Counties get defensive

Transportation cost shifting, attacks on property tax base top NCACC watch list for 2008 session

By Jason King
Assistant Communications Director

Like a trip to the dentist’s office, county officials are hoping the 2008 legislative session will be quick and painless.

After scoring wins on Medicaid relief and local-option sales and land transfer taxing authority during the 2007 long session, the Association is shoring up its defense in order to survive attacks on the county property tax base and local autonomy, in particular, this session.

Legislation involving transportation, property tax exemptions, and justice and public safety issues figure to significantly impact county budgets if passed, and the NCACC provided a legislative outlook during its series of six district meetings across the state in April.

Road weary

S1513 gave counties authority to voluntarily participate in various transportation projects, such as construction, improvement and maintenance of roads. Recommendations coming from the 21st Century Transportation Committee, tasked by the Legislature with offering ideas for the 2008 and 2009 sessions to improve transportation systems and find innovative ways of funding transportation needs, could leave counties with little choice but to participate.

Haywood County Chair Larry Ammons welcomes attendees to the April 10 district meeting. (Photo by Jason King)

According to Senior Associate General Counsel Paul Meyer, one of the ideas under consideration by the committee is to eliminate the state’s secondary roads program, taking the $175 million currently used for paving and enhancements of such roads and diverting the funds for larger highway projects. Maintaining the current level of funding on these roads could have a major impact on a county budget, if the county were to voluntarily backfill the state’s failure to live up to their funding commitment.

The impact is more pronounced in rural counties with smaller tax bases. For example, the 982 miles of secondary roads in Rockingham County were budgeted to receive $3.95 million in funding for paving and enhancements in 2007-08. In order to raise $3.95 million, commissioners would be forced to raise the county property tax rate by 6.7 cents. Greene County, with 371 miles of secondary roads, would be looking at a $0.113 increase on the property tax rate to meet the $1.06 million budgeted for 2007-08.

A report for the 2008 session could include recommendations to end transfers from the highway fund, to provide gap funding for toll road and bridge projects statewide, and to improve efficiency at the N.C. Department of Transportation. The 21st Century Transportation Committee has also raised the possibility of a $1.8 billion transportation bond in 2008 – funding that could require a match from local governments.

Two county commissioners hold seats on the committee, but neither is a member of the important financing subcommittee.

The NCACC Intergovernmental Relations Steering Committee has been meeting since February to develop policy points on transportation and will likely present recommendations to the NCACC Board of Directors on May 14.

Putting the brakes on tax breaks

A handful of bills that crossed over from one chamber to the other in the waning days of the long session would further chip away at county revenues by increasing the number of exemptions from the property tax base. Three bills that each overwhelmingly passed in either the House or Senate are in particular a real threat:

S1180 would prevent local governments from enacting Adequate Public Facilities Ordinances that involve fees that developers would pay to finance infrastructure that is necessitated by development. The bill passed the Senate 38-4.

S1309 was amended during the final days of the session, transforming a bill that would change the structure and timing of property tax revaluations into a bill that would provide tax breaks for homebuilders and owners of low-income properties. The bill passed the Senate 42-5.

“[Homebuilders] argue that it’s not fair to tax them on the increasing values that take place in the property they own while they are developing it,” said General Counsel Jim Blackburn. “A lot of the increase in the value of the property that you tax is this kind of property.” Forsyth County Tax Assessor Pete Rodda has pegged the cost of the amendment at $90 million for counties statewide.

Owners of low-income properties, where rentals are limited, already receive tax credits from investing in the low-income properties, Blackburn said.

H1889 would allow land that is preserved for wildlife to be taxed in the same manner that working farms are taxed – at present-use value, rather than fair market value. The bill passed the House 93-22. In effect, the bill would allow farmers to stop farming their land and still receive the same property tax break they would receive operating a working farm.

The attack on the property tax is not inclusive to North Carolina, either. NCACC Executive Director David F. Thompson warned that the passage of a recent property tax relief initiative in Florida could be a national trend on “property tax reform.” In a statewide ballot referendum on Jan. 29, Floridians overwhelmingly passed a change to the state’s homestead exemption that basically cut property taxes by $240 per household.

State budget actions from 2007 linger

Intergovernmental Relations Director Rebecca Troutman said that while North Carolina’s economy is better off than most states, state projections for 5 percent growth in revenues are high, meaning the state’s 2007-09 biennium budget will likely need to be tweaked. That opens the door for potential “nickel and diming” of counties, such as requiring counties to fund state telephone and data systems – included in the budget provisions in 2007.

Orange County Commissioner Moses Carey was among county officials attending the April 2 district meeting in Wake County. (Photo by Jason King)

The NCACC and Administrative Office of the Courts (AOC) are working together to overturn that provision, which shifts the cost of installation and maintenance of court telephone and data systems from the state to counties. AOC has developed a strategic plan to install and maintain Voice over Internet Protocol (VoIP) systems in all county courthouses – and has funds to implement the plan.

AOC would like all county courthouses to operate off of hubs in Mecklenburg and Wake counties, and recently upgraded and installed hub operations in Mecklenburg County at a cost of $1.5 million. Deputy Director Patrice Roesler said it is possible that legislators misunderstood that the cost would be similar in all counties (resulting in a total cost of $150 million) during budget deliberations and decided to shift the cost. She said she hoped that educating legislators on the real costs, which are significantly less, and on the advantages of a unified, statewide telephone and data system would lead to the provision’s undoing.

Two important state-funded county programs that were not included in the continuation budget during the 2007 session are currently under review. Because funding was not guaranteed past the end of the 2007-08 fiscal year, counties are concerned with losing key staff for their Juvenile Crime Prevention Councils (JCPC) and Criminal Justice Partnership Programs (CJPP).

Roesler reported that continuation evaluations of the JCPC programs have been somewhat favorable, though lawmakers have expressed concerns on funding priorities – spending more money on at-risk youths than court adjudicated youths – and the state funding formula for counties. Legislators are also examining the types of programs funded through CJPPs. Evaluations on both programs were scheduled to be presented to legislative committees in mid-April.

Headlines grab lawmakers’ attention

Mental health reform is again a priority issue following a recent series of articles in The News & Observer of Raleigh that detail the failures of mental health provisions. According to Roesler, two of the state’s four working psychiatric hospitals have lost federal certification and Medicaid dollars, resulting in a major cost for the state, something officials are working to correct. Legislators also have their eye on a shortage of psychiatric social workers and nurses in the hospitals, as well as high staff turnover in general.

At the community level, legislators are concerned with the provision of crisis care as well as provider stability and quality. Roesler said a push is afoot to have local hospitals dedicate beds for crisis care so that patients do not have to enter short-term stays at state hospitals.

Three work groups are helping Department of Health and Human Services Secretary Dempsey Benton develop recommendations for mental health reform. A Crisis Services work group, which includes county representation from Catawba Commissioner Barbara Beatty, released recommendations on stabilizing community crisis services to the governor April 1. Recommendations include stationing 30 state-funded psychiatrists across the state and increasing the reimbursement rate for hospital beds and the number of mobile crisis units.

Roesler also reported the new psychiatric hospital in Granville County is unlikely to open in July as originally scheduled.

The murders of a Duke University graduate student and the student body president at UNC-Chapel Hill have also produced media and public backlash over the handling of probation cases. According to Roesler, lawmakers will likely look at ways of reducing the caseloads for probation officers.

Caseloads should number less than 60 but are typically running in the 60-90 case range, she said.