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House | April 9, 2013 | Committee Room | House Finance

Full MP3 Audio File

First of, I've, y'all will probably notice a much more pleasant demeanor about myself today: My wife's gonna be in town. So, I will be smiling much more. We are glad to have with us today our pages: Tyler Brown, Representative Torbett; Bree Campbell, Representative Wray; Brett Ellison, Representative Luebke; and Alexandra Fisher, Representative Schaffer. Glad to have y'all with us today. Hope you enjoy your experience this week. And our Sargent at Arms: Mr. Fred Hines, Mr. Reggie Seals, Mr. Mike Clampett, and Mr. B.H. Powell. We appreciate y'all helping us. Couple of administrative issues: House Bill 205 will be moved to to the Occupancy Tax sub committee, House Bill 135 will not be heard today, House Bill 449 will not be heard today at the request of the sponsor whose asked that it be brought up next week, and we will take the bills in order of the agenda that is here in front of me. I assume you have the same agenda, and hopefully we will get to House Bill 488. We do have speakers from outside to speak on that bill today. And our first bill, House Bill 261: Kannapolis ??? Annexation. Representative Ford has a committee substitute I understand. [SPEAKER CHANGES] Yes, sir, good morning. [SPEAKER CHANGES] And, Representative Davis moves that we have the committee substitute before us. Representative Ford would you like to present the committee substitute. [SPEAKER CHANGES] Thank you, Mr. Chairman. This seems to take care of the little technical issues that we had last week. The property will be going from the City of Kannapolis to the Town of Landis. The Moss property. The 1.84 acres, and this should take care of this. It's been something that has been going on for a lot of years and I hope that this'll handle the problem. [SPEAKER CHANGES] Representative ??? (Br??) [SPEAKER CHANGES] Mr. Chairman I'd like to move approval to proposed committee substitute unfavorable to the original bill. [SPEAKER CHANGES] We have a motion. Representative Alexander. [SPEAKER CHANGES] I was going to second that. [SPEAKER CHANGES] Any further discussion? If not the motion before us is we give the post committee substitute a full report as unfavorable to the original bill. All those in favor let it be known by saying Aye. [SPEAKER CHANGES] Aye. [SPEAKER CHANGES] Those opposed, No. The Ayes have it. Thank you, Representative Ford. House Bill 290. Representative Hager. [SPEAKER CHANGES] Thank you, Mr. Chairman. You ready for me? [SPEAKER CHANGES] We are ready for you, and especially since you're the only one without a committee substitute. [SPEAKER CHANGES] I'm trying to find my glasses. Hold on. One second. Can't see. Yeah, let me have those. Thank you, Mr. Chairman, this bill this bill actually is a local bill that allows the board of commissioners to serve as ex officio members on our airport authority. We've had some issues at our airport authority that have been pretty egregious in the last little while. You may have read some issues of going on at our airport so we need to get a little more control of that so this allows them to serve as ex officio members to try to, to try to, it allows them the possibility to serve as ex officio members to try to maybe get some more control of our airport. [SPEAKER CHANGES] Representative Lewis. [SPEAKER CHANGES] I'd like to be recognized for a motion. [SPEAKER CHANGES] You are recognized for a motion. [SPEAKER CHANGES] Thank you, Mr. Chairman. I move that House Bill 290 be given a favorable report. [SPEAKER CHANGES] We have a motion that House Bill 290 be given a favorable report. Any further discussion? Yes. I'm sorry. [SPEAKER CHANGES] Representative Rodney Moore. Mr ??? [SPEAKER CHANGES] I was wanting to say, Representative Rodney, but couldn't get to that. That's him. That's him. [SPEAKER CHANGES] Representative Hager just very quickly. You mentioned something, I just wanted follow-up with it about some things that have happened. Are you, are they like ...are they, are you at liberty to kind of give us kind of some examples. I want to support your bill, but I, since you said there were some egregious acts, I was just trying to get some background. [SPEAKER CHANGES] Well, obviously, its, I'm not proud of my county to know that we've had a murder out there in the last six months. So we've got some issues going on out there. Some insurance issues. We've got some criminal issues going on, and we just need to get a handle on those.

No further discussion? We have a motion. Representative Samuelson? [SPEAKER CHANGES]I was trying to, thank you, Mr. Chair. I was trying to figure out, will they be voting members? [SPEAKER CHANGES]It says ex-officio right now. We'd just like to have some ex-officio. I think ex-officio means somebody, right? [SPEAKER CHANGES]Any further discussion? There being none, all those in favor of of giving House Bill 290 a favorable report, let it be known by saying aye. [SPEAKER CHANGES]Aye. [SPEAKER CHANGES]Those opposed, no. They ayes have it. Thank you Representative Haggar. house Bill 301, Clarifying changes, Engineering Survey Laws, Representative Arp? And I understand you have a committee substitute? And Representative Willows moves that House Bill 301, proposed committee substitute go before us. Representative Arp, would you like to explain the committee substitute? [SPEAKER CHANGES]Thank you members of the committee. This bill is basically, what it is, it makes changes in the technical requirements for the licensor of Professional Engineer and Professional Surveyor. This was requested by the Board of Engineers and Land Surveyors. We use a national exam. That exam is going to be on-line for our engineering interns coming up on 2014. What this does, is our law says that the exam is a written 8 hour exam, we need to make this change so that it no longer has that hour requirement, and can be a computer based testing. That's the first change. When we got into it, we realized that the provisions in the law wasn't rationally related, so it was restructured kind of in the order that the engineers actually go through the thing. And finally, the third thing that we do, is this bill grandfathers existing GIS professionals. The Board of Engineers and Land Surveyors regulated that about 10 years ago, and this provision grandfathers those professionals who have been practicing in GIS, and rolls them in, and grandfathers them in, and it gives them a date and all the experience requirements to grandfather them into liscensors. And with that I'm ready to answer any questions. [SPEAKER CHANGES]Representative Haggar? This is as good a time as any. [SPEAKER CHANGES]Thank you, thank you, Mr. Chairman. I move on a favorable report on the proposed committee substitute to pass Bill 301, and unfavorable to the original. [SPEAKER CHANGES]We have a motion that the proposed committee substitute be given a favorable report, unfavorable to the original. Any further discussion? There being none, all those in, sorry, Representative Collins? [SPEAKER CHANGES]I did want to say one thing, I'm not trying to be hard to get along with, but every time we have a bill that comes from a professional group, or a business group, or whatever, I just want to make sure we're not doing one thing. This is not, there's nothing in here designed to make this harder to get to protect the people who are already in the profession, versus competition from new entrants, I hope. [SPEAKER CHANGES]Thank you for that. What it's an attempt to do is to grandfather those folks who are already practicing, and bring them in, in a transitory fashion. That's the GIS part. What this bill also does is allow computer based testing. It used to be that for the engineering intern and surveying intern, you had to come to Raleigh one day and take a national test, what this allows people to do is take them at test centers across the state, so it really

up a lot of things. [SPEAKER CHANGES] If I were an insurance agent I wouldn't worry about other people looking out for themselves. ?? committee substitute for a report unfavorable to the original. All those in favor let it be known by saying "aye". [SPEAKER CHANGES] Aye. [SPEAKER CHANGES] Those opposed, "no"? The "aye"s have it. Thank you Representative. [SPEAKER CHANGES] Thank you. 334? House bill 334, Bunkem city sales tax use, Rep. Ramsey. [SPEAKER CHANGES] Good morning. Thank you Mr. Chairman. This is a bill that would allow Bunkem county to provide for capital needs for our schools for digital education purposes. Bunkem county in 1983, the general assembly enacted legislation that restricted a portion of the county's sales taxes to go for school capital projects. This legislation only amends that law to allow for digital education, Rep. Moffitt is here who is one of the sponsors of this bill. Rep. Fisher, who's in our delegation has a- is supportive of this, won't speak for her, and this is the city county schools have been supportive. The county commissioners have been supportive, we have 2 school districts in Bunkem County. The money is apportioned on a ADM basis. Currently, Ashville city schools need all those dollars for a bricks and mortar projects but the county does have the ability to use some of those dollars for digital education and they would appreciate the ability to have that authority. This is not a tax increase, it just takes existing dollars and allows them the discretion to redirect those dollars. [SPEAKER CHANGES] Rep. Starnes. [SPEAKER CHANGES] Thank you. I've got a question, I think we're beginning to see a trend here of taking dedicated money for bricks and mortar school construction and use it for digital learning, we just did that with the lottery bill that we passed, and now we have this one. My question is, what are the school construction needs in Bunkem county? I'm not- and Ashville city schools? I'm not opposed to allowing you to do this, but I'm afraid at some point in time you may shortchange the needs for school construction and maybe place an additional burden on the people for a general property tax increase? [SPEAKER CHANGES] Absolutely. That's a very legitimate question, Rep. Starnes, I think there's a couple answers to that: Number one, because of our relative aging population, our schools have been flat lined for about the last 10 or 15 years. So there's about 30,000 students in Bunkem county and Ashville city schools. As indicated earlier, Ashville city schools are in the process of trying to acquire funds to construct 2 schools in their school district, the proposal is about $80 million. If we had one school system in our county, we could easily handle those dollars without any impact to the citizens. The challenge is, it's distributed on a ADM basis and the Ashville city schools are about 5000 students, Bunkem county schools are about 25,000 students. There is something they call a bond model that provides for future capital needs, are currently the county schools are just completed a 2 5 6 schools that were in the range of about $45 million, they do not have significant capital needs beyond that outside of one additional 5 6 school. They have about in excess of $80 million in bonding capacity with this dedicated sales tax dollars that they could use for capital projects and for the county schools and just want to reiterate, no other county in the state that I'm aware of has let local legislation that specifically restricts a portion of their sales tax dollars to capital projects. So it has been successful in the past, allowed the sitting county schools to build a lot of schools, and to repair a lot of schools, but based on where we are now, the commissioners certainly don't want to raise property taxes, and they would not support, giving this additional authority if they thought down the road it would cause

negative financial impacts to our citizens. [SPEAKER CHANGES] Follow-up. [SPEAKER CHANGES] Follow-up. [SPEAKER CHANGES] Well that helps. You can say you’ve got bonding capacity, but that doesn’t always… that means you’ve got the ability to pay the money. Borrowing’s easy; paying it back’s hard. What is your projected enrollment growth? Is Asheville-Buncombe County school system stable, or are ya’ll still in a growing mode? [SPEAKER CHANGES] Well unfortunately, and this is one of the challenges for our community and our region, young families find it very difficult to locate in our community, afford housing and find decent jobs to support their families, and we tend to be a retirement community, which means that the folks when they tend to have children, it’s not a growing demographic for us, so as I indicated, the school population projections are proposed to be about 30 thousand students in the future. There’s very little growth proposed at all for our schools, and that’s been – that number has been about the same for the last 15 years. From a financial standpoint, every year the sales tax dollars come into the county and that money goes into a pot. They pay a lot of these projects on s cash basis, so a lot of them, they do not issue bonds to pay for it. In some cases they do issue certificates of participation to allow them to engage in those projects. [SPEAKER CHANGES] Representative Setzer. [SPEAKER CHANGES] At the appropriate time I’d like to make a motion for a favorable report. [SPEAKER CHANGES] And Representative Carney. Representative Luebke. [SPEAKER CHANGES] Mr. Chairman, given that Asheville is controversial as it is in this session, I want to know if there’s anyone on the Asheville City Board of Education who opposes this legislation and anyone on the Buncombe County Board of Education who opposes this legislation. Can you just bring us up to date on that? [SPEAKER CHANGES] Absolutely, Representative Luebke. There is not. There is consensus on this bill that this is a good thing. The challenge with this bill, there’s no desire on my part to merge our city and county school systems. If we did merge our city and county school systems, this would allow for the city schools that are trying to currently replace a middle school and that elementary school which they have projected cost about 80 million dollars, it would allow us to use some of this capacity for that. The way this money is distributed and the way the county commissioners distribute these dollars is based on an ADM basis, so there being 25 thousand students in the county schools, a little less than 5 thousand students in the city schools, it’s difficult for the city to acquire large amounts of capital dollars. The advantage the city school system has is they have a supplemental tax for the city school district. Because of that supplemental tax, the city school district is one of the highest-funded per student school systems in the state of North Carolina. They’re usually in the top five, and what little knowledge I have about schools, and Representative Fisher served as Chair to Asheville city schools, so she understands that much better than I do. So I think that’s a legitimate criticism of this bill, that if we could use those dollars to help pay for Asheville city school projects, perhaps this funding would not be necessary, but what I would contend to you is our county system does have the capacity, and I think long-term, if you’re going to have two separate school systems, you can’t distribute the money is a disproportionate manner over many years. That would not be fair to either system. [SPEAKER CHANGES] Representative Ramsey? [SPEAKER CHANGES] Mr. Chairman? [SPEAKER CHANGES] I believe the question was “Do the school boards agree with this?” Yes or no? [SPEAKER CHANGES] Yes, the school boards agree with this. They have no objection. I apologize for the rambling. [SPEAKER CHANGES] If I may just quickly follow up. Thank you, Mr. Chairman. So both school boards are okay with this bill? [SPEAKER CHANGES] Absolutely. Both school boards do not oppose this bill, have no objections to this bill. I’ve tried to explain the challenge that we have, but they understand they’re not asking for a disproportionate distribution. [SPEAKER CHANGES] And if I might, Mr. Chairman. Representative Ramsey, if you and I can talk some time about the idiocy of having two school districts in one county, I’d like to do that. Thank you. [SPEAKER CHANGES] Ya’ll do that other than on our time. Representative Setzer, you’re recognized for a motion. [SPEAKER CHANGES] I move a favorable report for House Bill number 334. [SPEAKER CHANGES] Representative Setzer moves for a favorable report, House Bill 334. Any further discussion?

There being none, all those in favor, let it be known by saying aye. [SPEAKER CHANGES] Aye. [SPEAKER CHANGES] Those opposed, no. The ayes have it. Congratulations, Representative Ramsey. [SPEAKER CHANGES] Thank you, Mr. Chair. [SPEAKER CHANGES] House Bill 439. Representative Howard. And we do have a PCS. And Representative Lewis moves that the proposed committee substitute for 439 be before us. Representative Howard will explain the committee substitute. [SPEAKER CHANGES] Thank you, Mr. Chairman, and members of the committee, I will stand and say this is truly a bipartisan jobs bill, and it’s economic development job sites preparation opportunity. A critical component in successfully recruiting and retaining jobs in today’s fast-paced market is have inventory in place, and that inventory needs to be designed as shovel-ready sites that are appropriately zoned and the infrastructure is in place and ready for the building to be developed. Many of the people that come into the state looking for sites have anywhere from a 90-day to a 120-day turnaround time that they want to be under roof, and North Carolina is lacking that type of inventory, so basically what this bill does is allows each county in the cities, and I will say that representatives from the County Commissioners Association are in the room and I believe yes, the Representative from the League of Municipalities, everybody was at the table when we put this bill together. There’s no opposition to the bill and if you drop on down to section 4, you will see that the Department of Commerce is the keeper of the records, and we’ve also had conversation with Secretary Decker of how this will work and what their part will be. Basically, to go to the important parts, as a site is designated, then that site goes into the inventory at the Department of Commerce, so when we have investors that are looking to come to North Carolina, their first stop can be the Department of Commerce where they can look at the entire list of inventory of sites that are ready to be developed, to have the buildings put on the property, and there’s no waste of time. Many of you know how long it takes to have the environmental studies done, how long it can take to have the infrastructure put in place subject to weather conditions and other adversities. This simply allows, if it’s a site of 100 contiguous acres, it stays in its current tax structure until there is a building permit requested or a zoning request, a change of zoning. There’s clawback provisions. If things do not work out then it’s a lien against the property for the developers that have put this in place, and they do have to pay the deferred property tax rate back if they decide they’re going to maybe do condos or something. This is really for job development. It’s an opportunity for our Department of Commerce to have that list collectively in their hand, and we can move forward when we have

-interested parties coming in to the state. Mr. Chairman, I'll be glad to try to answer any questions. [SPEAKER CHANGES] Representative Stam. [SPEAKER CHANGES] I met with a couple of dozen economic developers this fall around the state. Representative Howard met with some of them and this is one of their top priorities of things that they think will really help without costing a lot. [SPEAKER CHANGES] Representative Starnes. [SPEAKER CHANGES] Representative Howard, I'm not clear on one point. Is the entire property tax deferred, or just the increase value deferred. [SPEAKER CHANGES] It's the increase value that's deferred. That's a good question, Representative Starnes. If the county goes through reval then that's recognized, but it's just the improvements that's deferred. [SPEAKER CHANGES] Follow up, then. So, you have a hundred-acre farm and it's taxed in present use values, agricultures, then developed as an industrial site, it will continue to be taxed as farm land until it's actually sold for industrial purposes. [SPEAKER CHANGES] Until it's sold or there's a couple of triggers. If a building permit is requested, that's a trigger also. [SPEAKER CHANGES] Representative Ross. [SPEAKER CHANGES] Thank you, Mr. Chairman. I just was wondering whether the country commissioners had any position on the deferral of this revenue. After that, I have another question, but if they're around and they could let us know how they feel about that. [SPEAKER CHANGES] Ms. Chairman, Mr. Leonard, Kevin Leonard, is in the back of the room and so is Ms. Rebecca Troutman. [SPEAKER CHANGES] Would you all like to speak on this issue? Identify yourself and you have three minutes. [SPEAKER CHANGES] Thank you, Mr. Chairman. My name is Kevin Leonard with North Carolina Association of County Commissioners. I appreciate the question by Representative Ross. We did sit down at the table at the beginning of this and work hard with the bill sponsor and the other stakeholders. We support the legislation. We feel it's though, and you know the county commissioners look after our property tax base a lot, and we feel as though the bill is crafted in such a way that there are safeguards in place that protect those items related to property tax. We feel comfortable with the language as written. I hope that answers your question. [SPEAKER CHANGES] Representative Ross, follow up. [SPEAKER CHANGES] Thank you, Mr. Chairman. Well, that would be my only concern, and so at the appropriate time I am happy to make a motion. [SPEAKER CHANGES] Thank you. [SPEAKER CHANGES] This is an appropriate time. [SPEAKER CHANGES] Thank you, Mr. Chairman. I move that we give the proposed committee substitute for House Bill 439 a favorable report, unfavorable as to the original bill. [SPEAKER CHANGES] Representative Ross made a motion that we give the proposed committee substitute for House Bill 439 a favorable report, unfavorable to the original bill. [SPEAKER CHANGES] There will be no discussion. All those in favor let it be known saying aye. [SPEAKER CHANGES] Aye. [SPEAKER CHANGES] All those opposed, no. The ayes have it. Thank you, Representative Howard. House Bill 488, Representative Moffitt. We have a proposed kind of substitute. We have outside speakers and we have some handouts. So it'll be just a minute. [PAUSE] While they're handing those out, somebody looked up a strange article (?) that said something about insurance agents. I am an insurance agent, have been for over thirty years.

Representative Ramsey moves that the Committee substitute be before us, and I'll ask Representative Moffitt to explain the Committee substitute. [SPEAKER CHANGES] Thank you, Mr. Chair, members of the Committee. What you have before you is a bill that creates a new subdivision in the state. It creates the Metropolitan Water and Sewer District. This bill establishes the framework for an orderly consolidation of public enterprises that serve multiple jurisdictions and combines those into one public enterprise. If you look at the second page, you'll see that establishing a new article, Article 5a. It gives you all the definitions pertinent to the Metropolitan Water and Sewerage District. At the bottom of page two, you'll have the District Board, and it walks you through how the actual Board is appointed and how those are apportioned to the jurisdictions that this entity will serve. At the bottom of page three, but it's really on page four, it talks about the overall general powers of the new entity. Right below that, it talks about the bonding capability of this new entity. It will have full authority to issue bonds. It will have the authority to establish tax rates. And a lot of this is really statutes that are brought forward in the construct of this new subdivision. When you look at page five, you've got the right of way and easements aspect that's part of the bill. You've got the authority of the governing bodies and the political subdivisions. On page six, something that I wanted to point out, in Section 162a-85.21. When this new authority seeks to run extensions, then it has to get the approval of the elected officials in the jurisdiction in which they want to put those extensions. A nuance to this bill is protecting the public asset nature of most public enterprises. This prevents privatization, and that's on the last page, page 7. I'll answer any questions. [SPEAKER CHANGES] Representative Setzer? [SPEAKER CHANGES] Thank you, Mr. Chair, members of the committee. At the appropriate time I'd like to make a motion for favorable report for House Bill number, proposed Committee substitute for 488. I'm just putting the motion on the floor. [SPEAKER CHANGES] We'll have a motion for favorable report. Anyone want to speak on the bill? Representative Brawley. [SPEAKER CHANGES] Thank you, Mr. Chair. Representative Moffitt, I had a couple people in Mecklenburg raise a question if this was going to restrict Charlotte Mecklenburg Utilities' ability to extend water mains through their interlocal agreements within Mecklenburg County. [SPEAKER CHANGES] It does not. [SPEAKER CHANGES] Thank you. [SPEAKER CHANGES] Representative Fisher. Hamilton. [SPEAKER CHANGES] Not to worry. There are a lot of us. Is

[SPEAKER CHANGES] Representative Moffitt, thank you Mr. Chairmen, is this a statewide bill? [SPEAKER CHANGES] It is. [SPEAKER CHANGES] So its not specific to one part of the state, this could effect every municipality, and every county in the state? [SPEAKER CHANGES] That’s correct, this is the framework to allow for the orderly consolidation of public enterprises that are multi jurisdictional anywhere in the state. [SPEAKER CHANGES] Follow up, Mr. Chairmen. [SPEAKER CHANGES] Follow up. [SPEAKER CHANGES] Thank you. Is this an option for cities and counties or is this turning into some sort of requirement that everybody begin to merge their utilities into this new entity? [SPEAKER CHANGES] Thank you Representative Hamilton. The way the bill is crafted, once one of the public enterprises reach a population base of 120,000 or higher, then this needs consideration, it needs to be on the table. I would hope that in most communities throughout the state, they would recognized once you get to that size, that an economies of scale can be realized by combining them. And this is not new, this has been happening throughout the state. Each one has a certain set of dynamics. And as all of us in this room know, that current general assemblies can’t bind future general assemblies. So, future general assemblies can address the nuances in certain areas when they need to. [SPEAKER CHANGES] One more follow up, Mr. Chairman. [SPEAKER CHANGES] Follow up. [SPEAKER CHANGES] This is probably more of a statement. In New Hanover County, we went through this process several years back, and I can assure you that its neither an orderly process or a process that has saved the rate payers in money at all, in fact it has limited the cities and counties control over their own growth. It’s created another bureaucracy for developers to go through in terms of finishing out their projects and extending water and sewer services. So I’m not in favor of this bill, and I think that its probably worthy of some sort of study longterm, but to go through this process and turn this into a state wide bill today, I think is sending us down the wrong path. Thank you. [SPEAKER CHANGES] Representative Carney. And after Representative Luebke. [SPEAKER CHANGES] Thank you Mr. Chairmen, I’d like to know first if there are any members of the public or representatives from the city of Asheville, etc., who would like to be heard on the bill. Could we hear from them before we have much more discussion? [SPEAKER CHANGES] We have a speaker from, and I’m sorry, your name. Jerry Jackson is a manager from the city of Asheville, and I told him he would have six minutes to make a presentation to the committee. Jerry. [SPEAKER CHANGES] Thank you Mr. Chairmen, then I’d like to be recognized for comments or questions. [SPEAKER CHANGES] Thank you very much for this opportunity. My name is Jerry Jackson, I’m the city manager of Asheville, I’ve been in this position since 2005. I have over thirty years experience in city management. Managed four other cities. [SPEAKER CHANGES] Closer to the mic please. [SPEAKER CHANGES] Excuse me for interrupting, he’s kind of a great distance, I ask that we listen to him. [SPEAKER CHANGES] Thank you very much. My experience range from sizes of cities Liberty, Missouri 25,000 to Fort Worth, Texas which has a population of 740,000, slightly larger than Charlotte. My formative years were as budget manager and assistant to the city manager of Dallas, Texas in the 1980’s. One formative highlight was being able to prepare the ?? for hosting the 1984 Republican National Convention in Dallas. I humbly believe that my extensive experience in public finance and management qualifies me to contribute professional, and non political perspective today on House Bill 488. Let me talk about water. In Asheville, since 2005, as city manager, I have been where the buck stops when it comes to management of the Asheville water system. How have we approached management of supplying quality drinking water to over 50,000 accounts in Asheville and our region? We have run utility like a business. We have controlled salaries, as any good business would. Healthcare costs, all variable costs, we’ve implemented award winning safety programs, and more importantly, we’ve created one stop shop for all plans and permits in business development in Asheville Probably most important of this conversation is that we have attacked a 15 million dollar backlog of deferred maintenance in water lines and plant repairs. These were caused in the previous administration and governance model of an agreement between asheville and Buckham county. The city discontinued that arrangement, so that it could put this water system on the right course...

-to serve business and residential customers. I'm proud to say that in the last six years, the Asheville mayor and City Council have supported us in making 70 million dollars in capital maintenance and repair. Cut into that backlog, 70 million in capital maintenance and repairs. That is two and a half times the previous investment in the proceeding six years under the other governance model. With this effort, we have put the system on a very positive trajectory. In my professional experience and judgement, I believe that house bill 488 sets a bad precedent. Not just for Asheville, but for our state and other municipal metropolitan areas. If it's happening in Asheville, it could be in your community tomorrow. Why would I say this is a bad business decision? In investment community labels, this would be high risk, low return. High risk, low return. Why is it a low return? As indicated under most recent analysis, a report in the Metropolitan ?? by their consultant, their $250,000 analysis of the system in a nine-year projection, the system change, the merger as proposed under house bill 488 with the advent of the house bill 252, which eliminates transfers for economic development and transportation projects, there is no benefit in the first nine years. That's because you have to make a significant capital investment to convert software systems, fleet management systems, and on down the line. This is pointed out in our data study. The only savings was attributable to the transfer, which was eliminated by your favorable report of house bill 252. So, there is no return, financial return, under this. And once again, this is just modeling. High risk. How many of you are familiar with, old enough like I am to remember the RJ Reynolds and the Nabisco Foods merger? How many remember that? How well did it go? And as has been pointed out by Representative Hamilton, a closer-to-home example is the Cape Fear merger utilities. I only have anecdotal information on that, but I can tell you, it is not going as well as expected, which points out the high risk in going based upon this kind of merger modeling. All it is is modeling. You're still dealing with cultures and people, you're moving multi-million dollar operations and it's a high risk. I urge you to pose house bill 488. Asheville is on the right trajectory and this threatens our job creation. In 2012, Asheville lead the state in municipalities in percentage of jobs creative. In 2012, hotel occupancies in Asheville returned to pre-recession levels. In 2010 Forbes rated Asheville as a top ten place to do business. And finally, I would close by saying in 2011, both Sierra Nevada and New Belgium brewery picked to locate within our water system. Why? It's a testimony to our good management. New Belgium is going to invest 175 million dollars and create 200 million jobs in Asheville. Again, please work with Asheville, North Carolina cities, to build our economy. Oppose house bill 488. [SPEAKER CHANGES] Representative Winkie? [SPEAKER CHANGES] Thank you, Mr. Chairman. I guess I want to first thank the manager for traveling here and for giving, it seems to me, like a highly professional and astute analysis of why this is not a good bill, and I guess my question is, you said you had worked first, at one point, at Fort Worth, Texas? [SPEAKER CHANGES] Yes, sir. [SPEAKER CHANGES] Basically, how would you measure the success of the Asheville water system compared to the water authority- I don't know if you had responsibility for it, it was under your hat or not, in terms of under your responsibilities or not, how would you compare Asheville's operations to, say, Fort Worth's? [SPEAKER CHANGES] Yes, sir. As city manager in Fort Worth, Texas, we had a Fort Worth Utility. It was the city department. It was originally a utility and it worked very effectively. Very similar model, a high level of transparency. We were very accountable to our suburban communities and customers, we posted what our capital improvement program was, we put out there how much we were going to invest, we talked about having fair and equitable charges, we entered into customer contracts with areas outside of our city. That's very similar to the model we have in Asheville. It's a very business-like approach, it's a very transparent approach, and it also provides for a high level public accountability because it is in the public eye and elected officials supervise it. [SPEAKER CHANGES] Asking a quick follow up, Mr. Chairman? [SPEAKER CHANGES] Follow up, Representative Luebke.

[SPEAKER CHANGES] Thank you Mr. Chairman. So you would say that your endorsement of the status quo for Asheville in terms of not endorsing this bill is based on your ability to see a major, see how things have worked in other major metropolitan area. It's not just an Asheville opinion but you're talking about your experience in Texas as well as part of your professional judgment. [SPEAKER CHANGES] Yes sir, that is correct. [SPEAKER CHANGES] OK. May I ask Representative Moffitt a question Mr. Chairman. [SPEAKER CHANGES] Representative Luebke is recognized to ask a question. [SPEAKER CHANGES] Thank you. Representative Moffitt do you know the old line if it ain't broke don't fix it? What's broke about the Asheville water system that would require your bill? [SPEAKER CHANGES] Thank you Representative Luebke. This is a public bill. It should be judged on the four quarters of the document in regards to whether or not this body feels that this allows for the orderly consolidation of public enterprises. If you want to talk about its impact contemporaneously Asheville would be one of the areas that's impacted by this and this body has dealt with the water system and the sewer system in our region since the 1920s. As far as what's broken. It's the government's model has not worked in our area. And I can go back to interlocal agreements that have been negotiated in good faith among all the parties only to be broken by the city of Asheville. So this is not a local bill this is a public bill. I would ask it to be judged on those merits, but I'll be more than glad to ask any questions regarding its impact back home. [SPEAKER CHANGES] May I followup Mr. Chairman? [SPEAKER CHANGES] One last followup. I've got four more people that want to ask questions. [SPEAKER CHANGES] Yes sir I'll be brief. This has been handed out to us perhaps by Representative Fisher. A lot of Q&A about the situation in Asheville and it makes a pretty strong case that your bill's not needed. Would you, could you point out, do you know about this document. Could you tell us what's maybe between now and the floor since I assume this bill passed here what's wrong with in this document that's been circulated to us. I mean this document is, Representative Moffitt, I think pretty definitively says your bill isn't needed because its being operated wonderfully the way it is. [SPEAKER CHANGES] Thank you Representative Luebke. This is gonna be a difference of opinion. I feel that our City Manager Gary Jackson has his view of the way things operate in regards to the overall oversight of the water system. You'll find equally as capable and professional competent people who disagree. This is resolving a long term issue back home by allowing for the consolidation into a regional system like you have in Durham where water and sewer that serves multiple jurisdictions is governed under one entity one regional authority. This is not a new concept. It is used in 8 other places throughout the state. This would be the 9th provided this bill passes and this framework will allow any other subdivisions of the state throughout the state to use this to provide for the same outcome and orderly consolidation for the public enterprises. This is not pioneering by any stretch. The subdivision of metropolitan sewage districts was actually created to address a multiple jurisdictional sewer issue in Buncombe County and that framework is being used throughout the state in other areas. So this just allows for an appropriate consolidation of public enterprises that reach a certain threshold in regards to numbers of customers so our folks back home can realize the savings that you folks realize when these entities were consolidated. [SPEAKER CHANGES] Be briefly on the bill. [SPEAKER CHANGES] Representative Luebke is recognized to speak on the bill. [SPEAKER CHANGES] Thank you Mr. Chairman. Members of the committee. Mr. Jackson as you see is a highly qualified professional. He's not, I don't know if he's a Democrat or a Republican or non-affiliated. But he's looking at this from the prospected of good administrative practices. And he's told you from a business prospective if he were working for a cooperation he would never recommend this as chief financial officer he would never recommend this to the stockholders of the cooperation. I 'm just putting words in his mouth, but I do think that's what he's telling us. So this should not a partisan bill. I can read this thing like the palm of my hand this is gonna go down more or less on parted line and it shouldn't because you have a professional manager. We all

know why Masters of Public Administration programs exist in our state, around the country, so that people being skilled do not have a political dog in the fight. And the manager is not, he's qualified as an administrator. He's told us this is a bad risk. It's a shame that this is going to another one of these partisan votes. A lot of my colleagues across the aisle know how to recognize that it ain't broken Asheville and just be willing to say, as we happen to me all the time when we Democrats are the majority. It's like hey, good idea. You're a Democrat and I'm a democrat, but we don't agree. And I wish could see more willingness on the part of colleagues, truly, to say that this is a good bill, a bad system. And even though my Republican colleagues put it in, I'm going to vote no on the bill. It's not going to happen but I wish it did. I think it's a sad day that we have this kind of partisanship here. [SPEAKER CHANGES]: Mr. Chair. [SPEAKER CHANGES]: Thank you, I'm going to vote against the bill ? I urge you, too. Bye. [SPEAKER CHANGES]: Mr. Chair. Would Representative Luebke yield for a question? [SPEAKER CHANGES]: I would. [SPEAKER CHANGES]: Thank you Representative Luebke. If you feel this way now, then why in 2005 did you vote in favor of Sullivan's two and three that were basically crafted by this body, by the Democrat majority, to address issues regarding the city's of Asheville oversight of the water utility? [SPEAKER CHANGES]: I say I represent my ? because the issues were not laid out clearly the way they are now. If had been here to point those out to me, I might have voted differently. [SPEAKER CHANGES]: Thank you, Senator Luebke. I'll be glad to assist you to Newport. [SPEAKER CHANGES]: Mr. Chairman, may I raise my remarks. [SPEAKER CHANGES]: We'll be taking a break at 9:40. I have one, two, three, four, five, six more people who have asked to speak. Representative Ross. [SPEAKER CHANGES]: Thank you so much Mr. Chairman. Well it's just never any kind of fun watching debates among members of the same delegation over what to do in their area. That's always the sad time here at the General Assembly. I'm sorry that we're having to do this about Asheville and Buncombe County yet again. But I'm even sorry that members of the delegation in Bumpkin County are trying to tell the rest of the state what to do as well. Because in Wake County, our delegation doesn't necessarily think this is the best way to go. I don't see any members of our Wake County delegation doing this. Our water system is run extremely well. Many of our towns have joined it. To open up this can of worms right now for the rest of the state, I just think is misguided. I understand that you might have to draft a bill to apply statewide to get your ?. But please, and don't throw the baby out with the bath water, it is absolutely wrong to put counties like Wake County in the same place and force us to re-look at something that might do detriment to a system that's working well. I have got to vote against this. Forget about the Asheville Buncombe County dispute. I've got to vote against this because it's bad to make the rest of the state have to be pulled into your mess. This is not the right way to make public policy. My folks have not been invited to the table to have a larger discussion about it. I just think it's irresponsible. [SPEAKER CHANGES]: Representative Tine is recognized. Thank you Mr. Chairman. Question for Representative Moffitt. How did you determine the 120,000 size as a trigger to enter into this model? Thank you Representative Tine. This is an entry point from a service based area where we feel that consolidation of public enterprise is the right threshold for that to take place. Anything above that is already consolidated. Anything below that, you have various degrees of consolidation or separately run entities. But that seemed to be the trigger, if you will, from a population standpoint that really made sense from a consolidation point of view. [SPEAKER CHANGES]: Follow up, Mr. Chairman. [SPEAKER CHANGES]: Follow up. [SPEAKER CHANGES]: Do you know how many systems in North Carolina will fall under the provisions of this bill should it pass or...

[Speaker changes.] ...I think, Representative ??????, currently it's only gonna effect Buncombe County, Henderson County and the City of Asheville system. [Speaker changes.] Representative Hager. [Speaker changes.] Thank you, Mister Chairman. Representative Moffitt, got a question for you as far as the transfers outlined on the question/answers we got. Looks like Asheville has transferred a little over two million dollars out of the operating expenses, am I reading that correctly? [Speaker changes.] That's a reimbursement for allocated costs that they charged back to the public enterprise for certain overhead issues. [Speaker changes.] Follow up, Mister Chairman. [Speaker changes.] Follow up. [Speaker changes.] Could you kinda outline what those expenses are/were...general...general terms? [Speaker changes.] You'll have an allocation for executive staff, you'll have an allocation for human resources, for IT, for space...just whatever the public enterprise is taking advantage of in regards to the city of Asheville. [Speaker changes.] One more follow up, Mister Chairman. [Speaker changes.] Last follow up. [Speaker changes.] Thank you. In the questionnaire, it talks about 33.8 million dollars that will be taken away from the taxpayers over the next nine years. Could you explain that a little bit? I'm not sure I understand that. [Speaker changes.] Thank you, Representative Hager. That's a combination of the allocated cost amount in addition to the Sullivan Act Transfer that we spoke about last week and repealed in the House as well as some direct billings from the city back to the public enterprise on various line item issues. [Speaker changes.] Representative Carney. [Speaker changes.] Well, thank you for recognizing me again but all of my questions have been answered. [Speaker changes.] Representative Brawley. [Speaker changes.] Thank you, Mister Chairman. I thought it was interesting that we were talking about RJR Nabisco a little earlier today where we merged a cookie company and a tobacco company, but, as was well documented in the book "Barbarians at the Gates", the problem was not the businesses, the problem was Ross Johnson who was the guy that was trying to make billions of dollars for himself out of the deal. As far as I know, Ross Johnson is not envisioned to manage this facility so I think the analogy breaks down. I was on the Water Study Committee that was commissioned in 2011 and attended the public hearings in Asheville. A lot of people from Asheville came up, said it's a great system, we're runnin' it great...leave us alone...and people that didn't live in Asheville, including elected officials, came out said it's a terrible system, we need your help...please help us. A lot of them were shouted down, there was a lot of intimidation. There were a lot of personal insults to the point that when I took over Chair, I actually threatened to have people removed from the room if they wouldn't settle down. The system as it exists is a good system for Asheville, it is a bad system for Buncombe County and Henderson County. It's a bad system for the other small towns. They are become dependencies of Asheville and Asheville uses water to control. There is simultaneously, a regional sewage system that treats everybody equally and acts agnostic. Asheville will say they need to be able to operate like ???????????. If they operated like ??????????, we wouldn't be here today. There would be one unified body of both water and sewer handling the whole area equally and that's the goal of this bill. Not to loot Asheville but just to put an agnostic water/sewage utility rather than have one that's controlled by the people and one that's controlled by a few. That will provide equal service to the whole area. The reason it won't mess with Wake and Charlotte and places like that is because you already merged with a sewer/utility. You're already acting in a fair and equal system. This was asked to be resolved locally. It couldn't be. It's on our desk. We've gotta solve it. I'm supporting this bill. [Speaker changes.] Representative Holley. [Speaker changes.] Thank you, Mister Chairman. I have a question for Representative Moffitt. On some of this literature, it says that recently ????????????? infrastructure that Asheville has added into it to try to fix this system over the past few years which is more than twice...two and a half times what it had done in previous years. So this is like a system that is already being fixed and now that it is possibly fixed now it gives the implication that you wanna take it over, is there anything in here that will give Asheville some of its funds back? Or are they being paid any money for the investment, this major investment they have put into this system for the past few years? {Speaker changes.] Thank you, Representative Holley. That is a typical misleading statement that is echoed often by city leaders. The city of Asheville taxpayers have not put...

-any money into the system. The city of Asheville, who operates the system, authorized issuance of revenue bonds, which is the responsibility of the enterprise itself to pay back. So those revenue bonds are covered by the city of Asheville, customers of the water system as well as Buncombe County customers, as well as Northern Henderson County customers. So the money itself that the debt travels with the enterprise. [SPEAKER CHANGES] Representative Hamilton. [SPEAKER CHANGES] Thank you, Mr. Chairman. This might be a question for staff, but on the issue of the threshold of 120,000 population, do I understand correctly that if places like Greensboro, which I'm assuming have 120,000 in population and other cities across the state that have that many, now will have to consider and go through this process? Or am I misinterpreting? [SPEAKER CHANGES] ??, I understand you have the answer. Jeff. [SPEAKER CHANGES] My name is Jeff Hudson. I staff the Environment Natural Resources Committee, typically. Our information from the Division of Water Resources in the Department of Environment Natural Resources is all of the systems above 120,000 are currently operated as either joint or regional systems, so they wouldn't be caught by this provision. [SPEAKER CHANGES] Representative Stam. [SPEAKER CHANGES] Yes. First, an apology to the sponsors. I thought I was going to be voting on a local bill and I'd be voting with these fine folks here. Representative Luebke has almost convinced me to vote for it, but here's my issue and I think I've got a- This is about sewer, sewer sanitation. You can't have a local bill about sanitation. So you have done what appears to be a public bill that's intended to apply to your areas. Well, Supreme Court, in several cases, has said a public bill that is really a local bill still violates article 2, section 24. So my problem is not what you ??, but how it would affect Apex and Cary if the Supreme Court were to say, "Well, it can't be a local bill so therefore it applies to the whole state." That's my problem. My solution would be, if it would be agreeable to you, is to say that if the courts determined that this is in fact a local bill, then rather than apply it to the whole state, they would get rid of it for the rest of the state. You see what I'm saying? I'm happy to make you guys happy out of the spirit of fellowship and fraternity, but I'm not willing to transfer all the assets of Apex and Cary to Raleigh so that Raleigh decides where we can but our subdivisions. You understand my problem? And I apologize to all of you for not paying attention to this before this morning. [SPEAKER CHANGES] Would you like to ?? amendment on the floor? [SPEAKER CHANGES] I could save it for the floor but, is that sort of where we are, on the drafting of the bill? That it's really a local bill but is phrased generally to attempt to get around the Constitution. [SPEAKER CHANGES] Yes. [SPEAKER CHANGES] That's what I thought. [SPEAKER CHANGES] Mr. Chairman? [SPEAKER CHANGES] Representative Moore(?) is next. Representative Moore(?)? Representative Moore(?)? Representative Ross is recognized. [SPEAKER CHANGES] Thank you, Mr. Chairman. I have a modest proposal if it's okay with the bill sponsors and it might help with Representative's Stam's concern, because my concern is the same concern that Representative Stam has. This bill has only been referred to House Finance. It hasn't been referred to any other committee and it might to good to, rather than slap an amendment on it, to think how to deal with this concern in a constructive way that avoids litigation, that avoids messing up Wake County. Either maybe we can have a PCS on this bill for next week or another meeting, or the bill could go to maybe a J Committee, go to Representative McGrady's J Committee. So the-

Aspects could be dealt with and there's no rush. We're gonna, there's no, we should do it the right way even though, I'm not sure it's the world's greatest idea, but please let's take care of Wake county. [SPEAKER CHANGES] The staff is drafting an amendment. [SPEAKER CHANGES] Mr. Chair. I'll prepare a amendment for the floor. [SPEAKER CHANGES] Alright, thank you. Alright, it is 9:40, so we would take a vote. We have a motion for ?? [SPEAKER CHANGES] Chairman, [SPEAKER CHANGES] Representative Glibkee [SPEAKER CHANGES] I would request a division, not the ayes and nos. I wont take up the committee's time on that, but a division so we can at least see generally how the committee looking. A division, I need show of hands. Mr, chairman as you know. [SPEAKER CHANGES] Okay, division having been called, the motion is that we give the proposed committee substitute favorable report unfavorable divisional bill. All those in favor, let it be known by raising your hand. Staff would help me count. Stand still and raise your hand. Representative ?? raise your hand up. [SPEAKER CHANGES] 16, 17. [SPEAKER CHANGES] Okay. all those. [SPEAKER CHANGES] 18 ?? [SPEAKER CHANGES] All those opposed, let it be known by raising your hand. [SPEAKER CHANGES] that's 10, proposed 18 ?? [SPEAKER CHANGES] 18 support, 10 opposed, the bill, of the proposed committee substitute will be in favorable report, unfavorable divisional bill. And I know you've worked hard today so as a committee adjourns, if you'd like to come down 303, I have some oatmeal raisin cookies we'll share with you. [SPEAKER CHANGES] Thank you Mr. Chair. [SPEAKER CHANGES] Meeting's adjourned.