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House | July 2, 2014 | Committee Room | Finance

Full MP3 Audio File

Few simple, very simple bills. Senator Heist, on Senate Bill 874, so are you ready on Spruce Pine Deannexation? [SPEAKER CHANGES] Thank you madam chairman, members of the committee. This deannexation bill has the full agreement of the property owners, and the town of Spruce Pine. They have agreed that they should part ways and no longer be in the same. [SPEAKER CHANGES] Representative Moffitt. [SPEAKER CHANGES] Thank you Madam Chair, I move for a favorable report. [SPEAKER CHANGES] Members of the committee, you’ve heard the motion. All in favor will say Aye. [SPEAKER CHANGES] Aye. [SPEAKER CHANGES] All opposed, no. Senator Heist, who will handle the bill for you on the house floor? [SPEAKER CHANGES] Representative Dobson. [SPEAKER CHANGES] The, thank you sir. [SPEAKER CHANGES] Madam Chair. [SPEAKER CHANGES] Yes Sir. Senate Bill 1144. Representative Setzer, sir you’re recognized. Have the PCS before us for the purpose of discussion. Representative Malone, are you here? Yes sir, you wanna come up here. And we’ll have staff to explain the, the bill for you if that’s okay. Staff, would you take on the PCS? [SPEAKER CHANGES] Yes, ma’am. The PCS deletes the contents of the original bill, and directs revenue laws to study the scope and application of the 1% 80 rate that applies to mill machinery and other similar types of equipment purchased by manufacturers. [SPEAKER CHANGES] Representative Davis, you’re recognized sir. For motion. Motion being. Representative Ted Davis, sir. [SPEAKER CHANGES] I make a motion for a favorable report. [SPEAKER CHANGES] Favorable report to the PCS and favorable to the original bill. [SPEAKER CHANGES] Yes, ma’am. [SPEAKER CHANGES] Is that your intent? Yes, sir. Members of the committee, you have a motion for favorable report to the PCS and favorable to the original bill. All in favor will say Aye. Thank you. Senate Bill 846 Shallot Deannexation, I believe staff will handle this bill. And Representative Brawley, sir, you’re recognized for a motion. PCS. [SPEAKER CHANGES] Excuse me madam chair, I move that the PCS be properly before the committee. [SPEAKER CHANGES] Thank you. All in favor will say aye. All opposed no. Staff would you give us the highlights of the PCS please? [SPEAKER CHANGES] All right the PCS deannexes some properties from the town. The town’s position is that it does not oppose deannexation. And it also rolls into the PCS Senate 731 at the bottom which updates the occupancy tax of South Port. [SPEAKER CHANGES] Representative Starnes, sir you’re recognized for a motion. [SPEAKER CHANGES] I move for a favorable report on PCS and favorable to the original bill. [SPEAKER CHANGES] Further discussion? All in favor will please say Aye. All opposed no. Representative Collins moves that we have the minutes before us for the purpose of approving those minutes from the last meeting, all in favor will say aye. Okay, I believe that’s unanimous. We’ve got the coal ash. Okay. Who’s handling that? Who’s handling coal ash? Senate Bill 729, Representative Hager, sir, are you handling 729? Samuelson. Representative Samuelson, ma’am, you’re recognized. Members of the committee, the fiscal note is being passed out as we speak, so. The bill and the summary. [SPEAKER CHANGES] Thank you madam chairman, sorry about that. If you all will look at the bill on page. Oh, okay. [SPEAKER CHANGES] It’s coming. [SPEAKER CHANGES] I’ll breathe a minute then. [SPEAKER CHANGES] We’ll stand at ease until members have their copy of the bill, please.

Is there anyone that does not have a copy of the bill yet? Representative Luebke does not have a copy of the bill yet, and the back row. Is there anyone that does not have a copy of the bill now? Representative Samuelson, you have the floor, ma’am. [SPEAKER CHANGES] Thank you, Madam Chairman. Members, if you’ll look on page 48, line 25, this is the fee portion of the coal ash bill. This portion is exactly the same as came over from the Senate; has not been changed. I’m going to have staff go over the details of it, but the idea behind it is that a lot of what we’re having to do to start monitoring these coal ash pits or impoundments is going to require extra staff, and so this will be the fee the fee that will then go to DENR so that they can then pay for that extra staff. I’ve got some blank looks. Do you not see it on page 48? Oh, ya’ll have got the newly… is that the newly-engrossed act? Tell me what the right page number is. [SPEAKER CHANGES] Page 48, starting on line 25. [SPEAKER CHANGES] Representative Samuelson, would you like staff to do it so we can maybe move through it faster? [SPEAKER CHANGES] Yes ma’am, they may, but they just concurred that it was the same line and page number that I have. [SPEAKER CHANGES] Hi. [SPEAKER CHANGES] Hi. [SPEAKER CHANGES] Representative Samuelson is referring to the right section. It’s part 9, it’s on page 48, and the copy that was just passed out to the members, it starts on line 25, and this creates a new regulatory fee for combustion residual surface impoundments, and these are the coal ash ponds that we have been referring to. This is very similar to the reg. fee that the General Assembly adopts each year in its budget; however, this is a new and additional reg. fee, and it is imposed only on the North Carolina jurisdictional revenues of public utilities with a coal ash pond. So this new reg. fee is .03 % of the North Carolina jurisdictional revenues, and the purpose of this fee is to pay for the cost of coal ash management, and it will be only used to pay for the cost of coal ash management. This fee becomes effective July 1st 2014, and it will be monthly for the first year and then paid quarterly after that. The fee also has a sunset, and the fee actually expires April 1st 2030. And that is the finance portion of the bill. [SPEAKER CHANGES] Members of the committee, do you have questions? Representative Luebke. [SPEAKER CHANGES] Thank you. The question is for Representative Samuelson, which is how did you come up with .03 as opposed to .01 or.05? What was the logic of this number? [SPEAKER CHANGES] The logic of the number was determining the number of staff people that might be hired. If staff would like to cover the specifics, that would be great. [SPEAKER CHANGES] Thank you. [SPEAKER CHANGES] Yes sir. This was calculated to provide 25 additional staff members to DENR and 5 staff for the Coal Ash Commission, the CAM commission that is also created in the bill. So that is how the fee was set. [SPEAKER CHANGES] Thank you. [SPEAKER CHANGES] Members of the committee, are there further questions in regard to the fee? I don’t see any hands. Are you all satisfied? Representative Starnes. [SPEAKER CHANGES] Thank you. Well I’m trying to figure out what we did in the budget. We appropriated some money for some new positions to DENR in the budget, and were they tasked with part of the coal ash cleanup or enforcement? [SPEAKER CHANGES] My understanding, and staff may correct me if I’m wrong, is the positions in the DENR budget are the DENR positions to help with certain things that are still exclusively DENR functions, but these positions are for things directly related to the things commanded in this bill, and to the staff of the Coal Ash Commission. For instance, these people may be helping to come up with the terms, but the DENR people still have to issue the permit. [SPEAKER CHANGES] Members of the committee, are there further questions? Seeing no hands, waiting for a motion. Representative Jones. [SPEAKER CHANGES] Madam Chairman, I move for a favorable report of House Committee Substitute for Senate Bill 729, unfavorable to the original.

Members of the committee, you’ve heard the motion. All in favor will say aye, all opposed no. I believe that’s unanimous. [SPEAKER CHANGES] Thank you. [SPEAKER CHANGES] Think there was one no. [SPEAKER CHANGES] Senate Bill 853. Senator Barrington. [SPEAKER CHANGES] Thank you Madam Chair. Members of the committee, you have before you--do they have the fiscal note yet, has it been distributed?--the fiscal note and also the bill. The bill was passed through the JV committee here in the House and I would like to yield to staff if they might describe or explain the fiscal note. [SPEAKER CHANGES] Mr. Chiles. [SPEAKER CHANGES] Thank you Madam Chair. William Chiles with Fiscal Research. The fiscal note shows a cost to this bill of about $50,000. $53,423 in the first year. This is essentially for a one personnel judicial system to deal with the expanded reporting requirements for the business court. They don’t have the technology to capture all of these pieces of data at the current time and they need another person to help gather this information. There’s also a revenue of $13,400 from the expanded filing fee. [SPEAKER CHANGES] Thank you. Madam Chair, I’ll be glad to take questions if there are any. [SPEAKER CHANGES] Members of the committee. Representative Starnes. [SPEAKER CHANGES] Thank you, and this is just for general information. It says that the business court will handle complex business issues. What qualifies a case for the business court? [SPEAKER CHANGES] Madam Chair? [SPEAKER CHANGES] Yes ma’am. [SPEAKER CHANGES] Thank you for the question, Representative Starnes. That really is one of the major focuses of this bill, the modernization of what is the venue of the business court. You can see on page two of the bill there are lists of the various venue options, beginning on line 35 and then continuing on. In the old bill, or as the bill is currently written, cases that “involved the internet” are potentially subject to the business court. Back in the ‘80s, when this bill was currently drafted, that would make sense because very few people even knew what the internet was then and it probably would be very complex. Now, if I send you an e-mail and we get into dispute over it, does that involve the internet and would that give one of us the option for the business court? What we found is there was a need to modernize those criteria and they’re set forth and were fully vetted in JV in two different hearings. In 1-9, describing what these complex business matters are and then in B, on the next page, we also include tax law related subjects, cases involving $5 million or more and then COLA taxes which are already part of the business court bill. We made no change to that. Those are involving video or telecommunication type disputes. [SPEAKER CHANGES] Representative Starnes. [SPEAKER CHANGES] Tell me what has been the workload of the business court before this bill and what do you anticipate it to be after the bill? [SPEAKER CHANGES] Other than the additional reporting requirement, I really do not anticipate that this is going to increase their workload. What we were trying to do was sharpen what would qualify and be more specific in what would qualify. Hopefully more businesses will come here as a result of this and they will choose North Carolina as the place for their business, so there would be more businesses to actually use the business court. As it’s drafted, if our business population stays the same, it’s my opinion sir that this should streamline the process instead of increasing the workload. There is the reporting requirement that will take some additional time but the reason for that is so that we can monitor and see if there would be necessary additions to the court, and it also gives us complete

not complete, but gives us better vision as to what the court does. [SPEAKER CHANGES] Follow-up, Representative Starnes? Representative Luebke? [SPEAKER CHANGES] Thank you, Madam Chair. My question is actually following up on what you just said. How does this bill make North Carolina more attractive? What is in this bill that makes North Carolina more attractive as a business location? [SPEAKER CHANGES] I really appreciate that question. When I came down here two years ago this was one of my goals. This is what I wanted to see happen. As part of our revision in deregulation and taxation, and all the other things that we’ve tried to do here to accomplish a warmer business climate, our business court was needing to be modernized because of some of the examples that I’ve already given. What this will do is send to the world that what we are doing is providing a place where business disputes can be efficiently rendered and so they can get on back to business. Being an attorney, I know how important predictability is in human behavior and in business, so the goal of this--because you’ll notice one of the things in here is we’re going to be developing a consistent body of case law--what we’re trying to do, we would like to be like Delaware with their Chancery Court but we cannot do so constitutionally. We have special courts here and what this will do is provide that certainty and that vision and that opportunity for a business to be able to predict if we do x then y is going to happen. I believe that’s what’s going to help our economy and help businesses want to do business in North Carolina. [SPEAKER CHANGES] Representative Luebke, do you have a follow-up sir? [SPEAKER CHANGES] Yes, and I guess we just saw the bill. I suppose if I looked at my calendar last night and gone home I could have, and should have, studied it but tell me what modernization means, if you would please. [SPEAKER CHANGES] Madam? [SPEAKER CHANGES] Yes ma’am. [SPEAKER CHANGES] I gave one example: the internet. A case involving an internet action. That needed to be modernized. What we’ve done in the statute too is make specific references to our North Carolina statutes that involve business transactions. We’ve worked very closely with stakeholders from the Defense Bar that practices very prolifically in the business court to the Justice Center. Bill Rowe was very concerned that consumers didn’t get dragged into this through this modernization and so we’ve actually gone in and cited to our specific statutory law in cases arising under that and similar to that so that, again, businesses will know what they can count on and whether they will be able to use this court or not to settle their disputes and do so in an efficient manner. [SPEAKER CHANGES] Thank you very much. [SPEAKER CHANGES] Representative Brawley. [SPEAKER CHANGES] If I might ask a question on the bill. [SPEAKER CHANGES] Yes sir. You’re recognized sir. [SPEAKER CHANGES] Senator, having talked to you I know you’re very smart in the legal arena, much more so than myself, but when I read phrases like “without a vote of the shareholder” the lights come on and questions pop up. I recognize there are things that could operate more efficiently if you didn’t have to go back to a vote, same thing around here, but are we still protecting and ultimately responsible to the shareholder? [SPEAKER CHANGES] Madam? [SPEAKER CHANGES] Yes ma’am. [SPEAKER CHANGES] I’m so glad you asked that question. You’re actually talking now about a different part of the bill, the holding company bill. I wish I could say this was my idea but it’s not. It’s came to me but let me tell you Representative Brawley, I am very skeptical of all the good ideas that come across my desk. A lot of them turn out not to be and so I vetted it with my business law background and I could not find anything wrong with the bill. I started with the gold standard in Delaware. After I did that, then I sent the bill over to my old law professor, Tom Hazen. While I do think that they do a very good job of business law at UNC Chapel Hill, he’s very protective of shareholder rights and so he came back and he said that it’s great. So that the committee might understand why it’s great and why we don’t have to worry about it, that part of the bill is only affecting wholly owned subsidiaries and so there’s no reason to put a business through the vote because they own the whole darn thing. That’s how that works. Thank you for letting me answer that.

Members of the committee. Representative Tine, sir. [SPEAKER CHANGES] Thank you, Madam Chairwoman. Am I understanding this correctly, that this is at the same level of court hierarchy as the superior court? Is that right? [SPEAKER CHANGES] Yes, it’s a special court. It’s one of our special courts. [SPEAKER CHANGES] If I could follow-up? [SPEAKER CHANGES] Yes sir. You have the floor. [SPEAKER CHANGES] What is the difference in the filing fee between the superior court and the business court? [SPEAKER CHANGES] I’ll need to defer to staff on that. I don’t know. [SPEAKER CHANGES] Staff? [SPEAKER CHANGES] The filing fee for a case in superior court, civil superior court, is $180 and under this bill currently the filing fee in business court is $1,000 and this bill increases it to $1,100. In business court you also have to pay the superior court fees as well, so it would be $180 plus the $1,100. [SPEAKER CHANGES] Follow-up? [SPEAKER CHANGES] Representative Tine. Yes sir, you have the floor. [SPEAKER CHANGES] What’s the purpose for, or the policy behind, the difference in those two? [SPEAKER CHANGES] The reason for that is that in this particular, the business court in North Carolina, in every case actually a written opinion is rendered and so there’s more service to that, whereas in superior court there would just be a ruling most of the time, and so it is a different procedure and a different process. [SPEAKER CHANGES] Representative Blust. [SPEAKER CHANGES] What is the rationale behind the provision that bypasses the Court of Appeals and takes appeals directly to the Supreme Court? [SPEAKER CHANGES] Thank you for the question, Representative Blust. As I stated earlier, our goal here is to provide and to create a body of predictable case law that businesses can count on and, at this point, certainly our business court is one of the greatest business treasures we have now, it just needs modernizing and improving. One of the ways we can improve that is now when a case is appealed it goes to our Court of Appeals and they do not sit en banc all together, they sit in groups of three. One never knows which judge they would get and also, as I said, it’s not the final word in this state. It is just, I don’t want to say just because it’s very important, but it’s not the Supreme Court. By having these cases go straight to the Supreme Court then they will get the same justices each time, will have the final say unless of course there’s an issue that would lend itself to the US Supreme Court, which is not very often. [SPEAKER CHANGES] Representative Hall, sir. [SPEAKER CHANGES] Thank you, Madam Chairwoman. Question for the bill sponsor. Could you clarify if every case that’s going to be in business courts, does one of the parties have to be in business in order for the case to be in business court or do both the parties have to be a business? [SPEAKER CHANGES] Senator. [SPEAKER CHANGES] I apologize. I was not expecting so many specific questions about the bill today and I didn’t review that portion of the bill again, so if I might defer to staff. [SPEAKER CHANGES] You’re always welcome to the House Finance Committee. Trina? [SPEAKER CHANGES] Representative Hall, I believe the only instance would relate to tax cases. Taxes cases that are coming out of OAH where the party would be the taxpayer, which may be a business but may also be an individual, are required to go to business court in this bill. [SPEAKER CHANGES] So to clarify. Follow-up. [SPEAKER CHANGES] Follow-up. Yes sir. [SPEAKER CHANGES] So I’m clarifying with staff then? [SPEAKER CHANGES] Yes sir. [SPEAKER CHANGES] You could be in business court and not be a business? Neither party would have to be a business? [SPEAKER CHANGES] That’s correct. [SPEAKER CHANGES] Follow-up? [SPEAKER CHANGES] Follow-up. [SPEAKER CHANGES] This is, again, to the sponsor or the staff. Would the parties have an option to be in business court or superior court and if so how is that determination made on the theory that I file a case in business court and the defendant moves to have it removed to regular superior court. Is that an option and how is that determination made? Who makes it? [SPEAKER CHANGES] There are two parts to the bill and so it depends on what kind of case you have. The first part, where it says designation of a complex case beginning

on line 26 of page 2, we have nicknamed those discretionary mandatory, and if you see there it says any party may designate as a mandatory business case any of the following. So if you have 2 parties to a case, and one of th parties wants to go to business court, if it meets one of these specific criteria, then it will go to business court if one of the parties so requests, so moves for that. Then there's the second part, which we have, as I said, nicknamed mandatory mandatory, which appears on page 3 line 22, and those are cases where they shall be. And those are the tax cases that staff talked about, cases of over $5 million in a contract dispute and then finally, the poll attachment ones. And so except for those 3 situations, it's up to one of the parties to be placed in the court. [SPEAKER CHANGES] Do you have follow up, Rep. Hall? [SPEAKER CHANGES] Yes ma'am. And I sure appreciate the indulgence, and I guess one final follow up, and the question is: If the case is regular Superior court, and I as a respondant party want to respond and then file a motion to have it removed to business court, is that because I'm not the party that originated the case, do I have that option to say I want it, and then what happens with the fees associated with it since I'm already responding to a Superior Court case that costs $180? [SPEAKER CHANGES] Yes you can, you can if you are the defendant or the one who's brought into court, you can make the motion for change of venue to the business court, and then the fee we've actually put in here, I'm not sure where that appears, but the fee is shared pro rata amongst- because there could be a number of different parties. And so if there were 13 parties, they would each share pro rata unless the judge, in his or her discretion decides that it should be allocated in another way. [SPEAKER CHANGES] And just one follow up- [SPEAKER CHANGES] Yes sir? [SPEAKER CHANGES] Thank you Madam Chair. So in that instance, if the case is determined that it should have been in business court all the times, so that fee should have been on the plaintiff who filed the case, you're saying- the question is is that the way the fee is allocated in a way irrespective of the fact that the court made the determination that it should have been in business court all the time? [SPEAKER CHANGES] I found on page 4, lines 46-50, "Upon the designation of action as a mandatory complex business case." So however it gets to the business court, then it's payable by each party to the action on a pro rata basis unless otherwise determined or ordered by the business court judge based on a different allocation. So the presumption is, if you have 2 parties it would be divided in half. If you had 10, it would be 1/10th. Unless the business court judge found there would be a reason to allocate it in a different manner. [SPEAKER CHANGES] Rep. Jordan? [SPEAKER CHANGES] Thank you Madam Chair. As one of the co-chairs of judiciary "B", I just wanted to, if it would alleviate any concerns, this bill has ben vetted in judiciary "B" thoroughly twice actually. All the non finance portions of it, and we've made various improvements and technical ammendments and so forth. It's passed unanimousely in Judiciary "B". Thank you. [SPEAKER CHANGES] Rep. Tine? [SPEAKER CHANGES] Thank you Madam Chair. The follow up with that discussion, the "mandatory mandatory" group, the 3 ones that you have there, why are those "mandatory mandatory" and not treated the same way as the other ones. [SPEAKER CHANGES] Well the easiest answer for number 3 is it's already mandatory. If you have a poll attachment case now, it goes to business court. The number 1, it is my opinion and others who have worked on this bill, that we need a predictable case law in taxation, it's very complex, it's very much in niche, and we need to be able to say "this is where those are going to be decided." Then the second one, which we actually worked on in Judiciary "B" about the $5 million and the amount in controversy, I certainly appreciate all the representatives that helped, especially Rep. Daughtry in this matter. What we're trying to send there is part of that message to the world that if you've got a controversy that's sizable in your business and a contract manner, and it meets one of the other criteria, the 1,2,3- all of the criteria before so

not a lien case where there’s been a default in the loan or some simple case. It would have to meet the criteria of the other part. In North Carolina we consider that important and it will be heard in our business court. [SPEAKER CHANGES] Representative Lewis. [SPEAKER CHANGES] Thank you, Madam Chair. May I comment on the bill? [SPEAKER CHANGES] Yes sir. [SPEAKER CHANGES] I just want to reassure the members of the committee that the business court is one of the most successful special courts of its kind anywhere. As the bill sponsor has explained, the meaning of the matters that they consider are very technical in nature and our state, in the administration of justice if you will, benefits from the judges being able to bring this kind of focus and this kind of expertise to review these cases. This is a good bill and, Madam Chair, would now be an appropriate time to seek recognition for a motion? [SPEAKER CHANGES] I believe we already have a request for that, Representative Lewis. Representative Collins sir. [SPEAKER CHANGES] I would be happy to defer to Representative Lewis for the motion. Go ahead Representative Lewis. [SPEAKER CHANGES] Let’s somebody do it. [SPEAKER CHANGES] Madam Chair. [SPEAKER CHANGES] Representative Lewis, you’re recognized for a motion. [SPEAKER CHANGES] Madam Chair, I move that Senate Bill 853 be given a favorable report. [SPEAKER CHANGES] Ladies and gentlemen of the committee you’ve heard the motion. All in favor will say aye, all opposed no. I believe the motion carries. Senator, is Representative Daughtry going to carry the bill on the floor for you? [SPEAKER CHANGES] Yes, please. [SPEAKER CHANGES] Thank you. [SPEAKER CHANGES] Members, before you leave your seats, I’d like for us to take just a minute and be respectful that we have some pages here that we haven’t had the opportunity to recognize. Tristan Adams from Lincoln. Representative Saine, would you stand if you’re in the room, in the back. Thank you, yes. Jason Bauer from Iredell, and Harrison Bryant from Alexander. Emily Calica from Montgomery, Emrys Roberts from Columbus and Emily Gage from Polk. Students, we appreciate you being with us. You’ve just witnessed House Finance and it gets a little testy sometimes. Glad you’re here. Are there other business or concerns of the committee? Representative Lewis. [SPEAKER CHANGES] Madam Chair, I deeply apologize for taking the committee’s time. Just to be clear, my motion was that the House Committee substitute that was before us be given a favorable report. [SPEAKER CHANGES] There was no substitute, Representative Lewis. I don’t believe so. We’re going to let you stay where you are. Members of the committee, we stand adjourned.