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Government

Issues Shift From State To Local

By Jenny Callison, posted Sep 12, 2014
Bob Bethel talks with customers at his store Mango Furniture Unlimited, one of the area businesses that will see their tax bill go down because of a recent state law, It’s a change not all local officials are happy about. (Photo by Chris Brehmer)
Bob Bethel is seeing his overhead lift a little. Bethel, owner of Mango Furniture Unlimited in Wilmington’s Landfall Center, is pleased at new state legislation that will eliminate the business privilege tax – also known as the privilege license tax – starting July 1, 2015.

“Any time you can pay less in taxes, that’s good,” he said.

While repeal of the tax, which is levied by local governments on many business operations within their boundaries, represents a bonus for owners, it puts the onus on cities and towns to make up that revenue elsewhere. And it may be part of a trend, suggested by several pieces of legislation approved by the General Assembly, to shift more responsibilities to local government.

The business privilege tax issue is very much on Wilmington mayor Bill Saffo’s mind. He says the tax represents about $1.6 million per year in revenue to the city, and he’s skeptical that legislators will offer replacement revenue sources.

“The governor has made comments about the need to do something and has asked the legislature to come up with alternative sources of revenue, but I haven’t seen anything of that nature. We’ll see what happens during the long session,” Saffo said. “In the meantime, we’ve already adopted our budgets, and Wilmington won’t have $1.6 million to help offset the delivery of services.”

The N.C. League of Municipalities is also monitoring the issue.

“We’re obviously concerned about the pending repeal of the privilege license tax and understand the concerns of our cities,” said Scott Mooneyham, a spokesman for the group. “But the governor has said he will hold the legislature accountable for assessing the issue next year and committing to find replacement revenue sources. We expect legislative leaders to honor that commitment.”

Saffo sees elimination of the tax as another slice at the tax base that supports public services. He points to the General Assembly’s new tax code, which reduces corporate and personal income tax rates.

The mayor also noted the mood among some in Raleigh to eliminate the state income tax altogether.

“If they do away with the income tax, you know what’s going to happen: we’re going to get a flood of retirees moving here,” Saffo said. “But we won’t have the money to provide the level of services they expect...Tax cuts will mean we cut services. Those are the things local governments have to wrestle with.”

Mooneyham sounded a more optimistic note. Several bills in the legislature that would have taken away municipal authority either didn’t pass or were repealed, he said.

As examples, he cited the repeal of a bill that prevented cities from passing environmental ordinances stricter than either the federal or state statutes and the failure of bills that restricted cities’ ability to have tree ordinances or to control urban design and aesthetics.

“I feel that these are instances where the legislature recognized that cities need to be able to exercise power,” Mooneyham said. “The legislature is feeling their way and learning.”

Saffo sees looming problems in other directions, however.

Another critical issue facing North Carolina municipalities, says the mayor, results from the General Assembly’s action to allow cities to take responsibilities for state roads within their boundaries. Saffo sees that decision as a potential unfunded mandate.

“The [transportation] issues we face at the local level continue to grow, and we’re getting no help from anybody,” he said, noting that the city is placing a transportation bond on the November ballot to address critical infrastructure and safety improvements. “If we don’t get that, driving around here is going to be tremendously uncomfortable.”

Saffo isn’t happy with the recent change in the way NCDOT decides which transportation projects to fund.

“The state changed the equity formula [for transportation funding], which dramatically affects the dollars available to eastern and western North Carolina,” Saffo said. “Almost 75 percent of the money is spent in three counties: Wake, Durham and Mecklenberg. We’re literally apportioned 2.9 percent although we’re the eighth largest city in the state.”

Not so, said NCDOT spokesman Steve Abbott. While confirming that the legislature did pass a bill that gave towns “the right to take over state roads in their area” and stating that there is never enough money to address all transportation needs, Abbott said that the state’s new tiered transportation project ranking system is an improvement over the old one.

Explaining that projects can be ranked and assessed on the statewide, regional and district level to ensure that needs all over the state have a shot at funding, Abbott said that decisions on funding are based on “congestion, benefit and safety” and not on politics and cronyism.

“The completion of I-140 in your area is an example” of a priority project, he said.

New Hanover County Board of Commissioners chairman Woody White believes that the new transportation funding formula “will be seen as a tremendous success of the last two legislatures, taking politics and patronage out of the equation.”

Even though counties take on many state authorities at the local level, New Hanover County manager Chris Coudriet is fairly confident, for now, that the state’s counties won’t be asked to take on responsibility for area transportation as well.

“I feel good that the General Assembly will continue to recognize the fact that [counties] have a whole range of mandated responsibilities, and the state and municipalities should stay in the transportation business,” he said.

Todd McGee, a spokesman for the N.C. Association of County Commissioners, agrees.
“One of our top priorities is to ensure that counties do not become involved in transportation responsibilities,” he said. “We have no reason to believe that the legislature is considering a move in that direction, but it’s not something we’re going to forget about.”
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