last month that would hand the city water system over to the Buncombe County Metropolitan Sewerage District. "I think we're experiencing the most radical shift in state policies that I've seen in 30 years here," Councilman Cecil Bothwell said. "If they pass the bills currently submitted, they are going to do serious harm to Asheville and other cities across the state. "I think the game plan is to force city councils to cut services or raise taxes, and then they will run candidates against us blaming us for doing that." Ramsey said the intent of bill approved by the House last week was to prevent the city from diverting water system revenues for other uses. "We're reinvesting the water revenue back in the water system," he said. "That's good policy."(Clarke Morrison, ASHEVILLE CITIZEN-TIMES, 4/04/13).

Charlotte Mayor Sees Inevitable CLT Authority
Anthony Foxx started his first day on the job since declaring he won’t seek re-election by attending a meeting on transit projects. That seemed fitting, since the Charlotte mayor is, according to insiders, being vetted as one of the candidates for transportation secretary in the Obama administration. Read More Here.

Gaston Regional Chamber Steps Up Push For Garden Parkway
The Gaston Regional Chamber has hired a lobbyist and public-relations firm to help it make sure the Garden Parkway toll road will be built. Read More Here.

NC Construction Jobs Trending Upward
North Carolina's construction industry added 1,000 jobs in January and 600 more in February, according to the Associated General Contractors of America. Read More Here.

Officials Make It Clear I-77 Widening Will Happen: With toll lanes
In meeting after meeting in recent months, state and local leaders have said plans are moving forward to widen I-77 north of Charlotte in the next few years by adding toll lanes. Just last week, state House Speaker Thom Tillis (R-Cornelius) told toll-lane opponents at the state capitol that the state’s plan to hire a private company to build and operate high-occupancy toll lanes is happening, and it’s the best option for widening the road soon. Read More Here.

Berger On McCrory’s DOT Ideas:  I’m Keenly Interested
We ran a fairly short Q&A with Senate President Pro Tem Phil Berger this weekend. I left out a whole section on education reform, which I’ll deal with in a separate story, probably this coming weekend.

There was also this, when I asked Sen. Berger what he knows about Gov. Pat McCrory’s hint last week that something big is coming on transportation funding: Read More Here.

NC Can’t Go Toe to Toe with East Coast Neighbors
Halfway into his presentation on “The Future of NC Ports”—the title of the latest community conversation hosted by the Cape Fear Economic Development Council—Jeff Miles, acting executive director of the N.C. State Ports Authority, put into words the authority’s approach to competing with other East Coast ports. Read More Here.

Governor Backs Eliminating Toll Road Mandate
RALEIGH (AP) — Gov. Pat McCrory’s administration supports a bill to eliminate a mandate on North Carolina transportation officials to build toll-road projects in Gaston County, the northern Outer Banks and near Wilmington. Read More Here.

If there are questions or you need additional information, please feel free to contact me at or phone 919-834-1144, ext. 1.


Betsy Bailey
Professional Engineers of North Carolina

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