IN PRINT – Exile on Jones Street: Creatures of the state

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by Kirk Ross

Traditionally, the relationship of the legislature and local governments is one of the more dynamic tensions of government.

Like just about everything else under the Carolina skies, the cities and towns of North Carolina, even those that preceded the republic, are officially creatures of the state. And they are creatures of a state where the legislature rules and where mucking about in the affairs of local governments is a time-honored pastime of the members of the General Assembly.

The crafting of local bills and statewide legislation that affects specific localities is practically an art form on Jones Street. It’s how favors are dealt and scores settled. And the extent to which locals can regulate various enterprises is an almost endless battle.

In the past few years, as an unprecedented wave of newcomers were sworn in and power shifted in the legislature from an urban-rural coalition to a majority dominated by reps from suburban-exurban districts, there’s been a concerted effort to rewrite the powers of local governments.

Part of that is the result of the anti-regulatory zeal of the leadership, which has tried an array of strategies to reduce environmental regulation, especially at the local levels.

Just as there’s been an attempt to identify and roll back state regulations found to be more stringent than federal regs, legislators have sought to prevent cities and counties from enacting ordinances more stringent than the state.

That’s proved to be a difficult sale to make, even in this era of deregulation. Last session, an attempt to pass so-called pre-emption legislation failed, but the General Assembly did agree to study it further and approved a moratorium of sorts on local environmental regulations requiring that any ordinances or environmental rules must receive a 100 percent vote of the local elected body.

Last week, a subcommittee of the legislature’s Environmental Review Commission put forward legislation lifting the moratorium, delivering an unexpected win to local governments.

Subcommittee co-chair Rep. Chuck McGrady (R-Henderson) said the law passed last year had too many unintended consequences, affecting appearance ordinances and even hunting regulations.

Erin Wynia, a policy analyst for the North Carolina League of Municipalities, said it was clear when the law was drafted last year that it went too far.

“It’s a really broad provision,” Wynia said. The result, she said, was that it delayed actions by local boards in areas the law never intended. The proposed legislation would drop the moratorium, allowing, for now, counties and municipalities to conduct business pretty much.

But that doesn’t mean the issue is settled — not as long as it remains a top interest of the homebuilder and real estate lobbies.

Wynia said she would not be surprised if some other effort is launched along the same lines.

“That can happen in almost any session,” she said.

But as was evidenced in the last battle, drafting a bill that fits the widely-varied terrains of the state and doesn’t result in a host of unintended consequences has proven a high hurdle.

Other potential short session legislation on local governments’ radar include a reform of the state’s privilege license tax, a sensitive maneuver given that the tax is one of only two sources of revenue for local governments.

Over the years, special exemptions, caps and other tinkerings by the legislature have created a not-so-rational system.

New legislation expected in the short session seeks to modernize the privilege-license laws, but whenever the General Assembly pops the hood on the revenue engine, a lot of mischief can happen.

The way cities use the taxes varies widely, as will the effects. If, for instance, the legislature drops the ability of cities to levy a tax based on retail stores’ gross receipts and limits them to a flat fee, it could have a big impact in places that have adopted a gross receipts-based tax.

Looking ahead, another major shift in the state policy for local governments could come out of a committee chaired by Rep. Tim Moffitt (R-Asheville) who is working on legislation that could impose strict rules on the use of public enterprise funds, the money generated by utilities operated by local governments.

Moffitt, who last session fought a high-profile battle with the city of Asheville over the use of its fund, wants to take restrictions similar to those placed on Asheville to a state level.

In a recent committee meeting on the subject Moffitt said he would not put forward legislation in the short session, but expects to have a proposal ready for the 2015 long session.

But Moffitt, who appears to be actively pursuing a bid for the House speakership, did put local governments on notice that if they are using their public enterprise funds to shore up other parts of their budgets and not for the actual enterprises that are generating the funds, they can expect an unpleasant reminder that those enterprises, too, are creatures of the state.