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Table of Contents

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Transportation

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21ST CENTURY TRANSPORTATION COMMITTEE RECOMENDATIONS: The 21st Century Transportation Committee met last week to hear and discuss the recommendations from each of its subcommittees. The following were the most significant recommendations:

1. Phase out, over a 2-3 year period, $170 million transfer from the Highway Trust Fund to the General Fund that has occurred each year since the HTF was established.
2. Create the Congestion Relief and Intermodal Transportation Fund ($1.75 billion based on bonding capacity)
3. NC Turnpike authority gap funding of $45 million in 2008-09 and $30 million in 2009-10; a total of $75 million annually from the Highway Trust Fund.
4. Yadkin River Bridge Replacement as a toll road. Planning to begin in FY 2008-09
5. Reorganization within the DOT designed to make the department more effective and efficient.

Commentary from PENC:

All of the recent polling data indicates that the number one concern for North Carolinians is the economy. All the numbers being released from the General Assembly’s Fiscal Research Division reflect a slowing North Carolina economy and the unemployment rate in North Carolina has increased from 5.0% in February to 5.2% in March – comparable to the U.S. average unemployment. April’s income tax collections will go a long way toward determining how well state government weathers the economic downturn for the final three months of this fiscal year and what to project for the following year. So far, conservative revenue growth projections built into the budget indicate that the state could still end the current fiscal year with a general fund surplus allowing state governments to avoid shortfalls facing other states. But what about next year?

Recommendation 1

With the state budget being the number 1 priority of the short session of the legislature, it is very unlikely that lawmakers will consider any recommendation that takes money out of the General Fund. Although the highway fund and the highway trust fund are in far worse shape than the General Fund, due to the continued cap on the gas tax, downturn in vehicle sales and fuel efficiency, lawmakers will be hard pressed to fund the general fund budget at the current level of services that build in mandatory increases in Medicaid, education and public safety spending. In addition, the Governor has pledged to “clean up” the mental health system disaster which will create a further strain on the general fund budget. Therefore, the current economic and political climate will effectively prohibit lawmakers from completely eliminating this transfer in FY 2008-2009. However, with North Carolina’s proven resiliency, and a new Governor in town, FY 2009-2010 could be “the” year for transportation.

Recommendation 2

The creation of the Congestion Relief and Intermodal Transportation fund would provide grants for local government transit projects, state agencies and railroads to continue and enhance rail service in the state, state ports railroad grants and grants for intercity passenger rail service. These grants would all have a local match requirement. The recommendation also includes authorization of local option revenues as a funding source for the match requirement. Because of the significant highway maintenance needs in the state, it is possible that, if this recommendation moves forward, it will also include funding for the interstate and intrastate system, loops and bridge preservation/replacement as well (as recommended by the Prioritization Subcommittee). But, it is likely that, given the political and economic circumstances, that this will be considered a long-term recommendation and, therefore, may not be addressed during the upcoming short session.

Recommendation 3

Because this recommendation is predicated on the elimination of the $170 million transfer from the Highway Trust Fund to the General Fund, it is unlikely that the entire $45 million will be available for gap funding in 2008-09. However, there appears to be enough political will to allow a smaller amount to fund the first turnpike project in western Wake in the $18 to $20 million range.

Recommendation 4

Replacement of the Yadkin River Bridge is a high priority both for legislators and DOT. The problem has always been – how to pay for it. Tolling the bridge solves the problem of paying for it but creates a new problem. The Turnpike Authority legislation currently prohibits tolling of an existing highway/roadway. If this legislation was amended to allow tolling for this project, then it would open up a debate for tolling other existing highways/projects. Additionally, this is a major north/south interstate that carries a lot of traffic. Could a toll potentially impede efficient movement through this heavily traveled corridor? Most transportation advocates and stakeholders agree that this project should be funded immediately but do not agree that it should be tolled.

Recommendation 5

The most significant recommendation from the Prioritization Subcommittee is that the Secretary of NCDOT “be statutorily selected as the Chairman of the Board of Transportation. As the only full time member of the board, the Secretary should provide the leadership to all members of the board necessary to maintain focus on transportation policies, programs, and long-term transportation needs. Additionally, the Subcommittee recommends that the Secretary not serve as the Chairman of the Board for the NC Turnpike Authority. The Legislative intent to provide some level of autonomy to the NCTA to improve on existing delivery processes is somewhat restricted with the existing organization. The State Highway Administrator should serve as the Chief Executive and be solely responsible for the Division of Highways operations and all Departments responsible for planning, programming, preconstruction, construction, maintenance, and operations. The current role for the Secretary to serve as a “CEO equivalent” and ex-officio Board member has resulted in producing a Chief Executive without a strong professional transportation background, decision making retained at a high level significantly impacting responsiveness, and a Board of Transportation that was marginalized by its ex-officio Secretary acting as CEO.” Any additional funding, including bonding authority or revenue increases, is predicated on the reorganization of the Department of Transportation.

It is important to note that these are only DRAFT recommendations. The full committee will finalize their recommendations to the General Assembly at its next meeting on May 13th.

GAS TAX: Republican gubernatorial candidate Bill Graham says the state gas tax should be suspended for the summer. Echoing a proposal by presidential candidate and U.S. Sen. John McCain, Graham suggested the state stop collecting gas tax from Memorial Day through Labor Day. "With our economy entering a recession and oil prices at record highs, we should alleviate the burden on the citizens of North Carolina," he said in a statement. "I urge those in Raleigh to act and declare a holiday from collecting thehe said in a statement. "I urge those in Raleigh to act and declare a holiday from collecting the 30.15 cents per gallon tax on fuel." (Dome, THE NEWS & OBSERVER, 4/16/08)

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Energy and the Environment

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CLIFFSIDE: A group of protesters -- some of whom chained themselves to construction equipment -- were arrested recently at Duke Energy's Cliffside Steam Station. Duke is adding an 800-megawatt boiler to the Rutherford County plant, which has drawn intense opposition from environmental advocates. The protesters are part of an environmental network called Rising Tide. The group blames such power plants' carbon dioxide emissions for global warming. Rutherford County Sheriff Jack Conner said some protesters were stunned with Tasers. All eight protesters were charged with trespassing, and four were charged with resisting arrest. Several environmental groups have asked a judge to halt the $2.4 billion project, saying the state air quality permit allowing construction violates federal law. On Wednesday, Duke filed a motion with the Office of Administrative Hearings to intervene in the appeal, indicating that it will help state regulators defend the permit. (Bruce Henderson, THE CHARLOTTE OBSERVER; THE ASSOCIATED PRESS, 4/02/08)

PIGEON RIVER: Tennessee lawmakers have approved a measure that would require stricter water quality monitoring on the Pigeon River. The legislation is apparently in response to a papermill in Canton, N.C., which -- for more than 100 years -- has dumped discharges from a bleaching process into the river before it flows into Tennessee. The bill would require the Tennessee Department of Environment and Conservation to test the water from the center of the river within a quarter mile of the North Carolina line. The measure still needs the signature of Tennessee Gov. Phil Bredesen before it becomes law. (THE ASSOCIATED PRESS, 4/03/08)

POLLUTION CONTROL: The Tennessee Valley Authority plans to install a $597 million pollution control system on a coal-fired power plant that's contributing to haze in the Great Smoky Mountains. The 712-megawatt John Sevier plant in Rogersville will get smokestack scrubbers and a selective catalytic reduction system that are expected to reduce pollutants by more than 90 percent. The plant is one of three TVA coal stations in Tennessee that are closest to the pollution-prone national park along the Tennessee-North Carolina border. Similar equipment already is being installed at the other two plants. All three should be online by 2012.

HYDROPOWER LICENSE: Gov. Mike Easley has asked federal regulators to delay renewing aluminum maker Alcoa's hydropower license for the Yadkin River. In a letter to the Federal Energy Regulatory Commission, Easley says critics have raised "important issues about the use of North Carolina's public water resources for private gain." Easley's letter came at the request of Stanly County, where for 90 years Alcoa was the biggest employer with up to 1,000 workers. Alcoa shut down most operations in 2002. Alcoa Power Generating, a subsidiary, wants to keep operating its four hydroelectric dams on the Yadkin. Electricity that once powered aluminum smelters is now sold to local and Southeastern utilities, netting Alcoa about $8 million a year. Stanly County argues that renewing the hydro license -- expected this summer -- would export profits from the county's most valuable natural resource. "The water of the Yadkin is a natural resource that should be used to the highest and best benefit," said Roger Dick, an Albemarle banker who's been vocal in asserting the county's rights. "Who has the right to a natural resource -- is it the local people or a private corporation?"

Alcoa says the long licensing process gave ample time for county officials to make their case. "Generally, we don't feel like any more time is needed," said licensing manager Gene Ellis. "Five and a half years of discussing issues is long enough." About 200 people from Stanly and surrounding counties rallied last week at the state Capitol in opposition to renewal of the license. Easley asked the commission to extend Alcoa's current license for a year "so that we may all work toward solutions to serve the long-term economic and environmental needs of these communities." The commission had no immediate comment. The 7,200-square-mile Yadkin is North Carolina's second-largest river basin. (Bruce Henderson, THE CHARLOTTE OBSERVER, 4/05/08)

ENERGY EFFICIENCY: Gov. Mike Easley announced that 10 state agencies, 15 University of North Carolina campuses and six community colleges have been awarded the state’s first Energy Efficiency Reserve Fund grants. The grants, totaling $5 million, will go toward 58 power-saving projects that are projected to save about $3.2 million per year in utility costs, according to state officials. "These are effective and creative energy-saving initiatives that can quickly be put into place and just as quickly reap rewards," Easley said in a statement. The grants are administered by the State Energy Office. (NEWS RELEASE, 4/08/08)

CHICKEN DROPPINGS: A Pennsylvania company has chosen a site in Sampson County to build the first of three power plants to be fueled by chicken droppings. Fibrowatt announced the location, financial incentives and other details Wednesday at Sampson County Community College. Building the project at a cost exceeding $200 million will qualify Fibrowatt for financial incentives from the county worth $2.5 million, mostly in the form of property tax refunds. The plant, to employ 30 to 35 people about 3 miles from the town of Faison, will burn about 500,000 tons of chicken droppings a year, about half the poultry waste generated in the eastern part of the state. Fibrowatt already operates power plants fueled by poultry litter in Minnesota and the United Kingdom. The company's ambition to build three such facilities in North Carolina is made possible by a new state law requiring renewables to generate a portion of the state's electricity.

While about half the states now have such renewables requirements, North Carolina is the only state in the country that specifically requires electricity made from burning poultry droppings. The company still has to finalize financing arrangements to pay for the project. Also, Fibrowatt is still in talks to sign a contract to sell the electricity it produces to Progress Energy. The project could also run into opposition from environmentalists since pollution emissions from poultry-litter power plants are comparable to emissions from coal-burning power plants. Several environmental groups have decried the poultry litter burning proposal as a waste incinerator. (John Murawski, THE NEWS & OBSERVER, 4/16/08)

BIOFUELS CENTER: The Biofuels Center of North Carolina announced Wednesday that it will distribute $2.55 million to help jump-start the state's alternative energy sector. At least 75 grant and loan applications totaling nearly $13 million were received March 17 in response to the Biofuels Center's request for proposals, officials said. The Biofuels Center's board approved 15 applications totaling the $2.55 million at a meeting Tuesday. Biofuels Center President John Ganzi on Wednesday said the large number of applications shows the pent-up need for capacity building to create such a sector within the state. The money will be applied to agriculture, industrial production, research and work force development. The Biofuels Center was created by lawmakers to provide statewide technical expertise in optional fuels and was funded by a $5 million appropriation from the 2007 General Assembly. (William F. West, THE HENDERSON DAILY DISPATCH, 4/17/08)

AIR QUALITY PERMITS: State government could speed up the process of approving air quality permits by as much as 52 percent and eliminate a backlog of applications by the end of next year, according to a receent audit. Officials with the state Department of Environment and Natural Resources say they are encouraged by the findings, which were developed in part during a workshop conducted by N.C. State University's Industrial Extension Service. B. Keith Overcash, director of DENR's Division of Air Quality, said staff members already are using some of the techniques. The workshop helped identify one of the major snags in the permitting process -- a lack of information from applicants in their permit applications. The back-and-forth required to complete the applications often drags on for months.

The audit also found that DENR's Division of Air Quality needs to adopt standardized review methods to speed up the process. The audit said that DENR could save $572,439 and avoid hiring an additional seven staff if it followed the recommendations. The federal Clean Air Act requires all major sources of air pollution -- such as electric utilities, manufacturing facilities and governmental installations -- to obtain operating permits. Almost 340 facilities have permits. As of Dec. 31 there was a backlog of 229 applications, most of them for renewals. (Dome, THE NEWS & OBSERVER, 4/18/08)

ALTERNATIVE ENERGY: Eighty percent of North Carolinians want electric utilities to emphasize renewable energy and efficiency programs before building new coal-burning power plants, according to a new poll. The telephone survey of 603 state residents was organized by North Carolina environmental activists who oppose a new coal-burning unit under construction at Duke Energy's Cliffside facilities in Rutherford County. Opinion Research Corp. conducted the survey for the Civil Society Institute, a nonprofit in Massachusetts that promotes clean energy and social change. “This poll, we believe, is another nail in the coffin for this ill-conceived Cliffside project,” said June Blotnick, executive director of the Carolinas Clean Air Coalition in Charlotte. Progress Energy and Duke Energy, the state’s two biggest electric utilities, also have found widespread support for clean energy in polling their customers. The activists’ survey also found that 56 percent of those polle! d had never heard of the Cliffside project. Duke officials say the 800-megawatt coal plant is necessary to meet growing energy demand. (John Murawski, THE NEWS & OBSERVER, 4/22/08)

WIND FARM: The state Utilities Commission has approved a proposed 4.5 megawatt wind farm project in Bettie pending approval by Carteret County and clearance by the Federal Aviation Administration. Carteret County has imposed a moratorium on wind farms as officials there seek to establish regulations for the structures in coastal areas. The three turbines proposed by Raleigh entrepreneur Nelson Paul would exceed 400 feet in height with blades fully extended upward, towering more than twice as high as the Cape Lookout lighthouse on the Outer Banks. Residents have lobbied against Paul's proposed wind turbines as an eyesore and environmental hazard.

The Federal Aviation Administration requires assurance that the wind turbines will not interfere with a nearby airport flight path and that they will not cause radio interference with a nearby air traffic control radar. The state utilities commission approval is also conditional on Paul conducting a study to determine that the air space above his farm can generate sufficient wind activity to justify building the project. Paul's proposal would provide power for about 900 homes when the wind is blowing, which is about 35 percent of the time. (John Murawski, THE NEWS & OBSERVER, 4/25/08)

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Water/Wastewater

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WATER INFRASTRUCTURE: Members of the State Water Infrastructure Commission recently discussed ways to encourage water conservation and ensure adequate water supplies during a drought. The state panel expressed interest in urging local public water systems to enact conservation measures, such as incentives for customers who curb consumption. Many city and county water systems are adding capacity to handle a severe drought. But commission members said conservation measures could be required before state money is approved for expansion projects. The panel also discussed acknowledging wastewater as a resource rather than a waste product.

North Carolina suffered the worst drought in state history last year. Recent rains have refilled reservoirs and recharged groundwater supplies, but state and city officials say another dry, hot summer would bring another severe drought. Members of the panel said new conservation laws and better planning are needed to prepare for the worst. (John Fuquay, THE FAYETTEVILLE OBSERVER, 4/08/08)

RISING WATER: Hyde and Dare counties and the Outer Banks would be part of the ocean floor if sea levels were to rise one meter, a scientist studying the impact of global warming on North Carolina's coast said Wednesday. Enrique Reyes, an associate professor of biology at East Carolina University, said one-third of the state would be lost to the ocean if sea levels rose 20 feet. Reyes is a member of a scientific team from the University of North Carolina system that is in the midst of a multi-year field study aimed at informing state agencies how to manage rising sea levels. "We're trying to make forecasts of how the North Carolina coast will look in the future," Reyes said. Sea levels on the North Carolina coast rise about one-quarter of an inch every year, according to Reyes, who spoke at the N.C. Estuarium. Reyes said that rate is manageable because many plants can adapt to the rising water and survive. However, the rate has increased in recent years as the average global temperature has risen, he said. If the rate reaches half an inch per year, the state's marshes and wetlands will drown, he said. "The average global temperature has already risen and will continue to rise," he said. "We have to deal with that fact." Reyes and the team of scientists he works with are trying to understand what effect humans have had on global warming and the effects climate change will have specifically on North Carolina. Reyes said that rising sea levels would have the most profound effect on eastern North Carolina, which would eventually lose the wetlands, marshes and Outer Banks that serve as lines of defense against hurricane winds and waves. (Dan Parsons, WASHINGTON DAILY NEWS, 4/17/08)

RECENT DROUGHT: Drought conditions continued to ease across the state this week, according to the U.S. Drought Monitor's latest report. For the first time since June 2007, conditions are back to normal in some North Carolina counties. Six coastal counties -- Pamlico, Hyde, Dare, Carteret, Tyrrell and Washington -- are no longer considered even "abnormally dry" in the weekly report. They account for about 12 percent of the state's area. About a third of the state -- 34 percent -- was still in "extreme" or "severe" drought status in Thursday's report, down from 46 percent last week. Those are the second and third most intensive of the four categories of drought. This week, as last, about 54 percent of the state was classified as having either "moderate" drought or "abnormally dry" conditions. (THE NEWS & OBSERVER, 4/24/08)

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Economic

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TAX COLLECTIONS: March tax collections came in below target, and state revenues are now running just $15 million to $20 million ahead of projections, according to a report presented to the Joint Legislative Committee on Governmental Operations. The numbers from the General Assembly's Fiscal Research Division reflect a slowing North Carolina economy, but conservative revenue growth projections built into the budget are so far allowing state government to avoid the shortfalls facing other states. Prior to the latest quarter's numbers, revenues had been running about $125 million ahead of forecasts. The report shows that sales tax collections continue to fall in March, with annualized growth falling to 2.3 percent, compared to a 5.7 percent historical average. Employee withholding taxes, though, continue to be fairly strong, with March collections up 6 percent over last year. The report points out that April's income tax collections will go a long way toward determining ! how well state government weathers the economic slowdown for the final three months of the fiscal year. (THE INSIDER, 4/17/08)

UNEMPLOYMENT: North Carolina's unemployment rate increased to 5.2 percent in March, according to the state Employment Security Commission. The new unemployment rate is up from 5.0 percent in February and compares to the U.S. jobless rate of 5.1 percent. All numbers have been adjusted for seasonal effects. March was the third straight month that unemployment has increased. (TRIANGLE BUSINESS JOURNAL, 4/18/08)