public policy advocacy for the professional engineer                                      July 3, 2013

Tax Reform
Today, the Senate will likely sign off on its third version of tax reform attempting to work out differences with the House Plan.  What’s not clear is whether they have gone far enough to get agreement with not only the House but also the Governor’s office.

In floor debate, Berger and his fellow Senate Republicans continued to focus on the tax overhaul they believe is needed to improve the state's economy. Democrats, as they have with previous Senate tax proposals, criticized the legislation as primarily a tax break for the wealthy being borne on the backs of the middle class and poor. The Senate plan would continue to cut a significant amount of dollars from the state's revenue stream, $3.3 billion over 5 years. The figure is nearly twice that of the House plan, which would bring in about $1.8 billion less over the same time period. Berger said projected revenue growth would still have the state budgets growing by $600 million a year over the same period of time. Sen. Josh Stein, D-Wake, responded that the amount of growth was only tracking population growth and inflation. "The more people, the more cost," Stein said. Among the provisions in the new Senate plan: a flat personal income tax rate of 5.75 percent in 2014; a standard deduction of $15,000 for married, joint filers and unlimited charitable contribution deductions; a $15,000 cap on mortgage interest deductions and property taxes on real estate; no taxing of Social Security benefits; elimination of the corporate income tax by 2018; and would cap the state gas tax for two years.

The Governor continues to signal a preference for the House’s more modest proposal that proposes less of a reduction in the state’s revenue stream.  While PENC has not taken a position on either tax proposal due to the complications of trying to apply the various scenarios in a standardized way, there is no doubt that the Senate proposal could detrimentally affect the state’s ability to invest in critical infrastructure needs.  Although a budget proposal has yet to be worked out pending an agreement on tax reform, neither chamber proposed much in the way of repair and renovation of our state’s public buildings (including the university system) nor increased investment in critical infrastructure. 

Transportation Update
Additionally, yesterday the Senate voted to cap the state gas tax (scheduled to increase a tenth of a cent on June 30th) for the next two years – effectively reducing the amount of money needed to maintain and expand our state’s transportation infrastructure.  The cap would keep the tax from going above the current rate of 37.5 cents and, in the first year, result in a loss of revenue of approximately $3 million dollars.   While this may not seem like a lot in a budget of $3 billion dollars, with this source of revenue eroding due to more fuel efficient vehicles and less consumption and the continued decline in federal transportation dollars, the impact on the state’s transportation budget is likely to be more significant than lawmakers may lead you to believe.

While the Strategic Transportation Mobility Formula, bill, signed into law by the Governor last week, is expected to more appropriately align the state’s critical transportation needs with available funding, it does not add any new funding nor does it address any future shortfalls, which are significant.  So, while the new formula is a step in the right direction, there is still a need to develop a plan to generate the necessary revenue for investment in our transportation system.   

Professional Engineers need to be involved at both levels.  First, PEs both at NCDOT and transportation engineering consulting firms need to play a major role in determining the objective criteria used to prioritize statewide and regional projects under the new formula. Second, PEs should also be involved in generating ideas and solutions to address the funding shortfall.  PENC and ACEC will be working to ensure that our state leaders use our Professional Engineers as a resource and that we are engaged in these critical conversations.    

Budget Update
Before the end of the fiscal year, June 30th, the House and Senate both passed a continuing resolution to keep state government operating into the next fiscal year as lawmakers work out deals on tax reform and the state budget.  The resolution would expire July 31.

Budget negotiations are on hold until a tax deal can be worked out.  The House actually took the week off as the Senate finalized their tax plan today.  Some believe that once there is agreement on tax reform, budget negotiations will move quickly.  However, there are significant differences between the House and Senate budgets most notably in NCDENR and the Department of Commerce.  Given where we are on both taxes and the differences in budget proposals, adjournment will likely be the middle to end of July.

Environmental Rules
The Senate has agreed to tweak proposed rules regarding the disclosure of chemicals used in hydraulic fracturing as it gave tentative approval to a wide-ranging environmental regulatory bill. Senators voted 35-11 in favor of the bill after an amendment that would allow the state Mining and Energy Commission to develop rules for an online registry so that the public could see some information about the family of chemicals that drillers pump into the ground as a part of the fracking process. Sen. Brent Jackson, R-Sampson, said the legislation protects the "recipe" used by the firms as trade secrets but would allow disclosures of the actual ingredients. The Mining and Energy Commission had been poised to approve tougher chemical disclosure rules, but then backed off because of industry concerns. In recent weeks, it had been working on revised rules. Responding to the legislation, the commission sent a letter of protest to lawmakers. Sen. Josh Stein, D-Wake, said lawmakers ought to leave it to expertise of the commission to deal with the issue. Beside fracking, the legislation also would make change to rules involving air quality permits, roadside tree-trimming, mountain development and planning, and erosion control penalties. A final vote is expected on the bill today. (Scott Mooneyham,  The INSIDER)     

Starting July 1, thousands of small businesses in North Carolina are required to use an Internet-based system to verify that new hires are eligible to work in the U.S. Under the state law, every business with more than 25 full-time employees will have to run new employees’ information through a federal system known as E-Verify. An employer enters an employee’s name, Social Security number, address and date of birth into a system that matches it with other federal data. “I thought if E-Verify were in place and employers were required to use E-Verify in their hiring practice, it would stymie some of the ease with which illegally present people could be hired,” said Rep. Harry Warren, R-Rowan, who helped spearhead the legislation. Employees whose information runs through without a discrepancy are cleared to work. Employees whose names are flagged have eight days to start an appeal. After that, any business that continues to employ someone deemed ineligible will be warned, then fined by the N.C. Department of Labor.

The law comes at a time when the state’s unemployment rate – 8.8 percent in May – is among the nation’s highest and immigration overhaul measures are being considered by Congress. The last phase also goes into effect on the same day that federal extended unemployment benefits end for more than 70,000 jobless North Carolinians. Warren argues that the E-Verify legislation could help reduce the state’s high unemployment by making it harder for undocumented workers to take jobs that North Carolinians could fill. Some critics argue it’s just more paperwork. Others fear it will dry up jobs in sectors, such as construction, that are critical to the economic recovery.(Caroline McMillan, THE CHARLOTTE OBSERVER, 6/30/13).

GOP Freshman
It's not easy being a freshman, whether in high school or your first year in the General Assembly. Freshman Rep. Ted Davis, R-New Hanover, described the experience as "very interesting." "It's very intense up here (Raleigh) from the minute you go in in the morning until the minute you leave," he said. "You're constantly doing something." The main function of the General Assembly is to write and pass bills. "People think you introduce a bill and it goes to the floor and it's over," Davis said. But he's had to learn the unique language and rhythm of the process, as have other freshman colleagues, Reps Chris Millis, R-Pender, and Rick Catlin, R-New Hanover. Catlin, who is also leader of the freshman Republican class, said he's found things moving at a fast clip. He noted one of his primary focuses has been on regulatory reform to make the state more business friendly. But, he's taking a cautious approach, noting that you can't undo decades worth of rules overnight without unintended consequences. Rep. Millis has successfully authored legislation to aid the transfer of environmental permits for distressed properties. He also pushed through legislation to direct the state on a pathway for more autonomous management of its inlets and waterways, among other bills.(Molly Parker, WILMINGTON STAR-NEWS, 6/30/13).

Offshore Drilling
North Carolina's congressional delegation on Friday largely split along partisan lines on a bill that would open up the North Carolina coast to offshore drilling. The House passed The Offshore Energy and Jobs Act by a 235-186 and will now go the Senate. All the state's Republicans as well as Democrat Mike McIntyre voted for the bill. All four Democrats voted against it. The measure was supported by Republican Governors Pat McCrory of North Carolina, Bob McDonnell of Virginia and Nikki Haley of South Carolina. Democratic Rep. David Price of Chapel Hill blasted the measure calling part of the "drill, baby drill mentality.'' "In my home state of North Carolina," Price said, "offshore drilling is highly controversial because of its potential adverse impacts on the environment and coastal communities, as well as the tourist economies on which they depend. In California, voters put in place a permanent ban on drilling in state coastal waters in 1994 because of the same concerns. In light of disasters such as the Deepwater Horizon oil spill in the Gulf, North Carolinians are justifiably perry of allowing the same drilling off our coast.''(Dome, THE NEWS & OBSERVER, 6/28/13).

Commerce Overhaul
The House has given final approved to a plan that would rework the state's approach to job recruitment and economic development, putting the efforts in the hands of a private non-profit agency. The legislation was approved by a 85-28 vote and now goes back to the Senate. The bill gained additional support in the House on Thursday, even though some critics have said it will lead to less transparency and continue policies emphasizing business recruiting incentives. The legislation would also create special zones across the state to get state agencies working together on serving the public and promoting economic development locally.(THE INSIDER, 6/27/13).

Mixed Results in States that have Privatized Economic Development (Charlotte Business Journal)

Durham Development
The House has approved a bill that would force Durham to annex and extend water and sewer lines to a subdivision even though the Durham City Council has voted twice to reject the development. The legislation affects the 751 South project, a mixed residential and business development on the Chatham County line. The project has been batted about various local governments, courts and legislative bodies for years. The General Assembly narrowly rejected a similar bill last year. "This bill is simply about property rights," Rep. Tim Moore, R-Cleveland, said. The city, he said, was using its power as the only large supplier of water in the area as a weapon in its battle against the development. Opponents of the move, including Democratic Durham Reps. Paul Luebke and Mickey Michaux said legislators are wading into a local issue in an unprecedented manner.(Mark Binker, WRAL, 6/27/13).

Clean Beaches
Since 2008, North Carolina has had some of the cleanest beaches in the nation – and 2012 is no exception. A report released Wednesday by the Natural Resource Defense Council detailed the environmental health of thousands of vacation beaches nationally and rated them on safety for swimmers. North Carolina was rated third out of 30 states. Its monitored beach samples exceeded national standards in 2012 only 2 percent of the time, according to the report. In North Carolina, elevated bacteria levels led to beach closings or advisories for 91 days in 2012, down from 126 days in 2011, according to the report. Erin Bryan-Millush, an environmental specialist with the N.C. Department of Natural Resources who monitors beaches, attributed the clean water to proactive local governments and lower rain amounts than usual in 2012. Concerns over EPA funding of beach monitoring programs were highlighted the NRDC's presentation of the report. "For the relatively small federal investment of less than $10 million, 30 states are monitoring their coastal and Great Lakes beaches," said Jon Devine, the NRDC's senior water attorney. "That's an investment we should keep."(Will Drabold, WILMINGTON STAR-NEWS, 6/27/13).

Data Reveals NC Municipalities Still Wary About Capital Projects (Triangle Business Journal)

Local governments in North Carolina are still playing it cautious in approving new building projects, new data shows.

Total indebtedness of North Carolina counties, cities and towns was $28.4 billion as of May 31, down 0.53 percent from 12 months earlier, according to the state Treasurer’s office.

The state of North Carolina’s debt load was also on the decline, by nearly 4 percent to $6.75 billion during the same period.

Governments sell various sort of bonds to raise money to build roads, schools, libraries, municipal centers and jails. Their total indebtedness figure falls when they are not replacing maturing bond issues with new ones.

Raleigh, Durham Among Fastest Growing Cities Since Recession (Triangle Business Journal)

Both Raleigh and Durham rank among the fastest-growing U.S. cities since the recession, according to Forbes.

The ranking, based on percentage growth in population from 2007 to 2012, slots Raleigh at No. 12 on the list and Durham at No. 14.

Two North Carolina cities ranked inside the top 10, with Charlotte placing No. 4 on the list and Greensboro at No. 9.

New Orleans tops the list, with the city’s population swelling by 28.2 percent to 369,250 in 2012. However, Forbes notes that The Big Easy is an anomaly, as much of its growth is due to a rebound effect after the population loss caused by Hurricane Katrina in 2005.

Generally, the fastest growth was observed in “lower-density, job-creating cities" and in "less dense areas of major metropolitan areas particularly where single-family houses, good schools and jobs are plentiful.”

Performed by demographer Wendell Cox, the analysis of post-2007 population trends considered 111 U.S. metro areas with more than 200,000 residents.

Street Widenings Part of Raleigh Transportation Bond
Raleigh officials have released the complete list of the street projects that will eat up the proceeds from the $75 million transportation bond issue Raleigh City Council will ask voters to approve in the fall. Click Here to Read More.

SC Touts New Road Repair Formula
The S.C. Department of Transportation is making repairs to a 40-year-old bridge in York County as the state touts a new method of paying for transportation infrastructure.

Click Here to Read More.

Forbes Lists Charlotte Among Fastest Growing US Cities
Charlotte ranks among the 10 fastest-growing U.S. cities since the recession, according to Forbes. Click Here to Read More.

CLT Authority Bill Put on Hold
After a months-long power struggle between North Carolina lawmakers and Charlotte city officials over control of Charlotte Douglas International Airport, legislation to create a regional authority to govern CLT appears to have stalled -- at least for now. Click Here to Read More.

NC Economy Slowly Mending
North Carolina is oh-so-slooooowly on track to bring unemployment below 7 percent statewide and below 6 percent in the Triangle by 2015, according to prognostications prepared by N.C. State University economist Michael Walden.

Read More Here.


If there are questions or you need additional information, please feel free to contact me at or phone 919-834-1144, ext. 1.


Betsy Bailey
Professional Engineers of North Carolina

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