A Summary of Laws Enacted in 1998
Richard D. Ducker and David W. Owens, Reprinted from North Carolina Legislation 1998
Land Use, Code Enforcement, Economic Development and Transportation
1998 was a relatively productive year for planning and development-related legislation, particularly if one considers that the legislative sessions in even-numbered years are supposed to be the "short" ones. Local governments both gained and lost. Although municipalities will be made subject to generally more demanding annexation requirements, local governments will be benefit from broader and clearer authority to regulate sexually-oriented businesses. The State has adopted a progressive policy for leasng State lands for telecommunications towers and antennae. North Carolina citizens can look forward to better funding of the state's infrastructure needs with the approval of the bond issue authorized by the "Clean Water and Natural Gas Critical Needs Act." Planners will be interested to know that evidence of a comprehensive land use plan will be a factor in determining priorities for at least some of the infrastructure funds. Important new tax incentives to encourage the relocation or expansion of businesses were also adopted. The provisions of the Roadway Corridor Official Map Act were expanded to include public transit corridors. In addition, the General Assembly adopted new legislation affecting planned residential communities and the organization and governance of their homeowners' associations.
Zoning and Planning
Regulating Sexually Oriented Businesses
The location and operation of sexually oriented businesses has been a highly visible and frequently litigated issue in North Carolina over the past few years. Controversies have arisen not only in the state's larger cities (Charlotte, Raleigh, Greensboro), but in small towns and resort areas as well (Roanoke Rapids, Calabash, the Outer Banks, and Maggie Valley).
In November, 1996, Sen. Marc Basnight, the President Pro Tem of the Senate, organized a town meeting in Nags Head to discuss the authority of local governments to regulate sexually oriented businesses and the need for potential state legislation on the subject. Early in the 1997 session of the General Assembly, Sen. Basnight asked the chair of the Senate Judiciary Committee, Sen. Roy Cooper, to further review this question and develop proposed legislation. Sen. Cooper introduced S 452 in March 1997 to clarify state law on the question of the scope of local regulatory authority regarding sexually oriented business and provide additional options for localities concerned with these issues. The bill was adopted by the state Senate in April 1997 and the state House of Representatives in July 1998. The bill had broad legislative support. It was approved unanimously in the Senate and by a 111-1 margin in the House. It became effective upon signature by Governor Hunt on July 15, 1998.
One of the principal objectives of S.L. 1998-46 (S 452) was to remove any doubt about legislative intention not to preempt the field of sexually oriented business regulation to the exclusion of local regulation. The law amends several key statute statutes to expressly provide that these statutes do not preclude local regulation of sexually oriented businesses. These statutes include those prohibiting obscenity (G.S. 14-190.1), prohibiting indecent exposure (G.S. 14-190.9), limiting adult establishments to one per structure (G.S. 14-202.11), and regulating facilities with alcohol sales (G.S. 18B-904). Clarification that state laws do not prohibit local regulation clears the way for a variety of local regulatory options, such as, for example, setting specific hours of operation for adult facilities with alcohol licenses, rather than being limited to the uniform 2:00 a.m. closing established by state ABC laws. There is also no longer a question as to the validity of dispersal requirements between sexually oriented businesses.
S.L. 1998-46 (S 452) also creates G.S. 160A-181.1 to set out the range of regulatory options available to cities and counties in regulating sexually oriented businesses. These regulations are to be directed toward the reduction of adverse secondary impacts of these businesses. Regulations can include restrictions on location and operation of the facilities, licensing requirements, and reasonable fees.
Among the specific regulatory tools authorized by the law are:
Limits on location, including restrictions to specified zoning districts and minimum separation requirements;
Limits on operations, including hours of operation, open booth requirements, limits on exterior advertising and noise, ages of patrons and employees, required separations between patrons and performers, and clothing requirements for masseuses, servers, and entertainers;
Licensing, disclosure, and registration requirements, including restricting ownership or employment of those with criminal records for offenses reasonably related to the legal operation of a sexually oriented business;
Moratoria on new facilities or expansions while studies are conducted and ordinances debated;
Amortization requirements for nonconforming sexually oriented businesses; and
Interlocal agreements whereby local governments within an interrelated geographic area can provide alternative sites for sexually oriented businesses without the necessity of each unit of government providing sites.
Local governments are also authorized to adopt their own detailed definitions of "sexually oriented businesses" to precisely set the scope of local regulations.
S.L. 1998-46 (S 452) also adds a new enforcement tool for local governments. It amends G.S. 19-1 to allow the public nuisance statute to be used against those businesses that repeatedly violate local ordinances on sexually oriented businesses in such a way as to create adverse secondary impacts. This is a powerful tool that G.S. 19-2.1 allows to be used by private citizens as well as units of government. It allows injunctions to prohibit continued misuse of the building. G.S. 19-1.4 also provides that after notice, subsequent owners are liable for violations in the same manner as the one who first created the public nuisance. G.S. 19-8 allows attorney fees and other costs to be awarded to the prevailing party.
It is important to note that S.L. 1998-46 (S 452) does not relieve local governments of the need to establish a strong constitutional foundation for any regulation of sexually oriented businesses. Sexually explicit but non-obscene material is protected by the First Amendment's free speech guarantees. Each of the provisions of S.L. 1998-46 (S 452) that removes any question of state preemption explicitly provides that the local regulations must be consistent with constitutional protections afforded free speech
It is a political reality that these uses are unwelcome in many communities. Citizens and local elected officials alike may have strong opposition to the content of sexually explicit performances and materials. Such concern however can not be the basis of regulation. S.L. 1998-46 (S 452) notes that the purpose of local regulations of sexually oriented businesses is to prevent undue secondary impacts from their inappropriate location or operation. The regulations must be directed toward prevention of these potential adverse secondary impacts, such as prevention of negative impacts on neighboring property values and reducing the potential for crime increases, rather than to suppress protected speech.
A local government should undertake the following steps to establish a proper constitutional foundation for its regulations of sexually oriented business. The courts have held that cities and counties have the burden of establishing that these steps have been undertaken. The steps include:
Conduct some study of the potential adverse secondary impacts to be prevented. This does not require a formal technical study, but some thoughtful, explicit consideration of these impacts while the regulations are being framed is needed. This can include a review of studies conducted in other localities, reports from the planning, police, and other local staff on potential impacts, and testimony from concerned citizens at public meetings and hearings.
Conduct an analysis of the adequacy of sites available for location of sexually oriented businesses. The regulations can not have the practical effect of totally excluding constitutionally protected speech. The adopting unit of government needs to establish prior to adoption that the ordinance will leave reasonable alternative avenues for expression open. The sites available do not have to be those most desirable or profitable for the owners, but they do need to be realistically within the commercial real estate market and be of a sufficient number to meet the anticipated demand.
Give consideration to how each proposed regulation will advance the purpose of reducing adverse secondary impacts. Regulations need to be narrowly tailored to meet legitimate objectives.
If permits or licenses are required prior to operation, there must be clear and definite standards for decisions and there must be adequate procedural safeguards to ensure prompt decisions and judicial review.
S.L. 1998-158 (S 1242) provides for the use and development of a wireless 911 emergency response system adapted to State use of cellular, personal communications service, and other wireless telephone service. However, the act also reflects the interest of the wireless industry in gaining access to State properties. The act allows State agencies to lease public property for the construction of wireless communications towers or the location of antennae on state-owned structures. One especially noteworthy feature of new act is the requirement that unless collocation is infeasible at a particular location, any tower located on State land must be designed and constructed to accommodate other carriers. The State’s lease must require the lessee to permit other telecommunications carriers to collocate on a tower on commercially reasonable terms unless the tower has reached its capacity. The act also spells out several other important location policies. The State must promote clustering of towers by encouraging telecommunications towers to be located near other such towers to the extent that it is technically feasible. The State is also directed to choose a location that minimizes the visual impact on surrounding landscape.
Perhaps the most intriguing question about towers on leased State land is the applicability of zoning and other ordinances. The act answers the question directly by clarifying that "(c)ity and county ordinances apply to communications towers and antennas authorized under this section." Thus it appears that either a zoning ordinance or ordinance adopted under the general ordinance-making (police) power is applicable to the location of such facilities.
G.S. 136-131.1 provides that no local government (or any other political subdivision) may cause an outdoor advertising sign along an Interstate or Federal-aid Primary highway to be removed except upon the payment of "just compensation." This provision has effectively nullified the ability of local governments to amortize billboards made nonconforming by a local zoning ordinance. Federal outdoor advertising legislation requires a state to adopt such a statute if the state wishes to qualify for its full allocation of federal transportation funds. North Carolina's statute was first adopted in 1981 with an expiration date set two years later on the oft chance that federal outdoor advertising program requirements would change. Since that time the state has extended the act on four different occasions. Section 27.5 of the Appropriations Act (S.L. 1998-212, S 1366) extends the just compensation statute until June 30, 2002. An interesting sidenote is this: since the old sunset provision expired on June 30, 1998, and section 27.5 did not become effective until October 28, 1998, the "just compensation" provision was not effective in North Carolina for a period of about four months.
S.L. 1998-192 (H 1114) represents an unusual compromise between the interests of inter-governmental planning and deference to the interests of residents of a relatively small unincorporated area. For some years the Swift Creek watershed area of Wake County has been in the path of development. Various local governments--among them Apex, Garner, Cary, Raleigh, and Wake County-- identified an interest in the manner that the Swift Creek area will grow. These local governments developed a management plan for the Swift Creek area over ten years ago. However, ensuring that the integrity of the plan was respected has been a notably more difficult result to achieve. The adoption of S.L. 1998-192 is a stride toward implementation of the plan. It requires that development ordinance amendment actions and project permitting decisions must be consistent with the plan. It does, however, allow the jurisdictions affected by the act to extend utilities into portions of the Swift Creek area that are located within each's planning jurisdiction, but only if the municipality zoned or rezoned the particular area in anticipation of providing those utilities. In an unusual concession to area residents the act gives the qualified resident voters of the area an opportunity to vote in a nonbinding advisory referendum on the incorporation of the Swift Creek area as a municipality. The referendum is to be conducted on November 7, 2000.
S.L. 1998-28 (H 1556) extends the extraterritorial planning jurisdiction of the City of Dunn to include an area described in the act. The transition between county jurisdiction and municipal jurisdiction is to be governed by the provisions of the North Carolina General Statutes (G.S. 160A-360(f)).
S.L. 1998-4 (S 1420) allows any Halifax County nonresidential building that is damaged by fire or an "act of God" to be replaced with a mobile home or similar manufactured structure for a period of one year. The law is intended to allow operations to continue while the damaged building is repaired or rebuilt. The act supersedes "any zoning, occupancy, or other ordinance or statute to the contrary . . . " S.L. 1998-4 expires on June 30, 1999.
Maps Attached to Deeds
Last year, the General Assembly adopted legislation requiring most plats presented for recording to be reviewed by a designated plat review officer and certified for conformity with the requirements of state law. Surveyors, chafing under a law that required additional review of their work, convinced legislators this year to make two new categories of maps exempt from certification by a review officer. The first category of maps exempted by S.L. 1998-228 (S 1552) includes maps of boundaries of municipalities, annexation maps, highway right-of-way maps, and transportation corridor maps. In addition, maps attached to deeds are also exempt from review officer certification if the map does not bear the original signature and seal of a registered land surveyor and is not a certified copy of a map that does.
Planners are aware of the fact that attaching maps to deeds is a not uncommon means of evading a local land subdivision ordinance since a deed must be recorded if it meets state recording requirements. S.L. 1998-228 (S 1552) makes a mild concession to the interests of land subdivision control by providing that the exemption for attached maps, described above, applies only if the map contains the following label: "THIS MAP IS NOT A CERTIFIED SURVEY AND HAS NOT BEEN REVIEWED BY A LOCAL GOVERNMENT AGENCY FOR COMPLIANCE WITH ANY APPLICABLE LAND DEVELOPMENT REGULATIONS." In addition, any map attached to a deed must now be no larger than 8 ½ by 14 inches.
S.L. 1998-37 (S 1518) amends existing local legislation defining the scope of Stanly County's jurisdiction to regulate land subdivisions. Under the new law the divisions of land into parcels greater than ten acres are exempt from regulation if no street right-of-way dedication is involved. In the past subdivisions with parcels over five acres were exempt if lots were served by a right-of-way of at least sixty (60) feet in width and the developer recorded a right-of-way agreement governing the construction and maintenance of the road.
The General Assembly enacted a number of provisions relating to environmental protection and natural resource management. These laws are covered in detail in Chapter 10, but those laws having particular bearing on land use issues are summarized here.
Protection of water quality was again a major focus of legislative attention. Development of comprehensive plans and management strategies on a river basin basis has been a high priority for the state. The Environmental Management Commission (EMC) approached rule-making to reduce nitrogen loading and other non-point source pollution for the Neuse River Basin as a model for the entire state. The rules (15A N.C.A.C. 2B .0233) were adopted by the EMC and approved by the Rules Review Commission in February 1998, subject to the legislative veto of G.S. 150B-21.3. The rules establish criteria for discharges and mandate use of vegetated buffers to reduce non-point source pollution. S.L. 1998-221 (H 1402) disapproves some aspects of the rule proposed to be adopted, allows other aspects to continue as a temporary rule, and mandates actions by the EMC prior to adoption of final rules. The law allows the EMC to delegate riparian buffer protection to local governments, subject to state standards and oversight. The law also allows use of mitigation when buffers are disturbed, with mitigation through any one of three options: (1) payments to a newly established Riparian Buffer Restoration Fund; (2) donations of interests in land for riparian buffer areas to the state, local governments, or nonprofit conservation organizations; or (3) establishment, restoration, or enhancement of a riparian buffer not otherwise required to be protected. The law also defines the vested rights that must be recognized and establishes a twenty-three member Stakeholder Advisory Committee to work with the EMC in preparing a final rule. The legislature also disapproved proposed rules for the Tar-Pamlico River Basin. S.L. 1998-138 (S 1373), however, allows these rules to be adopted as temporary rules (except that a specified portion of the river may not be reclassified from WS-IV to WS-V by temporary rule).
In other water quality actions, concern about the impacts of sedimentation from construction sites led to the enactment of S.L. 1998-99 (H 1415) to improve the enforcement of the Sedimentation Pollution Control Act. G.S. 113A-57 now requires disturbed land to be protected within fifteen working days (was previously thirty working days) or thirty calendar days of completion of any phase of grading (whichever is less) to prevent pollution from runoff. This law also amended G.S. 113A-65.1 to allow stop work orders to be effective for five rather than three working days.
Three local bills were also adopted to enhance the ability of Charlotte and Durham local governments to address stormwater management issues. S.L. 1998-66 (S 1203) allows Charlotte to levy stormwater fees to support previously issued revenue bonds. S.L. 1998-60 (S 1397 allows Durham County to join the City of Durham in assessing and using stormwater fees. S.L. 1998-52 (S 1399) allows the City of Durham to use stormwater fees to participate in public-private stormwater improvements and maintenance.
Water and Sewer
The General Assembly took a major step towards enhancing local government ability to finance water and sewer improvements. S.L. 1998-132 (S 1354) authorized a November 1998 statewide referendum on the issuance of $800 million in general obligation bonds for water and sewer projects ($500 million for state matching funds for federal grants and $300 for loans to local governments) and another $200 million in bonds for extension of natural gas service. Both measures were subsequently approved by the voters. The law creates G.S. 143-690 to provide that planning for the water and sewer projects will be coordinated by a nineteen member State Infrastructure Council within the Department of Environment and Natural Resources. Local governments that have comprehensive land use plans will receive priority in funding, as will those with capital improvement plans, water reuse and conservation programs, and those that reduce the overall volume of wastewater. Projects may not be funded that would extend water or sewer lines for new connections in any WS-1 watershed or within the critical areas for WS-II, WS-III, or WS-IV watersheds, though waivers are allowed for correction of pre-existing water quality or health problems. Portions of the new funding are reserved for various specified types of projects, including high unit cost projects, economic development projects, projects in rural and economically distressed counties, for rural schools, and for unsewered communities.
Other Environmental Laws
The General Assembly adopted a number of other laws affecting environmental protection.
S.L. 1998-188 (H 1480) extends the moratorium on construction on new large scale swine farms for an additional six months.
S.L. 1998-126 (H 1462) requires new septic systems that treat less than 3,000 gallons per day to include filters and provisions for access. Commission for Health Services rules apply these requirements to systems permitted on or after January 1, 1999.
S.L. 1998-225 (H 1448), which makes substantial amendments to fisheries regulations, also included a provision designed to clarify that members of the public have free access to the state’s ocean beaches up to the vegetation line, recognizing that this area has traditionally been freely used for walking, fishing, and recreation. A pending suit in Currituck County had raised questions about the scope of these public rights.
S.L. 1998-221 (H 1402), the bill on the Neuse River Rules, also authorized the Coastal Resources Commission to adopt temporary rules on coastal energy facilities.
S.L. 1998-136 (S 1171) amends the well setback requirements for licensed institutional facilities located in single family homes (such as foster homes). This law amends G.S. 130A-235 allow water supply wells for these facilities to be located within the building setback required for institutional uses, provided tests show no contamination of the water and there are no health hazards associated with the well. The Commission for Health Services is to adopt temporary rules regarding this setback waiver by January 1, 1999.
S.L. 1998-168 (S 1299) amends various laws regarding interbasin water transfers. G.S. 143-211 now provides that transfers are not to violate the state’s antidegradation policies. G.S. 143-215.22H now requires registration of all transfers of 100,000 gallons per day or more (was 1,000,000 gallons per day), with an exemption provided for agricultural uses of less than 1,000,000 gallons per day. G.S. 143-215.22I now requires consideration of cumulative impacts, the preparation of environmental assessments, preparation of a drought management plan, and consideration of future water needs as part of the review process prior to approval of regulated interbasin transfers.
In notable budget action, S.L. 1998-212 (S 1366): appropriated $250,000 to the Farmland Preservation Trust Fund for a pilot program for the purchase of agricultural conservation easements (Sec. 13); appropriated $400,000 for grants for historic waterfront revitalization projects in the cities of Murfreesboro, Washington, Swansboro, Jacksonville, and Washington, Beaufort, Hyde, and Tyrell Counties (Sec. 15.2B); appropriated $300,000 to the Upper Neuse River Basin Association for the development of a comprehensive state-local watershed management plan (Sec. 14.15); and transferred $47.4 million to the Clean Water Management Trust Fund Reserve to continue that program. Also, Sec. 29.13 of S.L. 1998-212 (S 1366) amends the allowable credit against income taxes for natural area, beach access, and conservation easement donations to increase the maximum tax credit allowed from $250,000 to $500,000 for corporations (G.S. 105-34) and from $100,000 to $250,000 for individuals (G.S. 105-151.12). This provision also deletes the previous requirement that the fair market value of the donation be added to taxable income in order to claim the credit.
Inspections and Code Enforcement
S.L. 1998-172 (H 1260) solves a problem that was created by a legislative change made last year. In 1997 the General Assembly amended G.S. 143-138(e) to prohibit local amendments or modification to the State Building Code, except for those involving fire prevention regulations (volume V of the Code). An unintended consequence of this change was to call into question floodplain management ordinances adopted by local governments. Many North Carolina local governments have adopted ordinances of this type in order to qualify for the federal flood insurance program. These ordinances are widely viewed as land-use control ordinances. However, they typically also include regulations governing the construction and floodproofing of buildings allowed within flood hazard areas. The State Building Code does not currently include flood hazard regulations, but the ordinance provisions required by the federal flood insurance program clearly fall within the scope of the Code. S.L. 1998-172 (H 1260) treats local ordinances governing building construction in floodplains as local modifications to the Code, but makes them an exception to the general prohibition against local Code modifications. It clarifies that the exception applies to ordinances that include provisions governing such matters as building improvements, foundation construction, protection of mechanical and electrical systems, building anchorage, and acceptable flood resistant materials.
Prior to 1997, local modifications to the Code were permitted, but only with the approval of the North Carolina Building Code Council. However, no city or county flood hazard ordinances were ever submitted to or approved by the Council before the 1997 legislative change. S.L. 1998-172 (H 260) resolves the tenuous status of these ordinances by ratifying those that were in effect on April 17, 1997, the date G.S. 143-138(e) was last amended.
H 1260, as filed, also included language establishing a continuing education requirement for officials who enforce the State Building Code. This proposal, recommended by the Legislative Research Commission Committee on Building Codes would have required code officials to complete twenty-four hours of continuing education credit every three years in order to maintain certification. However, this proposal was deleted from the bill before it was ever referred out the House committee to which it was originally referred.
The North Carolina Building Code Council
The provisions of S.L. 1998-57 (H 1334) affect the North Carolina Building Code Council in one way or another and were supported by the North Carolina Homebuilders’ Association. Under current law the Council must direct the Office of State Budget and Management to prepare a fiscal note for any proposed change to the State Building Code that has a substantial economic impact. (A substantial economic impact is defined as an aggregate financial impact on all persons affected of at least $5 million in a twelve-month period.) S.L. 1998-57 requires that such a fiscal note must also be prepared for any proposed Code change that "increases the cost of residential housing by eighty dollars ($80.00) or more per housing unit." Several other features of the act reflect the concern of residential builders, particularly those who work at the coast. The law first increases the membership of the Code Council from fifteen (15) to seventeen (17). It provides for a second registered architect to be appointed to the Council and also adds a licensed general contractor specializing in coastal residential construction. In addition, it directs the Code Council to reexamine the wind-load resistance requirements that apply to residential dwellings. In doing so the Council must consider site-specific factors, "the actual experience to date of the existing wind-load resistance requirements," and "the impact of the proposed requirements on housing affordability."
Conflict of Interest
The North Carolina conflict of interest statutes (G.S. 160A-415; G.S. 153A-355) impose strict limitations that apply to members of local inspection departments and contract inspectors. The laws prohibit these officials from being financially interested in or employed by a business that is involved in the construction, alteration, or maintenance of any building within that jurisdiction, unless the official owns the building. S.L. 1998-122 (H 915) reflects the fact that some inspectors, especially part-time inspectors who have opportunities for moonlighting, have chafed under the prohibition. The new law amends G.S. 160A-415 and applies only to cities and their employees and contractors. It exempts from the conflict of interest provisions any firefighter whose primary duties are fire suppression and rescue, but who also engages in fire inspection activities as a secondary responsibility. However, it also prohibits such a firefighter from inspecting any work actually done, or materials and appliances supplied, by the firefighter or the firefighter’s business within the preceding six years.
Code Enforcement on Cherokee Indian Tribal Lands
The title of S.L. 1998-21 (S 1466) is "AN ACT TO ALLOW THE EASTERN BAND OF CHEROKEE INDIANS TO PERFORM BUILDNG INSPECTIONS ON TRIBAL LANDS." The title is misleading because it is unlikely that the Cherokee Nation must gain the permission of the North Carolina General Assembly in order to regulate building construction on North Carolina tribal lands. However, just what building code provisions do apply on tribal lands has caused confusion, particularly because the Cherokee Nation has requested assistance from North Carolina local governments in enforcing building regulations adopted by the tribe. S.L. 1998-21 reflects the interest of the Eastern Band of the Cherokee Indians in becoming subject to the jurisdiction of the State Building Code and the enforcement authority of local government building inspectors. In order to achieve this end the act adds a new G.S. 153A-350.1. It apparently serves to give the Cherokee Tribe the attributes of a county insofar as lands held in trust for the Tribe in Cherokee, Graham, Haywood, Jackson, and Swain counties are concerned. For purposes of enforcing the State Building Code within its jurisdiction the Cherokee Tribal Council has the same powers of a board of county commissioners.
Other Local Acts
S.L. 1998-85 (H 1595) allows the Town of Wrightsville Beach to adopt an ordinance requiring the use of sprinkler systems in certain new buildings within its city limits and its extraterritorial planning jurisdiction. The town's authority applies to (i) buildings in excess of 50 feet in height; (ii) nonresidential buildings; and (iii) residential buildings that have three or more dwelling units. S.L. 1998-13 (H 1407) allows the Town of Nags Head to adopt ordinances of the same variety. However, its ordinances may apply to (i) buildings greater than 50 feet in height; (ii) nonresidential buildings that contain at least 5,000 square feet of floor surface area; (iii) buildings that are designed for assembly occupancy that can accommodate more than fifty people; and (iv) multifamily buildings that include three or more dwelling units. In addition, the authority of Nags Head also extends to existing buildings to the extent that the provisions of the State Building Code apply to existing buildings.
Local governments in North Carolina increasingly have to deal with the problem of abandoned houses. Some owners vacate and close houses rather than repairing or demolishing the homes. In some instances the abandoned homes become eyesores or are used for illicit purposes, thus adversely affecting the surrounding neighborhood. G.S. 160A-443(5a) gives municipalities in counties with populations over 163,000 the authority to require buildings that have been vacated and closed for a year to be repaired or demolished.
In recent years smaller cities have sought local legislation to be afforded this same authority. Lumberton secured such authority in 1995, as did Roanoke Rapids, Newport, Greenville, Bethel, Farmville, and the municipalities in Lee County in 1997. In 1998 two local bills were adopted to allow additional smaller cities to use the procedures of G.S. 160A-443(5a) to address abandoned houses. S.L. 1998-26 (H 1290) extends this authority to Waynesville and S.L. 1998-87 (H 1618) extends it to Eden (though the latter bill inadvertently omitted reference to several local bills adopted in previous sessions).
DOT Board Reform
The past several years have seen a spate of bad publicity about the operations of the North Carolina Board of Transportation and the execution of transportation policy. There have been allegations of Board member conflict of interest, claims that appointments are linked to the extent of an appointee’s political contributions, and various other suggestions of inappropriate Board member behavior. S.L. 1998-169 (H 1304) is a reaction in part to these charges. The new legislation imposes a variety of ethical and disclosure requirements on anyone who is appointed to the Board or appointed Secretary of Transportation and makes certain changes in the composition of the Board. First, both current and future office-holders must disclose any contributions that the office holder or a member of that person’s immediate family has made to the political campaign of the appointing Governor during the preceding two years. Those appointed to one of these positions after 2001 are also subject to a more demanding standard. An appointee must also disclose contributions received as a candidate for certain other offices or positions, if the contributions were made within the two years preceding appointment as a Board member or Secretary. The offices and positions for which contributions must be reported include any statewide or State legislative elective office or membership on any political party executive committee or political committee acting on behalf of a candidate for statewide or State legislative office.
This reform bill also directs the Board to adopt an ethics policy by Dec. 1, 1998. The new policy must prohibit a Board member from acting on a matter if a financial conflict of interest exists, or there is an appearance of one. In addition, Board members and the departmental secretary must file an economic interest statement that includes a listing of the individual’s real estate holdings and financial interests in businesses related to the State’s transportation system. Similarly, they must file a statement of association indicating affiliation with societies, organizations, and advocacy groups whose activities pertain to the State's transportation system.
Other features of the bill elaborate the conflict of interest features of present law affecting Board members. The amendments clarify that a Board member may not take an official action or use the member’s official position to profit the member’s immediate family, a business with which the member or the member’s immediate family has a business association, or a client of the member or the member’s family.
The Board itself is directed to develop for its members an education program both for new and holdover members dealing with ethics and Board member duties and responsibilities. The program is to be instituted by Jan. 1, 1999, and held at least once annually thereafter
S.L. 1998-169 also reorganizes the Board of Transportation. It reduces the size of the board from twenty to nineteen members and the number of at-large members from six to five. It directs that at least three members of the Board must be registered voters of a political party other than the political party of the Governor (increased from one). It specifically acknowledges that the fourteen members that represent each of the geographic highway divisions are to direct their efforts to developing transportation policy and addressing transportation problems in their respective regions of the state. They are also to consult the local governments and the Transportation Advisory Committee (TAC) in the region they represent. In contrast at-large members are expected to address these matters with a statewide perspective. The new law directs that the five at-large members be qualified as follows: (1) one with expertise in State environmental issues; (2) one familiar with State ports and aviation issues; (3) one residing in a rural area with broad knowledge of and experience in transportation issues affecting rural areas; (4) one residing in an urban area with broad knowledge and expertise in mass transit; and (5) one with broad knowledge and expertise in government-related finance and accounting.
Local Government Consultation/Studies
S.L. 1998-169 (H 1304) also includes a number of provisions affecting State transportation planning and programming. It adds a new G.S. 136-11.1 entitled "Local consultation on transportation projects." It directs the North Carolina Department of Transportation to inform all municipalities and counties affected by a planned State transportation project and provide them with a 45-day period prior to Board of Transportation action on the project to adopt a resolution expressing their views on it. A city or county may authorize its Transportation Advisory Committee to provide the response. The opportunity to respond must be provided not only for projects in the Transportation Improvement Program, but also for projects in the Secondary Roads Paving Program and certain other projects whose cost exceeds $150,000. The department and the Board are to consider, but are not bound by, the views of the local government.
The act also directs that a number of studies and plans be developed by the Board of Transportation, with the assistance of the Secretary and Department of Transportation, before the end of the year. In each case the Board is to report its findings and recommendations to the Joint Legislative Transportation Oversight Committee and the Joint Legislative Commission on Governmental Operations by December 31, 1998. First, the Board is to develop a plan to establish Rural Transportation Planning Organizations (RPOs) as counterparts to the existing Metropolitan Planning Organizations (MPOs). Second, the Board is directed to study the realignment and reorganization of the fourteen transportation divisions of the State so that they more closely match the urban and rural regions that have developed in the state. The Board is to give primary consideration to the boundaries of the metropolitan planning regions in realigning the divisions. Third, the Board is to study the backlog of maintenance needs for State highways and suggest methods for addressing the matter, including sources of funding.
Transportation Corridor Official Maps
In 1987 the General Assembly adopted a package of legislation designed to allow the North Carolina Department of Transportation (NCDOT) and the state’s municipalities to acquire right-of-way for and protect future roadway corridors. The Roadway Corridor Official Map Act, adopted that year, authorizes the Board of Transportation to adopt an official map for any portion of the State highway system, whether existing or proposed. It also permits a city to adopt such a map for any thoroughfare included in a city’s comprehensive street and highway plan. Once adopted, the effect of such a map is to prohibit the granting of any building permit or the approval of any subdivision plat for land encompassed by the designated corridor for a period of up to three years.
S.L. 1998-184 (S 1291) is a reflection of the increasing emphasis on modes of transportation that do not involve the automobile. It renames the act the "Transportation Corridor Official Map Act." It expands the purposes of the act to include preservation of public transportation corridors, including rail corridors. (The act clarifies that although a transportation corridor does not include bikeways or greenways, it does include adjacent transit or rail stations and parking lots). It also allows an official map to be adopted by a regional public transportation authority or a regional transportation authority as well as by a city or the Board of Transportation, if the transportation facility involved is included in an adopted long-range transportation plan.
The new law also makes various refinements to the Act. Now, for the first time, each owner of land affected by the corridor designation must be notified by first-class mail of the public hearing that must be held before adoption of the official map. Another feature, designed to protect the interests of landowners, requires that the names of all affected landowners be indexed in the "grantor" index in the office of the register of deeds. Other changes affect the continuing vitality of the development restrictions. Under the current law the corridor is deemed abandoned if work has not begun on the project’s environmental impact statement or its preliminary engineering within one year after map adoption. The new law does clarify that a new corridor map may not be readopted or amended so as to extend the period during which the restrictions apply unless the amended map establishes a substantially different corridor in a primarily new location. Unfortunately it does not clarify the period of time during which this prohibition against map amendment applies
S.L. 1998-184 (S 1291) directs regional public transportation authorities and regional transportation authorities to adopt procedures for the granting of variances from the development restrictions and for acquiring corridor land in hardship situations. These procedures must provide that if one of these authorities denies a variance request, the petitioner is entitled to a de novo hearing conducted by NCDOT in accordance with the same procedures that would be used if NCDOT had original jurisdiction to hear the variance request. If property is deemed eligible for acquisition because of hardship, the land must be acquired within three years of the finding or else the map restrictions no longer apply.
The act became effective November 1, 1998, and applies to maps and map amendments adopted after that date.
Throughout the 1990s North Carolina involuntary annexation statutes have been the subject of almost constant debate and study. The North Carolina League of Municipalities has opposed many of the legislative proposals offered during this period. However, a proposal recommended by an LRC committee this year received the League’s support and was eventually enacted as S.L. 1998-150 (H 1361). The legislation became effective November 1, 1998. The new law is analyzed in greater detail in the chapter entitled Local Government and Finance.
Generally, the legislation places more demanding requirements on cities than desire to annex. The annexation standards governing the land use, the extent of land subdivision, and the population density of the area are altered in a way that will make them more difficult for cities to satisfy. One unusual change concerns the annexation of agricultural land that qualifies for use-value taxation. If annexed, such land becomes part of the city and becomes part of the city’s planning jurisdiction, but is not subject to property taxation nor is the area entitled to city services.
The new law also gives attention to procedures designed to protect the rights of affected property owners. If a city does not provide police protection, fire protection, street maintenance, and garbage collection service within 60 days after the effective date of the annexation, an affected owner may petition the Local Government Commission for an order to abate property taxes until after the city begins to provide such services. Another feature is the requirement that the city hold a public informational meeting before it holds its public hearing. The city must present its annexation report at the meeting and respond to questions. The report must include a statement showing how the annexation will affect the city’s finances and services, including the estimates of the changes in city revenues.
S.L. 1998-150 (H 1361) also extends the time period in which property owners may seek judicial review of the annexation. It also allows a court to declare the ordinance void rather than simply remanding the matter to the city for correction.
Several local acts authorize variations from the general statutes concerning satellite annexations. These include acts affecting Raleigh (S.L. 1998-200, S 666); Banner Elk (S.L. 1998-77, H 1309); Asheboro (S.L. 1998-203, H 1629); and Morehead City (S.L. 1998-42, H 1638). Other local acts simply change municipal boundaries as set forth in legal descriptions included in the act or correct surveying errors. These include acts affecting Pinehurst (S.L. 1998-200, S 666); Spruce Pine, Mocksville, and Lake Waccamaw (S.L. 1998-200, S 666); Ocean Isle Beach (S.L. 1998-34, H 1475); Pembroke (S.L. 1998-39, H 1504); Asheboro (S.L. 1998-203, H 1629); Pleasant Garden (S.L. 1998-205, H 1401); Franklin (S.L. 1998-51, S 1103); Farmville (S.L. 1998-32, S 1166); Landis (S.L. 1998-65, S 1333); and Chadbourn (S.L. 1998-53, S 1410). One other local act repeals an annexation ordinance adopted by the Town of Cape Carteret (S.L. 1998-41, H 1637).
Joint Legislative Commission on Municipal Incorporations
In recent years a number of municipalities have been incorporated that have provided few services to their citizens, have imposed no local taxes, and have relied almost exclusively on revenues shared by the state. The North Carolina General Assembly is generally free to incorporate cities if, when, and how it deems appropriate, subject to several provisos. Article VII, Section 1 of the North Carolina Constitution prohibits the General Assembly from incorporating a city if it lies within a certain distance of an existing municipality. (Permissible distances vary according to the incorporating city's population.) However, this limitation does not apply if the annexation is adopted by a vote of three-fifths of all of the members of each house, as is virtually always the case. One other feature of the incorporation process is the role of the Joint Legislative Commission on Municipal Incorporations. Sponsors of a proposed incorporation may submit it to the Commission for the Commission's evaluation and recommendation. However, the recommendation is not binding. Since the General Assembly has not insisted that proposals be submitted to the Commission, many incorporation proposals have been adopted without any Commission evaluation at all.
S.L. 1998-150 (H 1361) changes the standards by which a proposal is evaluated, but does not compel proposals to be reviewed by the Commission. Under the new law, the Commission may not provide a positive recommendation unless the entire area proposed for incorporation would also qualify for annexation under the involuntary annexation statutes. In addition, the Commission is prohibited from giving a positive recommendation unless sponsors submit a plan by which the municipality will provide at least two municipal services. The services must be two of the following:
Planning and zoning
The following municipalities were incorporated in 1998: Oak Ridge (S.L. 1998-113); Wesley Chapel (S.L. 1998-43, S 1137); Cranberry (S.L. 1998-91, S 1497); and Hemby Bridge (S.L. 1998-143, S 1514).
Other Boundary Changes
Two other legislative acts concerning local government boundary changes are of special note. S.L. 1998-98 (H 860) authorized a voter referendum on a proposition to remove an area known as Carolina Shores from the Town of Calabash and incorporate the former as a municipality. (The ballot proposition was later approved.) The other matter concerned the famous "Meck Neck," an isolated area of Mecklenburg County connected by land to Iredell County, but not to the rest of Mecklenburg. S.L. 1998-15 (S 1222) changes the Mecklenburg-Iredell boundary line by transferring the land in the Meck Neck from Mecklenburg County to Iredell County.
In 1996 the North Carolina General Assembly adopted the William S. Lee Quality Jobs and Business expansion Act, codified as Article 3A of Chapter 105 of the North Carolina General Statutes. The law introduced a number of income tax and franchise tax incentives for new and expanding businesses that were recommended by the Governor’s Economic Development Board. A number of additions and modifications were made to the act in 1997. Legislation adopted this year, S.L. 1998-55 (S 1569), makes additional changes to the variety of tax incentive programs that play important roles in the State’s economic development program. Some of the tax incentives are obviously designed to benefit specific businesses that have chosen to locate major facilities and employment centers in North Carolina. These include the Federal Express air courier hub in Guilford County and the Nucor steel mill in Hertford County.
Perhaps the feature of the act that is of greatest interest to local governments concerns the designation of a "development zone." A development zone consists of one or more contiguous census tracts or census block groups. To qualify it must have a population of 1,000 or more, must be located in a city with a population of more than 5,000, and more than 20% of its population must be below the poverty level. Once designated by the Secretary of Commerce upon the request of a taxpayer or a local government, the designation is effective for 48 months. The effective of the designation is to provide a special investment tax credit to a taxpayer investing in machinery and equipment, providing worker training in a development zone, or creating jobs. For purposes of these first two credits, location in a development zone is treated the same as location within a tier-one enterprise zone, the zone in which credits are the greatest. One other benefit of development zone designation is that the new law provides that projects located in such zones are given priority for Community Development Block Grants, along with enterprise tier-one areas. Local governments should note, however, that in order for these benefits to become available, the governing body of the city in which the zone is located must adopt a strategy to improve the zone and establish a development zone committee to oversee the strategy. The strategy and the committee must conform to requirements established by the Secretary of Commerce.
In addition, the act makes the following changes to existing law:
Allows certain recycling facilities (1) an investment tax credit ranging from a maximum of $150,000 in 1998 to $10.4 million in 2004-2007; (2) a refundable income tax credit, (3) a sales tax reduction for cranes and materials handling equipment; (4) a sales tax refund for construction materials; and (5) a property tax exemption for recycling property;
Allows certain air courier services (1) a sales tax reduction for materials handling equipment used at a hub; (2) a sales tax exemption for aircraft lubricants and parts used at a hub; and (3) a property tax exemption for aircraft used at a hub.
Expands the Industrial Development Fund and Utility Account to include the same businesses as the William S. Lee Act;
Extends the Utility Account to include "tier two" counties in addition to "tier one" counties;
Raises the amount of the maximum grant under the Industrial Development Fund from $4,000 to $5,000 per new job and from $400,000 to $500,000 per project;
Permits the Department of Commerce to allow a local government to use 2% of its Industrial Development Fund grant funds to administer the grant;
Provides for an additional jobs credit of $4,000 per job if the position is located in a development zone.
Increases the worker training credit from 50% of the wages paid to eligible employees to 100%;
Amends the Lee Act to expand the central administrative office credit to gross premium taxes and to jobs created during a period of 24 months before the property is constructed;
Provides tax investment tax credit threshold applies only once for a two-year project;
Expands the investment tax credit to include leases of property as well as purchases of property if the project costs more than $150 million;
Simplifies the worker training tax credit;
Imposes a $75 fee for those who apply for certification of incentive eligibility;
Extends the credit carryforward period for projects over $150 million from five years to twenty years;
Establishes conditions under which an industrial park straddling two counties can be assigned the designation of the lower-tier county;
Clarifies that credits are allowed for businesses that are sold only if there is imminent closure or an employee buyout;
Clarifies the method of calculating the investment tax credit for leases; and
Clarifies the definitions of the types of businesses eligible for incentives.
Until this legislative session, North Carolina had never had a law designed to apply specifically to planned residential communities and relationships among developers, property owners, and property owners’ associations in such a development. For this reason alone the North Carolina Planned Community Act adopted this year is a significant legislative initiative. S.L. 1998-199 (S 801) began as a bill recommended by the Real Property Section of the North Carolina Bar Association and was based on recommended uniform state legislation. Although the Senate passed S 801 early during the 1997 session, it languished when the North Carolina Homebuilders Association opposed some of its features. However, some of groups interested in the bill reached a compromise during the late summer of 1998 and a more limited version of the bill was adopted in the fall.
A planned community is generally defined as a development in which the lot owner is obliged by a declaration to pay real property taxes, insurance premiums, and other expenses to maintain or improve other property. The definition expressly excludes condominium and cooperative developments, but does include developments in which lots are subject to leases of at least twenty years in length. (A prototypical planned community is a planned residential development that includes common open space and in which lot ownership confers automatic membership in a homeowners’ or lot owners’ association.)
The act applies to new residential developments with more than twenty lots. However, a community with twenty lots or fewer or developments with lots restricted to nonresidential use may be made subject to the act, if the declaration provides or is amended to provide that it is. Perhaps more important, a planned community of any size, established prior to January 1, 1999, may elect to come under the act by amending its declaration. Such an amendment may be adopted with the approval of those holding 67% of the votes in the association, or any smaller majority specified by the declaration.
Another important provision bans any zoning or land subdivision ordinance provision that would prohibit a planned community or which would impose on such a community a requirement that it is not imposed upon a similar development with a different form of ownership or administration.
Some of the other features of the Planned Community Act are as follows:
Provides for the creation, alteration, and termination of such developments;
Requires the creation of a lot owners’ association;
Provides for the powers of members and officers of the executive board, including the power of lot owners to remove an executive board member without cause;
Establishes procedures for holding an annual meeting of the association;
Establishes a quorum of 10% of the votes which may be cast, unless the bylaws provide otherwise;
Requires the association to maintain property and liability insurance; and
Provides that an assessment levied against a lot that remains unpaid for at least thirty days constitutes a lien against the lot.
The act applies to planned communities created on or after January 1, 1999.
Richard D. Ducker
David W. Owens