SUMMARY OF A JOINT MEETING BETWEEN THE MAYOR AND COUNCIL OF THE TOWN OF CHAPEL HILL, NORTH CAROLINA AND MEMBERS OF THE LOCAL STATE LEGISLATIVE DELEGATION, FRIDAY, FEBRUARY 22, 1991, AT 7:30 A.M.

Mayor Howes called the proceedings to order. Council Members in attendance were Julie Andresen, Joyce Brown, Joe Herzenberg, Nancy Preston, Alan Rimer and Arthur Werner. Also in attendance were State Senator Howard Lee, State Representative Anne Barnes, Orange County Commissioner Verla Insko, Assistant to the Mayor Lisa Price, Town Manager Cal Horton, Assistant Town Managers Sonna Loewenthal and Florentine Miller, and Town Clerk Peter Richardson.

Mayor Howes expressed the Council's appreciation to Senator Lee and Representative Barnes for their attendance at this morning's meeting. Mayor Howes noted that he took great comfort in the local legislative delegation and the good leadership of the State's General Assembly.

Mayor Howes said the primary purpose of the meeting was to identify potential local bills for consideration by the Legislature. He noted that the Council would be meeting with the Orange County Commissioners on March 6th to discuss the proposed impact tax and the establishment of a visitor development authority. At Mayor Howes' request, Mr. Horton briefly reviewed a memorandum outlining possible local bills.

Mr. Horton noted that fire protection funds from the State and reimbursables were at greatest risk of being curtailed. Representative Barnes noted that although some members of the House favored eliminating fire protection funds, it was unlikely that House Speaker Dan Blue would favor this measure. Mayor Howes noted that the fire protection funding was not a giveaway, since the State received valuable fire protection for facilities such as the University of North Carolina at Chapel Hill. He noted that if the funding were not continued, alternate funds would have to be found in the local tax base.

Mayor Howes inquired about the outlook for reimbursables such as intangible taxes. Representative Barnes noted that some members of the legislature opposed continued provision of reimbursables. Representative Barnes stated that Governor Martin appeared to favor a half-cent local sales tax option. Representative Barnes noted that she did not generally care for such an option. Council Member Andresen inquired about the possibility of greater sales tax increases to offset State budget shortfalls. Representative Barnes responded that it would be necessary to raise the sales tax by two cents to offset the anticipated shortfall. Senator Lee added that there would likely be a tough fight for allocations during the upcoming session. He noted that the Senate leadership was unlikely to a local option sales tax. Senator Lee noted that one possible outcome was the continuation of current allocations throughout the current fiscal year. Representative Barnes stated that an attitude of no new taxes appeared to be pervasive in the State Legislature.

Noting the State's current low tobacco tax, Mayor Howes inquired about the likelihood of an increase in this tax. Representative Barnes noted that the State's tobacco tax was the lowest in the nation, one-half cent less than that of neighboring Virginia. Representative Barnes said she had recently drafted a bill proposing a match of Virginia's tobacco tax level. She stated that manufacturer's taxes were not very popular among her fellow legislators. Senator Lee noted that he supported an increased tax on tobacco. He added that he had received a heavy volume of mail from lobbyists opposing the proposed increase in the tax. Senator Lee said that if Representative Barnes' bill moved out of the House, he would support it in the Senate. He noted that the leaders of the General Assembly appeared to be opposed to an increase in the tobacco tax.

Representative noted that a number of lottery proposals were in the embryonic stage. She noted that such a proposal had passed in the Senate last year for the first time ever. She added that some of her constituents appeared to find this alternative to be an increasingly attractive alternative revenue option. Representative Barnes emphasized the need for a State-wide referendum on this proposal. Mayor Howes inquired about the possible revenue impacts from a lottery. Representative Barnes stated that $150 million in revenues were projected in the first year, with revenues expected to gradually decrease after about ten years. She noted that most of these monies would not generally not be used for operating expenses.

Mayor Howes noted that the pressure was quite great to keep local property taxes as low as possible. He expressed hope that the General Assembly would give local governments more flexibility and greater options for local revenues. He inquired about the chance of passage of local admissions and payroll taxes. Representative Barnes and Senator Lee responded that the General Assembly was examining a variety of options for new local revenue sources. Representative Barnes noted that all such proposed new sources would be reviewed by the House Finance Committee. Council Member Andresen expressed her interest in options for an impact tax or admissions/entertainment tax. She expressed her support for putting forward a local bill on these matters during the current session.

Mayor Howes said that the Council would support the League of Municipalities endorsed legislative program. Mayor Howes inquired about the impact of the University's continued opposition to an admissions tax. Senator Lee said he suggested putting the matter forward despite the strong opposition from the University. He added that all new revenue sources would be reviewed by the Senate Finance Committee for possible statewide implications. Senator Lee said he could not offer great hope of passage for this legislation during the current term. Representative Barnes noted that she had heard relatively little about the proposed entertainment tax within the General Assembly. She said that more rural areas would gain little benefit from an entertainment tax. Council Member Andresen inquired whether any new taxes were enjoying a great deal of support. Representative Barnes responded that the concept of new taxes were not very popular.

Mayor Howes noted that it was becoming increasingly difficult to obtain statewide legislation for new revenue sources. Council Member Rimer said the pervasive sentiment in Washington, D.C. appeared to be a trickling down of responsibility to individual states. He inquired whether it was possible to develop a philosophy realizing the long-term fiscal needs of local government. Representative Barnes noted that members of the General Assembly had a great deal of concern for local governments. She cautioned that it was too early to tell what would occur in terms of local government funding.

Mayor Howes stated that a proposed increase in the local vehicle registration fee from $5 to $10 was less onerous than increasing the gasoline tax or other alternatives. Representative Barnes inquired about the pattern of registration fees across the State.

Mr. Horton responded that most communities had fees in the range of $10 to $20, with a general tendency to move fees upward.

Mayor Howes inquired about the availability of a stable funding source for the establishment of the Triangle Transit Authority. Noting that several other communities were seeking similar legislation, Senator Lee suggested drafting a proposed bill for consideration by the Legislature.

Mayor Howes inquired about the feasibility of a $20, rather than $10, vehicle registration fee. Representative Barnes said this would likely meet with a mixed reaction.

Mayor Howes noted that Orange County had proposed the concept of a development impact tax. He noted that this type of tax would be imposed on those generating demands for new services. Mayor Howes said this was counterbalanced by the increased cost of housing.

Council Member Werner inquired about the attractiveness of revenues tied to specific uses, rather than the general fund. Representative Barnes said these types of proposals would be more attractive if they were applied on a statewide basis. Verla Insko noted that the Homebuilder's Association might be inclined to support the concept of impact fees. Representative Barnes suggested that earmarking funds to address existing problems such as affordable housing might make draft legislation somewhat more palatable in the General Assembly.

Mayor Howes noted that the Council would be discussing the concept of a visitor development authority with County officials in the near future. He also noted that current annexation statutes, while a perennial issue in the legislature, tended to favor municipal interests. Senator Lee responded that he had no personal inclination to reduce local annexation authority. He also pledged his willingness to work with League of Municipalities staff to maintain existing annexation statutes. Mayor Howes inquired about the status of recent downzoning bills. Representative Barnes responded that none of the draft bills had reached the floor of the legislature.

Council Member Brown expressed her interest in a possible State or local program concerning bottles. Senator Lee said he also had interest in this proposal. He added that his staff was in the process of drafting such a bill. Senator Lee noted that a public meeting or educational forum on this proposal might be held in the future. He added that any such proposal would likely be defeated in the current session. Representative Barnes noted that a bottle bill was equally unlikely to pass in the House. She expressed hope that the industry would be an instrumental partner in problem solving. Council Member Brown expressed the Council's willingness to assist in any way possible with a draft bottle bill.

Senator Lee said that dialogues like this morning's session allow the legislature to perform groundwork to attain the goals of local government leaders. Repesentative Barnes, noting the importance of this morning's session, expressed the importance of holding local public hearings on proposed legislative matters. She noted that any additional time for the review process would be very helpful. Mayor Howes stated that Council consideration of local bill requests could possibly be moved up by one week in the Council's schedule, from March 25th to March 18th.

Representative Barnes said her principal responsibility in the current term was education matters. She noted that there was currently no consensus around the State in terms of proposed educational reforms.

Senator Lee noted that he had recently introduced legislation to limit terms in the State Legislature. He indicated that he was uncertain of the legislation's chance of passage. Senator Lee added that he was chairing a subcommittee on the provision of driver education in public schools and was serving as a member of the Higher Education Committee. He noted that the committee was considering authority for local State University campuses to raise tuition rates. Senator Lee said that this might necessitate a study of State tuition policies. Senator Lee noted that the current legislative session promised to be exciting and very busy. Mayor Howes inquired whether there was any validity to the notion that the current legislative session might be quite short. Representative Barnes said that many legislators hoped this could occur, since redistricting was occurring in the near future.

Emphasizing the importance of continued clear communications, Mayor Howes thanked Senator Lee, Representative Barnes, and the local legislative delegation for their continued good works.

The meeting concluded at 8:59 a.m.