Living with Legislation

1. Living with Legislation Kara A. Millonzi millonzi@sog.unc.edu Professor of Public Law and Government 2019

2. Gifts/Grants to Private Entities • System Development Fees • County and Municipal Funding for Schools • Meter Tampering • TDAs

3. Gifts/Grants to Private Entities

4. Local nonprofit approaches your board and asks for the following: • Reduction of building inspection fees for new addition to the nonprofit’s building • Waiver of park shelter rental fees for nonprofit’s summer camp program • Forgiveness of remaining special assessment payments due on the property • Additional law enforcement patrol around nonprofit’s building during evening hours • $5,000 grant from the local government to support the nonprofit’s programs • $10,000 grant from the local government to help nonprofit fix its roof

5. Exclusive Emoluments Clause NC Constitution, Art 1, Sec. 32. No person or set of persons is entitled to exclusive or separate emoluments or privileges from the community but in consideration of public services.

6. Local nonprofit approaches your board and asks for the following: • Reduction of building inspection fees for new addition to the nonprofit’s building • Waiver of park shelter rental fees for nonprofit’s summer camp program • Forgiveness of remaining special assessment payments due on the property • Additional law enforcement patrol around nonprofit’s building during evening hours • $5,000 grant from the local government to support the nonprofit’s programs • $10,000 grant from the local government to help nonprofit fix its roof

7. Grants/Gifts to Private Entities Counties generally do not have authority to provide gifts to private entities. Instead,a “[county or city] may contract with and appropriate money to any person, association, or corporation, in order to carry out any public purpose that the [county or city] is authorized by law to engage in….” GS 153A-449 & GS 160A-20.1 And see Dennis v. Raleigh, 253 N.C. 400 (1960).

8. Local nonprofit approaches your board and asks for the following: • Waiver of park shelter rental fees for nonprofit’s summer camp program • $5,000 grant from the local government to support the nonprofit’s programs If local government enters into contract with nonprofit to provide the summer camp on behalf of the local government.

9. Gift or Loan of Credit “No county, city or town, special district, or other unit of local government shall give or lend its credit in aid of any person, association, or corporation, except for public purposes as authorized by general law, and unless approved by a majority of the qualified voters of the unit who vote thereon.” NC Const. Art. V, Sect. 4(3) “A loan of credit within the meaning of this Section occurs when a county, city or town, special district, or other unit, authority, or agency of local government exchanges its obligation with or in any way guarantees the debts of an individual, association, or private corporation.” NC Const. Art. V, Sect. 4(5)

10. Possible Gift or Loan of Credit • Borrowing through non-voted GO debt and lending proceeds to private person or entity • Borrowing through non-voted general obligation debt and acquiring stock in a private company • Guaranteeing private obligations • Borrowing through non-voted general obligation debt and using the proceeds primarily to benefit a private person or private entity • Engaging in a joint venture with one or more private persons or private entities

11. Guaranteeing Private Obligations Probably applies to: • Guaranteeing a private entity’s loan • Guaranteeing contract or tort obligation of private entity • Open-ended indemnification agreements Possibly does not apply to: • Loan loss reserve funds (limited to current pot of money) • Limited indemnification agreements (limited to current pot of money)

12. System Development Fees

13. Assessed on property owner at time of connection to cover direct costs of making connection Assessed to cover costs of inspections, plan reviews, etc. Assessed when plat recorded or when service committed to cover proportional share of past investments or proportional share of future capital necessary to serve property Assessed pursuant to contract to extend water/sewer lines to specific property or do system expansions to serve specific property Assessed on water/sewer utility customers—typically has fixed and variable component Assessed on certain properties when water/sewer available but property owners choose not to connect

14. Local government utility may assess a system development feeon “new development” within its territorial boundaries to fund certain capital costs attributable to that new development.

15. What is “New Development”? • Subdivision of Land • Construction, or any change to existing structure, that causes increase in need for service • Any use or extension of use of land that increases need for service

16. Buy-in: based on value of existing capacity Incremental cost: based on the value or cost to expand the existing system’s capacity Hybrid: combo

17. When is Fee Collected?

18. When is service committed?

19. Spending Proceeds • Incremental / Combined Cost Methods • Costs of future construction or expansion that are “necessitated by and attributable to” new development (construction; surveying/engineering; land acquisition; debt service for future projects; fee analysis costs) • If no capital improvements planned for 5 years, debt service on existing “capital improvements” • Buy—in Method • Likely may be used for current debt service on past projects that benefit new development • Capital rehabilitation projects that benefit new development

20. Administering Proceeds Capital Reserve Fund (CRF) • Adopt Ordinance or Resolution • Specify projects to be funded with proceeds • Amend CRF each year to appropriate new proceeds • Must move $ to budget or project ordinance before spending

22. Counties

23. Dispute Resolution Process A school board may challenge a county’s appropriation of capital outlay funds or operational funds, or both, if it feels the amount appropriated is “not sufficient to support a system of free public schools.”

24. Dispute Resolution Revamp Step 1 Step 2 Step 3

25. Per pupil maintenance of effort + inflation

27. Municipalities

28. Municipalities • May fund operating or capital costs of any public school within municipal boundaries • May fund operating or capital costs, on a per pupil basis, for any public schools outside territorial boundaries that are attended by municipal residents • “Funds appropriated by cities in accordance with this subdivision may be used to enter into operational and financing leases for real property or mobile classroom units for use as school facilities for public schools and may be used for payments on loans made to public schools for facilities, equipment, or operations. However, municipal appropriations shall not be used to obtain any other interest in real property or mobile classroom units.”

29. Meter Tampering

30. Old Law: G.S. 14-151.1 Authorized local governments to impose meter tampering fees

31. New(ish) Law: G.S. 14-151 • No meter tampering fees • Bring criminal charges against individual suspected of meter tampering • Class 1 misdemeanor • Sue individual civilly in court • If found guilty, triple losses and damages, up to $5,000 (but clear proceeds go to schools)

32. Tourism Development Authorities (TDA)

33. TDAs…. • are separate legal entities • must adopt their own budgets • must appoint their own finance & budget officers • must designate own bank accounts • must have/pay for annual independent audit (but can be a component unit of county or city if certain criteria met)

34. TDA Expenditures • Look to local act!!!! • Most include the following restrictions: Promote travel and tourism. – To advertise or market an area or activity, publish and distribute pamphlets and other materials, conduct market research, or engage in similar promotional activities that attract tourists or business travelers to the area. The term includes administrative expenses incurred in engaging in the listed activities. Tourism-related expenditures. – Expenditures that, in the judgment of the Tourism Development Authority, are designed to increase the use of lodging facilities,  meeting  facilities, or convention facilities in a district or to attract tourists or  business travelers to the district. The term includes tourism-related capital expenditures. 2/3 1/3