SUMMARY MINUTES OF A MEETING OF THE
CHAPEL HILL TOWN COUNCIL AND THE
ORANGE COUNTY LEGISLATIVE DELEGATION
THURSDAY, MAY 2, 2002, AT 7:30 A.M.
Mayor Kevin Foy called the meeting to order at 7:50 am.
Council members present were Flicka Bateman, Mayor pro tem Pat Evans, Ed Harrison, Mark Kleinschmidt, Bill Strom, Jim Ward and Edith Wiggins.
Council Member Dorothy Verkerk was absent, excused.
Staff members present were Town Manager Cal Horton, Assistant Town Managers Sonna Loewenthal and Flo Miller, Town Attorney Ralph Karpinos, Assistant to the Manager Bill Stockard, Finance Director Jim Baker, Assistant to the Mayor Michelle Lewis, and Acting Town Clerk Vickie Hackler.
Members of the legislative delegation present were Senator Howard Lee, Senator Ellie Kinnaird, Representative Joe Hackney, and Representative Verla Insko.
Others present were Ellis Hankins, Executive Director of the League of Municipalities and Linda Convissor, University Relations Coordinator.
Mayor Foy welcomed those present, and thanked them for attending the meeting.
Issues for Legislative Delegation
Mayor Foy explained the Town’s objectives for the meeting. He expressed concern that the Governor’s withholding of tax revenue is nearly 10% of our revenue, noting that after cutting expenditures, cutting pay raises, and holding the line on other expenses, we are still having a difficult time and are struggling with our budget.
Mayor Foy asked everyone present to introduce themselves, and he called for questions or conversation.
Ellis Hankins said at the appropriate time he had suggestions for how to protect local governments.
Mayor Foy said we would like for Utilities Franchise Taxes not to be escrowed next year. He explained that the uncertainty of the three million dollars escrowed is making it difficult to plan for next year. Mayor Foy stated that some assurance that money would not be seized next year would be a relief. He said a one-half cent sales tax option moved up to this year would be helpful to our Town and would enable us not push this on property owners by raising their taxes so much.
Senator Lee assured the Mayor that they hear our issues, and understand them but they don’t have many options either. He stated that the escrow of funds was done by the Governor, who has the authority to escrow any fund in times of crisis. Senator Lee said they are in negotiation with the Governor’s office, but they do not know what the results will be. He said for those members in the Appropriations Committee, they will not have conversation about revenue enhancement, instead they will focus on spending reductions.
Senator Lee stated that personally, he feels that the final analysis will have to look for creative options and acceleration of a sales tax could be a possibility. Other thoughts will emerge as we go along, he said, and they are very empathetic with municipalities and what they are up against, but this financial grip that is on the State is no joke.
Senator Lee stated that he is very concerned that the State will loose the AAA bond rating and that will have devastating long-term consequences for municipalities. He expressed that it is a priority to save the bond rating, as it affects bond holders now and in the future.
Senator Lee assured that they are working very hard to try to reconcile where we are in relation to municipalities and find options to pursue to have systemic changes in the way we carry on business. He said at this point he cannot do more than say to the Town that our delegation has personally recognized the condition that the local government is in, but the State is in worse condition.
Council Member Kleinschmidt asked what it means to have no possibility of revenue enhancement, and at what level, State or local? Senator Lee replied this is at the State level and the table is open for ideas and input. He said that our leaders are very clear that as of this time we should focus on getting a handle on spending rather than looking for ways to add revenues.
Representative Insko commented that she is on the Appropriations Committee and one of their discussions was a five million dollar cut in Medicaid. She reiterated that there is no focus on revenue right now, but it is very early in the budget process. Representative Insko commented that it is very painful to see programs that have taken years to put together now be completely eliminated only to have to start all over later.
Representative Hackney stated that in terms of the process, the usual process is to focus on spending rather than revenues. He added that the crisis needs to be solved not just with cuts but with new revenue, at least temporarily. Representative Hackney said there were no votes in the House for finding new revenue, but that does not mean there will never be, and ideas are welcome. He invited everyone to attend the short session of the Legislature, stating there was a lack of understanding of how State budget process works, and there is nothing like a crisis to learn. Representative Hackney said there has been inappropriate local criticism of the budget process, and encouraged everyone to come participate and help, that everyone is welcome and help is needed.
Senator Lee said that Representative Hackney made an excellent point in that usually this is done behind closed doors, but this year it is important to have open talks. He stated that you can sit in on all meetings, and make sure you bring ideas with you.
Senator Ellie Kinnaird commented that not raising revenues is very discouraging, and it is hurting our own people. She encouraged everyone to work and see what can be done to convince legislators of what needs to be done, and try to convince them that they need to go a different direction.
Ellis Hankins commented that he had some suggestions. He stated that the General Assembly has a huge problem to solve and he believes that the most crucial thing is to secure the Local Government revenue base. He said his suggestions fall under two categories: reimbursements for previously repealed taxes, and State collected local taxes such as utilities franchise and beer/wine. Mr. Hankins recommended working to secure those sources, and said we know that the budget situation gets worse and worse and it does not look good for next year. He asked our legislators not to reduce local government funds any more than they have already been reduced. Mr. Hankins asked them to walk down the path with us to strengthen State statutes that provide for distribution of funds to these governments, and protect their revenue by restricting the Governor’s authority to withhold funds.
Mr. Hankins said that local government is not a creature of the Executive Branch, but are of the Legislative Branch and it is reasonable for the General Assembly to have input as to how funds are spent and not withheld. Mr. Hankins distributed a resolution that the League is trying to get introduced on how to protect revenue sources. He detailed the drafted proposed Constitutional amendment, and stated that they plan to seek sponsors to introduce the bill to amend statutes with respect to revenue sources, and would appreciate its consideration.
Town Manager Cal Horton commented that the key points have been made. He said they have done the best they can as management to bring the Council a budget that is not devastating to the community, but thee is nothing left. Mr. Horton noted that this year’s budget proposal recommends the largest tax increase in anybody’s memory but it will deliver less to citizens than what they are accustomed to.
Council Member Ward said that the Legislators are saying no revenue increases, but the Leadership’s actions in Raleigh are increasing taxes. He said he is assuming that every town is facing a version of what we are, yet the Legislative delegates are going to say increased revenue is off limits, and not to raise taxes. Chapel Hill is proposing a 10-12 percent tax rate, and that will not even hold the line for us.
Representative Hackney responded that attitude comes from vote counting, it is not philosophical. He said we can assume that the same scenario is being played out not only in North Carolina, but in every other state in the nation. Representative Hackney explained that this is a difficult problem to face because of the magnitude of cuts necessary and because of the impact on local government, university, and school systems. He stated that the Governor says schools will not be affected, but under the present system, that is not possible. Representative Hackney said they will continue to work on it and do the best they can. He said it is not pretty, and they have to work with the views of 170 people from all across a state which is hurting.
Representative Hackney asked how can we increase taxes of workers who are laid off? He said industry is not doing well enough to justify increasing taxes, and reminded those present that conditions across the State differ greatly, that agricultural economy is not doing well, and manufacturing economy not doing well. Representative Hackney said that a fairly mild recession was worsened by the 9/11 events which snowballed the effects of a recession.
Council Member Strom commented to Representative Hackney that he knows from Representative Hackney’s work on the Smart Growth Commission that he is keenly aware of some communities’ desire for power to deal with local issues. He said that we are being double bound by being told that revenues are frozen, but there are no local options for revenue. If vote counting is running the legislature, he asked for comment on why folks would be opposed at this point to giving us increased flexibility. Council Member Strom asked is time not right to do a major push for local options? Representative Hackney answered that vote counting always rules every government.
Council Member Wiggins said she was just about to say that we count votes too.
Representative Insko said she had the same thought, that 170 people are making decisions for local elected officials. She said they are not just making decisions for the State by refusing local options, but they are also making decisions for the local governments as well.
Council Member Strom stated that if a Representative from another county does not want an increase, that is fine, but why would he be opposed to us having one? Representative Insko suggested for him to look at the League, saying that they have good contacts, and not to underestimate the impact you have if you agree on something.
Senator Lee said he doubts if you would find any legislators who are overjoyed about local government taking the hit. He said that once the budget is passed, it is the Governor’s Budget and even though nobody is happy about what he has done, we cannot do anything about it. He said they express some trepidation, and he does not know what kind of chance the League’s proposal has but he will try to get it through.
Ellis Hankins said he has not had previous opportunity to discuss his proposal, and is hoping for consideration and introduction in the Legislature. He said he pushed the Governor’s staff regarding this year’s money, and is looking forward to finding future solutions. Mr. Hankins said he would like the Governor’s support on the proposal and he expects to get that support. He said they completed State-wide meetings and had members of the General Assembly come to speak and, when this proposal was mentioned, and that Senators Rand, Hoyle and Gulley said they wanted to support it.
Representative Hackney asked what is the Governor saying about this year? Mr. Hankins said it is getting worse
Senator Kinnaird said she met with and heard from communities in her jurisdiction and wondered if conservative members who pledge not to raise taxes are meeting with the local governments, and if so, are they receptive to what they hear? Mr. Hankins asked if they are telling our elected officials that the Governor should not hold our money. He said we need to adopt a sound balanced budget
Senator Lee said that a one-half cent sales tax in Charlotte was difficult to get through the Senate. He explained that the local community had asked for it, and still had to fight the battle to get it. Senator Lee said he heard one of the senators say that 2/3 of the Senate would support a tax on liquor, beer, cigarettes, yet that very person has never voted for revenue enhancement, so he was not including himself in that 2/3. He explained how that is what we are up against, that we are preaching to the choir, and they are with the local governments.
Representative Insko said that people have “bad-mouthed” government for so long that we think it is bad and needs to change. She said that we are Government, and people are Government (emphasis added), and need to articulate all roles to make it good. She said there is a movement across the nation to reduce government, and a way to do that is to reduce taxes, not increase them.
At this time Senators Lee and Kinnaird excused themselves, as they had business to attend in Raleigh.
Mr. Horton noted that following along with Mr. Hankins, the language offered by the League would give us some assurance, and if adopted could help us reduce the problem we are facing this year. He said the Attorney’s view is that the tax rate must be set by August 1, but it is preferable to have it set by July 1. Mr. Horton concluded that if this solution could be enacted by June 15 or shortly thereafter, that would encourage us to tell our Council that the tax rate does not have to be so high, and we could provide better compensation for our employees. He said to keep that in mind and please do this in time to make it effective this year.
Mayor Foy said the budget was not the only issue the Town is presenting today. He said we did keep our requests limited, but to try to keep these issues on the front burner if possible. Mayor Foy said that although one issue is a menu of possible local revenue options, we understand the different ways different communities are affected. He said that real estate transfer tax is one we think would be particularly beneficial to this community and will support the League’s request.
Council Member Bateman said that last night several of us in this room were at another meeting which looked at the issue of Latino labor and how dependent our State is, and how after 9/11 the documentation issue is affecting the work force. She said this is a federal issue, but there is power in many voices. Council Member Bateman wondered if any discussion had occurred at the legislative level to unite to get immigration reform and say amnesty is important, because our economy depends on it, and these folks have seen their dream turn into a nightmare.
Representative Insko said she was there too, and they have a process of passing a resolution, but not on those issues. Council Member Bateman asked if they could pass it and send to Congress? Representative Hackney answered that they probably could do that, but he does not remember one previously. He said this subject came up in the aftermath of 9/11 when driver licensing was a big issue, and North Carolina was one of easiest states to get a fraudulent license. He said onerous requirements were placed on the immigrant community to make sure they had some form of ID and a local address prior to receiving a North Carolina license, and concluded that is all we did about it last year.
Representative Insko said she would be glad to check limitations on resolutions. It may not be a practice to do that with decisive issues, she said, and suggested that since it is a federal issue, to call or write Congressman David Price.
Representative Hackney said he was remembering a new book titled Breaking Loose Together. He said earlier versions of immigration were occurring in 1760’s and a lot of the same things were going on then, and said we are all immigrants and need to think about that. Representative Insko said there was a speaker last night talking about facilitating workers and getting access to a legal Social Security Number and supporting agencies who provide that service are at State level.
Council Member Bateman asked Mr. Hankins if the League had any discussion on this issue, or if there was any effort to bring about change. Mr. Hankins said he was not aware of any. Council Member Bateman encouraged him to make that an issue.
Representative Hackney said, as recently reported, there is an agreement on the Smokestack bill. He said to keep our fingers crossed that we have an agreement on that bill that will easily pass the House and Senate for substantial reductions for nitrous oxide and sulfur dioxide over a period of years. Representative Hackney said if we hold what we have now and get through, there will be significant improvement in air quality in this and other North Carolina areas. He said he went to a drafting meeting on this bill, and on the basic principles there were no objections, which is a step forward in that process.
Mayor Foy thanked Representative Hackney and commented that there is much work and effort that we never see and this has been a long time in the making. Representative Hackney said that CP&L and Duke Power and other utilities put the latest version together and the reductions are the same as the one that passed the Senate, and are very significant reductions.
Council Member Strom said that earlier Mayor Foy mentioned housing and community development issues, including a new approach to an old problem in working on housing. Council Member Strom suggested asking for investment tax credits for people in housing construction who are meeting community goals for affordable housing. Also, Council Member Strom said there is a problem that a certain amount of additional staffing appears to be needed to provide adequate enforcement of the State soil erosion and sedimentation regulations.
Council Member Strom said there is only one officer for three counties, and State projects are only inspected once every three months. Representative Hackney said he introduced a bill on that in 1999, and has seen some improvement. He said that sedimentation control is one of the least effective State programs, with recent cuts and planned cuts it will continue to be that way. Representative Hackney said he had heard that the State is thinking about eliminating State officers and letting local governments do their own, but he is opposed to that and our delegation has been fighting it. Council Member Strom said we are particularly vulnerable at the level of construction activity by the University. Representative Hackney said one of the small victories we have had over the years was that DOT does a better job, but not as much as they could do. He gave an example that one of their projects filled up farm ponds and ruined them on the Highway 64 construction project, and it should be controlled better than that. Representative Insko said a tax credit for developers is good idea to look at.
Council Member Ed Harrison said he would like to make a point regarding sedimentation control and enforcement. He said he did a study in the mid eighties on State programs looking for a local component. Council Member Harrison said if local government could fund a program, it was hundreds of times more effective, as the State is burdened by DOT projects alone. He added that the number of inspectors is more like one inspector per 15 counties, and it is not possible to get the effective inspections done.
Mayor Foy thanked everyone for being here today for the discussions.
Representative Insko encouraged everybody to stay in touch through the legislative session about what we are hearing from across the State.
The meeting was adjourned at 8:53 am.