I'm joined today by Senator Bob Rucho, Senator Bill Raymond and Representative John Torbit, who is chairman of the House Transportation Appropriations committee to present Senate bill 20, this is a combination bill of the IRC update internal revenue code and then motor fuel tax changes. I'd like to have staff explain the bill, then we'll discuss it further. [SPEAKER CHANGES] The internal revenue code update piece, you're probably familiar with by now, since we start with federal adjusted gross income to do our corporate returns also. The general assembly has to review federal tax changes each year, and update this reference to the internal revenue code. Whenever we do that as staff, we identify specific provisions in the federal tax law changes that would have a material impact on North Carolina revenues if you conform to all of the federal changes. This year we identified several, and if you take a look at the physical note in your packet regarding this bill, and go to page 2, I have a bulletin list there of the items that this bill decouples from. The first one is the enhanced section 179: expensing limits for businesses. The general assembly has decoupled from this one in the past, but instead of allowing the business to deduct the full amount, it allows the business to take that deduction over a 5 year period, which sort of softens the physical impact. By decoupling from this provision, there would be no physical impact on the budget. This bill also decouples from a tuition deduction, and from a deduction for mortgage premiums as interest, and it decouples from a income exclusion for IRA distributions to ?? by a person who has reached 70 and a half years old. This PCS actually conforms to two provisions. It conforms to a deduction for classroom supply expenses of up to $250, and it conforms to an exclusion from income for the cancellation of mortgage indebtedness. The cost of the general fund in 1415 of conformity through the teacher supply expense deduction and to the exclusion of income for mortgage debt forgiveness is $15,000,000. [SPEAKER CHANGES] Part two of this PCS sets the motor field tax rate at $.36 per gallon, beginning in April 1st of this year, and continuing to the end of this calendar year. On January 1st 2016, the current gas tags formula is re-established, the one change to the formula, is currently the formula resets twice a year, on January 1st and July 1st. This bill mimics Senate bill 20, and it eliminates the July reset so that the tax changes annually on January 1st. [SPEAKER CHANGES] Ms. Cameron, if we did not have this bill, what would the gas tax fall-- (audio ends)
TWFFSO [0:00:00.0] …Without this bill. [SPEAKER CHANGES] Sir, it is forecast that the motor field rate on July 1 would fall to 29.9 cent per gallon. In January, it would fall to 29.6 cent per gallon and then you can see in the fiscal note to the end of it, we actually list out for you a comparison of the average tax rates over that fiscal year. So that would be Table 4 the very bottom of the fiscal notes. [SPEAKER CHANGES] I have a follow up. [SPEAKER CHANGES] Follow up. [SPEAKER CHANGES] Is this again then is it initially I thought you are saying it was the gas tax increase of six cents over what it would be and if I look at your fiscal note, am I reading it right that it would be five cents? [SPEAKER CHANGES] Well, let me say first that the amounts in the chart are the averages. [SPEAKER CHANGES] Okay. [SPEAKER CHANGES] Of course from one…So it would include the six months in one calendar and the second in that sense. So that’s a little bit of the change. [SPEAKER CHANGES] Right and then if I’m… [SPEAKER CHANGES] Follow up. [SPEAKER CHANGES] So if we go to the basics it is the fact that this bill brings the gas tax up to 36 cents and if we did not have this bill rounded, rounding up to 30 cents we would have a 30 cent gas tax. So in other words, there is a six cent I know you can’t speak to this in terms of the exact situation except to say that there is a 36 cents minus 30 cents means that there is a six cent increase in the gas tax as a result of this bill. [SPEAKER CHANGES] Sir, for this fiscal year the rate will reduce from 37.5 to 36 from the period of July to December of this year the rate would have been 29.9 and this bill establishes a rate of 36. [SPEAKER CHANGES] Thank you. So can I ask this real quick to Representative Brawley? [SPEAKER CHANGES] Yes. [SPEAKER CHANGES] Representative Brawley? [SPEAKER CHANGES] Okay, what I would like to address that issue and then take your question because you are pointing out that without absent this bill the gas tax will drop and that is true. Absent this bill, the power bill money to the city of Durham will also drop 1.2 million. The maintenance money from the state for Durham County will drop 8 million 134,000. At the same time two million and 100,000 power bill money will drop from Rally, the Wake County maintenance budget for DOT will drop 31 million, for the city of Charlotte four million $50,000 in power bill money will be lost and the maintenance budget from Mecklenburg County will drop by 37 million, the city of Fayetteville will loose one million 100,000 in power bill money, Cumberland County will loose 13 million 70,000 in state maintenance money. The city of Greensboro will loose 1 million 400,000 in power bill money and Gilford County will loose 20 million 527,000 in state maintenance money. I mean the unique position being supported by both the North Carolina Chamber of Commerce and the North Carolina legal municipalities to stop the bleeding on transportation funding. This fix dispatch of a 36 cent gas tax for the reminder of 2015, it’s simply to allow this body time to come up and fully debate a more comprehensive fact or to fix to the problem of transportation funding. Now, the sources of the numbers that I have just given you, the county numbers came from the North Carolina Chamber of Commerce, the power bill losses were give to me by Rose, ?? Williams of the legal municipality. So they are both asking that this body joining with the Senate take action to prevent a catastrophic… [0:05:00.3] [End of file…]
[SPEAKER CHANGES] Loss of road funding at a time when we already recognize our funding system is broke. We can debate and score points as much as we want on whether we're cutting taxes, raising taxes, or anything else. What we are actually trying to do is address a critical situation in funding as two years ago we addressed a critical situation in how funding was allocated. We have a major problem here that we need to fix and this will give us the time to fully debate more permanent changes and we'll certainly give you the opportunity for us to share a great many debates on this topic in the coming weeks. So that's what we're trying to do today sir. [SPEAKER CHANGES] May I now address the- [SPEAKER CHANGES] If you'll suspend for just a moment, so I'm not an expert on chairing, but I'm in a roomful of experts. So everyone's quick to point out that, while we had a motion and a second that we did not take a vote to have the bill properly before us, so all those in favor please signify by saying aye. Those opposed like sign. Thank you. Representative Luebke. [SPEAKER CHANGES] Thank you. I hear what you're saying Representative Brawley, but for the middle class consumer, at the pump, those consumers will pay six cents more a gallon because-for gasoline-than they would otherwise without this bill. There's a six cent increase, tax increase for the consumer at the pump. [SPEAKER CHANGES] Sir, it would drop by seven-and-a-half cents. We are reducing that drop to one-and-a-half cents. We are not raising the tax, but we are not allowing it to decrease as much as it would have absent this bill. [SPEAKER CHANGES] Representative Stam. I'm sorry, do you have a follow up? [SPEAKER CHANGES] Representative Brawley, just briefly. Still with everything said, people will pay six cents more at the pump than they otherwise would. This bill means that people will pay six cents more at the pump. [SPEAKER CHANGES] There would be six cents more gas tax absent this bill, you are correct. As to what they will actually pay at the pump, if you know the answer to that, you should be a millionaire in trading commodities. I have no idea what the prices are. [SPEAKER CHANGES] Mr. Chairman. [SPEAKER CHANGES] Very good. I'll come back to you. Representative Stam. [SPEAKER CHANGES] Mr. Chairman. [SPEAKER CHANGES] Yes, Representative Brawley. [SPEAKER CHANGES] Mr. Chairman. [SPEAKER CHANGES] Would you look at page seven? [SPEAKER CHANGES] I'm sorry. [SPEAKER CHANGES] Of the bill. [SPEAKER CHANGES] If you'll suspend. Representative Lewis? [SPEAKER CHANGES] If the chair would indulge. I don't know if Representative Stam's inquiries are on the same line as the gentleman from Durham, but if they're not I'd like to just ask a clarifying point. [SPEAKER CHANGES] Representative Lewis if you'll ask your question please. [SPEAKER CHANGES] Thank you Mr. Chairman. If staff could tell me what the current tax is per gallon of gas? I've been told its 37.5 cents. Is that right or is that wrong? [SPEAKER CHANGES] Amna Cameron, sir you are correct. The current tax is 37.5 cents per gallon and that is because there is a cap in place that does not allow that tax to go higher. [SPEAKER CHANGES] And could I just follow up, Mr. Chairman? [SPEAKER CHANGES] Follow up. [SPEAKER CHANGES] Just to be clear, under this bill, the gas tax would become 36 cents, which is less than 37.5 I believe. Notwithstanding the point about the importance of stabilizing the road funding that the gentleman from Mecklenburg has made. Thank you for that clarification Mr. Chairman. [SPEAKER CHANGES] Thank you Representative Lewis. Representative Stam. [SPEAKER CHANGES] Yes Representative Brawley, on page seven, Section 2.4H, am I reading that right? That we're asking DOT to eliminate 500 filled full-time positions? Is that supposed to be in here? [SPEAKER CHANGES] No Representative Stam, it is not supposed to be in here. [SPEAKER CHANGES] I'd offer an amendment at the appropriate time. [SPEAKER CHANGES] Representative Torbett I think can address, or also Amna can address the actual numbers that we were- [SPEAKER CHANGES] Miss Cameron if you would. [SPEAKER CHANGES] Yeah, he's right it says 500 but it's not supposed to. [SPEAKER CHANGES] Would that be all of Subsection H? I know I is still supposed to be in there. [SPEAKER CHANGES] We'll suspend for just a moment.
Mr. Chairman? [SPEAKER CHANGES] Representative Brawley. [SPEAKER CHANGES] Representative Stam, that was in the original bill. That effective date has been pushed back to September 1 and it is not an immediate cut of any positions. The funding for the 36 cent cut would require the elimination of 40 unfilled positions this spring. Absent action by this body, there would be a reduction of 500 on September 1, as there will be a reduction of the gas tax to a forecast 26.1 on January of 2016, absent action by this body, and both of these are deliberate. It basically puts… I’m not sure what analogy I want to use, but it puts a great deal of pressure on the House and the Senate to solve this problem this long session, and that’s the intent, sir. [SPEAKER CHANGES] Follow-up. [SPEAKER CHANGES] Follow-up. [SPEAKER CHANGES] So I’m missing it. Is 2.48 supposed to be in this bill? [SPEAKER CHANGES] Yes. [SPEAKER CHANGES] Well may I speak to that? [SPEAKER CHANGES] Representative Stam. [SPEAKER CHANGES] I’m hoping, Mr. Chairman, that we’re going to start building highways and filling potholes, etcetera, and I just can’t imagine that those 500 people are sitting there twiddling their thumbs and not doing anything. I hope they’re getting projects ready, and here we’re telling them to fire 500 people, and Secretary Tata, whatever you think of him, is a great manager, and… [SPEAKER CHANGES] You want to take it out? [SPEAKER CHANGES] … I would move… [SPEAKER CHANGES] If the gentleman wants to send forth an amendment… [SPEAKER CHANGES] Representative Stam, if you will prepare an amendment, send it forth please. [SPEAKER CHANGES] Any others wishing to speak while Representative Brawley’s in front of us? Representative Brawley, back to you if you will continue explaining the bill. [SPEAKER CHANGES] Well the cuts that would take place immediately need to raise 9.2 million. That was worked out by the Appropriations chairs. There will be 40 unfilled positions eliminated immediately in DOT, but there will be no layoffs of actual filled positions. There are some other cuts that are detailed in the bill. John, would you like to address those in greater detail, or are there questions? [SPEAKER CHANGES] Any questions? Representative Collins. [SPEAKER CHANGES] Yes, Representative Brawley, I know I’ve talked about this with you, and the reason for a lot of the dates in this thing is to put pressure on us to actually solve the situation long-term, which I’ve been in favor of ever since I’ve been here, so I want to make sure I’m understanding you right. Are you saying that 2.4H, that September 1st, 2015 date is in there, again, to force us to solve this problem, and if we do get a permanent fix for this problem, then we would repeal what’s in section 2.4H? Is that correct or not? [SPEAKER CHANGES] Well the intent of the PCS is to give us a stabilized transportation revenue for the rest of the year, with the expectation that all of this, the transportation section of this, would be replaced by comprehensive legislation to deal with transportation funding, and it’s for that reason that I think it would be okay for us to take it out. If we solve the problem, we don’t need the 500 layoff. If we don’t solve the problem, the layoff is going to be significantly more than 500 because we will lose significantly more than was intended. [SPEAKER CHANGES] Follow-up. [SPEAKER CHANGES] Representative Collins, follow-up. [SPEAKER CHANGES] I agree with that, and I agree with anything that will force us to solve this problem this session. I’m still not sure how I’m going to vote on this issue because I’m not sure if this temporary patch with the default bad things that will happen after it is sufficient to get us moving or if maybe it may take a four month crisis where we can’t do anything to the highways to get us to move, but movement to comprehensively solve the problem is what I’m for. [SPEAKER CHANGES] Representative Collins, I would ask that you indulge us and vote for this, and I will express that I have more confidence in the wisdom of this body to come together and solve that problem. [SPEAKER CHANGES] Representative Jones. [SPEAKER CHANGES] Thank you, Mr. Chairman. Representative Brawley, I’m right here. I’m following you, and I understand what it is that you’re trying to accomplish. I understand, but I’m contemplating an amendment, and I want to ask your opinion. I understand that we’re trying to but some time so that we can come up with a long-term six, which I am totally
FJVHNT [0:00:00.0] I think you and the other Chairs know that I have a proposal that I think merits some consideration and I think that this would give us time to look at that and other good ideas. My question is, I think a lot of folks were troubled and we have already heard both sides, we understand for three months there is going to be a reduction in the gas tax and then we understand from this that over the next six months there is gonna be reduction from what it is now but it’s gonna be higher than it would be if we do nothing with this bill. So my question is—could we push that January 1st day back to October 1st which does make us have to make our decision a little bit sooner but it still gives us a few months? So I know that in looking at my issue for instance I was told that they probably needed three months in order to make a transition to do what I wanted to do. So my question is would it be a little bit, give us a little bit more comfort to say that let’s have three months where we are decreasing it and then three months where it would be higher than it would otherwise be? So I want to amend that would simply be to move that January 1st day back to October 1st and let’s try to solve the problem just a little bit sooner. [SPEAKER CHANGES] Representative Brawley. [SPEAKER CHANGES] Thank you for your question Representative Jones. There was originally discussion at an earlier termination date and essentially the decision was made that we would be messing with the normal reset dates on the existing gas tax legislation to pick a date other than July 1 or January 1. So the decision to go to the end of this calendar year is that the formula would normally operate to reset the gas tax on January 1 regardless. So that put the additional pressure, the October 1 date would, if were voted back what not to what number we would we revert? So that it would require additional load on the administration of the gas tax so that was the reason that why an earlier date was originally chosen for the reasons that you have mentioned, the January 1 date was finally put in because of the most corresponded to the existing mechanisms for administering and collecting gas tax. [SPEAKER CHANGES] Representative Stam? [SPEAKER CHANGES] Can I move my amendment and speak on it? [SPEAKER CHANGES] Yes. [SPEAKER CHANGES] I don’t have copies but if you could read it, it’s very simple. [SPEAKER CHANGES] Yeah, the amendment reads. To amend the bill on page 7, line 5 to 16…I’m sorry, lines 16 through 31 which changes the title by deleting the lines and re-lettering the remaining subsections, Representative Stam. [SPEAKER CHANGES] Yes, I’m all in favor to put pressure on ourselves to get something done but since we hope and expect that this won’t happen, there is no reason to put a couple of thousand employees in the position of wondering for the next six months or so whether they have a job when we want them to be preparing plans to get roads bill. So I move the adoption of the amendment. [SPEAKER CHANGES] We have an amendment? Is there second? No, second, another discussion, Representative ?? [SPEAKER CHANGES] A question, didn’t someone say not in this meeting but earlier that these 500 positions were also in the budget to be eliminated at one point? And I’m just wondering what happen to that? [SPEAKER CHANGES] Representative Brawley? [SPEAKER CHANGES] That is correct, it wasn’t the budget to be eliminated, this was an additional pressure point but the point being made to have this hanging with the question, with the macro question not being answered, it’s a reasonable adjustment we are still going to be pushing for the outsourcing of some positions but we are taking that out of this bill. [SPEAKER CHANGES] Follow up. [SPEAKER CHANGES] And maybe this would be a question for Representative Torbett but if that was in the budget how come it was never accomplished? [SPEAKER CHANGES] Representative Torbett, do you like to address that please? Representative Brawley? [SPEAKER CHANGES] It might actually be more appropriately address to Transpiration Administration. [SPEAKER CHANGES] Questions for the bill sponsors, Representative Harry Warren. [SPEAKER CHANGES] Thank you Mr. Chairman, actually I wonder someone or staff could tell me if the gas tax drops by 1 cent effectively prefers and hopes if that going through July 1st, I believe… [0:04:59.3] [End of file...]
QSKCUN [0:00:00.0] Well, the 15 week period what does that represents that 1 cent in the last revenue. [SPEAKER CHANGES] Miss. Kelly. [SPEAKER CHANGES] This current bill has that cut from 37.5 to 36 so a penny and a half, and in that rate cuts the revenues to the highway fund by 10 million $50,000 into the Highway Trust Fund by three million $350,000. [SPEAKER CHANGES] May I follow up? [SPEAKER CHANGES] Follow up. [SPEAKER CHANGES] So for those sponsors can you tell why we are doing a reduction when you consider the price of gas per gallon was about a dollar so less than was a year ago this time and it’s really an incidental amount, I look back on page 4 of the bill, I’m seeing 11 million deducted from the current Highway Program Administration, is that an offset the loss, the reduction of the penny and can you explain me why we are initiating one cent sales tax temporarily? [SPEAKER CHANGES] Representative Brawley? [SPEAKER CHANGES] The 36 number came about re-consultation of Finance Chairs, Transportation Chairs, leadership, some members of the minority party and roughly about 25 people kicking this around to decide what number made sense from both transportation funding and political point of view? So this is not a purely technical answer there was a lot of arguments that said, “Let’s set it at 37.5 and leave it.” There are some people that say, “Let’s let it fall and count on all the additional people that were drive to North Carolina to buy additional gas to make up the short fall.” We had to pick a number that had support and that’s what we choose. [SPEAKER CHANGES] Just to clarify staff had some clarification on the question. [SPEAKER CHANGES] Emily Cameron, Sir I think what you are looking at is page 4 in the bill, what that represents is the budget that was adopted in 2004 and so that is actual law what changes is line 36 to show that this bill reduces revenues by 3.3 million dollars in the Highway Trust Fund so that cut was made to the 2004 budget, 2014 budget. [SPEAKER CHANGES] Mr. Speaker? [SPEAKER CHANGES] Yes. [SPEAKER CHANGES] I just want the clarification on the year, Representative I appreciate your explanation you have told me how but I’m still not clear on why we want to voluntarily suffer a lost of that much money? [SPEAKER CHANGES] Representative Brawley? [SPEAKER CHANGES] Yeah, actually I think that’s a good answer that Representative Stam says it’s called a compromise, if the gentleman wants to send forward an amendment to change to 37.5 we will see if the committee will support it. [SPEAKER CHANGES] Mr. Chairman. [SPEAKER CHANGES] Representative Louis? [SPEAKER CHANGES] With all due respect are we debating the bill or we debating the amendment from Representative Stam? [SPEAKER CHANGES] The point has made we are doing amendment, are there any other comments on the amendment? [SPEAKER CHANGES] Yes Sir. [SPEAKER CHANGES] Representative Louis? [SPEAKER CHANGES] Thank you Sir, I have the fiscal analysis memorandum that was passed out in our packet this morning, I would like to ask about some members if I could as I look at this bill or at this memorandum it appears that there is a cut of 40 million in savings for the fiscal year 2014, 2015; not a cut, yes that cut would produce a misstate impact of 15…Well, my question would be am I reading that right, my next would be would the gentleman from Wake, amendment not change that radically? [SPEAKER CHANGES] Miss. Kelly? [SPEAKER CHANGES] Representative Louis I’m not seeing the 15 million numbers but I will walk you through what the cuts are, if you look at page three of the fiscal memo, you have a Table 1 and the Table 2, the bill balances, the adjustments to the current fiscal year and six ways, first it makes no… [0:05:00.3] [End of file…]
the board cut, with several exceptions, including to the ferry division. Number two, is it reduces three maintenance accounts by a half a percent. It makes three statutory adjustments of items that receive motor fuel tax revenue, that's the Powell Bill, Wildlife Resources, and dredging, and lastly it eliminates 40 vacant positions and gives the department the authority to use lap salary in addition to make up that cut of $683,000. In the Highway Trust Fund, it follows the statutory formulas for the strategic transportation investments program. [SPEAKER CHANGES] Representative Lewis, does that clarify for you better, or a follow-up question? [SPEAKER CHANGES] Yes sir, Mr. Chairman. I apologize. Let me try to restate it. On the first page of the fiscal analysis memo, in the box column that's labeled "fiscal impact, dollars in millions," under the column entitled "fiscal year 2015-16" there's a minus 540 and that's beside the line that says "state position." So I'm just trying to understand if the amendment that's being considered by the committee passes, would this minus 540 become a minus 40, and if so would that not have significant fiscal impact to the transportation budget? [SPEAKER CHANGES] Ms. Cameron? [SPEAKER CHANGES] Thank you, sir. I understand what you're saying and you are correct. The state positions that are cut, you would include the 40,000, I'm sorry, the 40 positions for each of those five years listed and you would remove the 500 positions beginning in the next fiscal year. In terms of an impact, of course there is none to the current fiscal year budget but any adjustments would be handled through the budget process if those 500 positions were taken in a future fiscal year. [SPEAKER CHANGES] Representative Davis, is your statement on the amendment? Okay. Okay, thank you. Any other commentary or questions on the amendment? Seeing none, all those in favor of the amendment as presented by Representative Stam, please signify by saying aye. Those opposed? Appearing to the chair the aye's do have it. The amendment it adopted. Representative Brawley. [SPEAKER CHANGES] Thank you, Mr. Chairman. [SPEAKER CHANGES] We are back on the bill. [SPEAKER CHANGES] Okay, I think you- [SPEAKER CHANGES] Representative Davis has a question. Representative Davis. [SPEAKER CHANGES] Thank you, Mr. Chairman. If this bill was to pass, can someone please explain to me what would be the effect on the shallow draft navigational channel dredging fund? I know there's a reduction, but how much? [SPEAKER CHANGES] As much as I'd like to answer that for you I think I'll let staff do that. Ms. Cameron? [SPEAKER CHANGES] In the current fiscal year you have a reduction of $16,750. In the future fiscal years, this would be a cut of, again it's on table three, $357,375 positive in fiscal year 15/16, and a reduction of $25,750 in fiscal year 2016/17. [SPEAKER CHANGES] Follow-up. [SPEAKER CHANGES] Follow-up. [SPEAKER CHANGES] Yes, thank you. If I could ask staff a follow-up up question, please? [SPEAKER CHANGES] Yes, please, Representative Davis. [SPEAKER CHANGES] On the top of page six, thank you, Mr Chairman, on the top of page six I noticed it says "motor fuel tax ?? shallow draft navigation and channel dredging fund" and to the right of that in parentheses is $1,677,134. Could you please tell me what that represents. [SPEAKER CHANGES] Ms. Cameron? [SPEAKER CHANGES] Representative Davis, could you repeat the question? It was a little hard to hear you. [SPEAKER CHANGES] I'm sorry, on the top of page six of the bill it states that motor fuel tax ?? shallow draft navigation channel dredging fund and to the right of that in parentheses is $1,677,134, my question was what does that represent?
Ms. Cameron. [SPEAKER CHANGES] Sir, it represents what was in the 2014 budget. What you should be looking at is page seven, line 13, and that gives the amount that is being changed from the current year budget of $16,750. [SPEAKER CHANGES] Thank you. [SPEAKER CHANGES] Thank you. Representative Jones, I think I had you first. [SPEAKER CHANGES] Thank you, Mr. Chairman, and Representative Brawley, you answered my question well a few minutes ago. Sometimes it takes me a few minutes to jest and reflect and contemplate so let me ask my question this way. If we were to pass this plan, there would be no change of the gas tax on July 1st. There would be a change effective April 1st and there would be not further change until January 1st. So I guess my question is if we are deferring that change for three months, if there is going to be no change on July 1st but we were to implement a change on October 1st, why would that be a problem? I understand that the tradition is that it's January 1st and July 1st but if we're not going to have a change on July 1st, and I don't know if you can answer this or maybe staff can answer it, but try to explain to me why the department would have a lot of difficulty in deferring that change for three months? [SPEAKER CHANGES] Representative Brawley. [SPEAKER CHANGES] Representative Jones, my understanding is that the people that would actually collect and submit the gas tax are on a July 1, January 1 reset. It would be if we changed our tax filing date this year from April 15th to July 15th, how much of a problem would that be for CPA's and all the accounting, and I think it's just that is the problem. It's just what people are accustomed to do, the way their computers are programmed, the way they generate their reports. Would staff- [SPEAKER CHANGES] Staff concur with that? [SPEAKER CHANGES] Representative Jones, could staff come in on that? Ms. Cameron. [SPEAKER CHANGES] The Department of Revenue does, its IT system is based on more of a quarterly system. So in terms of an administrative burden, it would be better to have a tax change on October 1st or January 1st, March 1st, so in terms of that it wouldn't be an issue. The issue is really what tax, if you choose to file an amendment, what tax do you want to be in effect on October, right now, the annual reset would be October so you're amendment would need to say something in terms of the effect of how the tax should be determined from October to January. [SPEAKER CHANGES] Follow-up. [SPEAKER CHANGES] Follow-up. [SPEAKER CHANGES] Then it sounds like, from that answer, since they're on a quarterly system that technically the computer, whatever, it shouldn't be a problem if we started at the first of the quarter which would be October 1st. [SPEAKER CHANGES] Ms. Cameron. [SPEAKER CHANGES] Yeah, she's confirming that would be the case. [SPEAKER CHANGES] If that's the case, Mr. Chair, I believe I would like for staff to prepare that amendment. [SPEAKER CHANGES] Okay, if you'll work on that. Representative Jordan. [SPEAKER CHANGES] Thank you, Mr. Chairman, a question for staff. [SPEAKER CHANGES] Go ahead with your question. [SPEAKER CHANGES] 37.5c and 36c, can you tell us what the current numbers are for Virginia, South Carolina, and Tennessee? [SPEAKER CHANGES] Ms. Cameron? I don't believe we have that. Hold on just a moment. Ms. Griffin. [SPEAKER CHANGES] I believe the bill summary has some reference to the other state rates. If you look on page five of the summary, down where it says "current law" and there's a subheading "rate," the second paragraph says what the current rates are in the surrounding states. You've got South Carolina, Virginia, and Tennessee listed there. South Carolina, 16c per gallon, Virginia 19.88c, and Tennessee 20c per gallon. [SPEAKER CHANGES] Representative Jordan, was that what you needed? Thank you. Any other questions on the bill?
We're waiting on an amendment. Representative Hall. [Speaker Change] Thank you Mr. Chairman and I want to go back I guess there seems to still be some confusion about whether or not this is going to increase the tax we're going to charge on these fuels and so I know, versus what it would otherwise be without this bill coming forward. And so I wanna make sure this is clear without this bill what the rate would be and what this does to increase the rate by passing this bill. [Speaker Change] Representative Brawley. [Speaker Change] Sir, today the rate is thirty seven and a half cents. If this bill passes the rate will drop to thirty six cents. If this bill does not pass the rate will drop to approximately thirty cents. There will be a reduction but I'm not selling this as a tax decrease or anything else. This is simply an attempt to stabilize the revenues on transportation. We have essentially two choices, we can drop the gas tax by seven and a half cents or we can fill the pot holes and pave the roads. Pick one. [Speaker Change] Follow up. [Speaker Change] For follow up. [Speaker Change] So, without this bill it goes to thirty cents. [Speaker Change] That is correct. [Speaker Change] And your saying you want to increase it to thirty seven and maintain it. [Speaker Change] No sir, I do not want increase [Speaker Change] To thirty six. [Speaker Change] I want to drop it less than to thirty cents. I want to drop it only to thirty six. [Speaker Change] Representative Jeter. [Speaker Change] Against my better judgement I'm going to make a comment if I could Mr. Chair. [Speaker Change] You may, we may not be able to save you after you make that comment but you may. [Speaker Change] Yeah, to me, been married fifteen years tomorrow so now you know how my wife feels. You know, it is I don't want to get into the semantical argument of whether or not this is a tax increase or a tax cut, it is what it is. Everybody can see it for what it is and I'm not going to go down that rat hole of us trying to get away from the larger scope of what we're trying to accomplish by trying to dictate whether this is or isn't what may or may not happen on July first. The premise I think we all have understand and respect here is we are trying to come up with a permanent fix to a problem that no other state has adequately fixed. And admittedly we are trying to do so with a bill here today that puts some emphasis on us to get it done by July first. It's on us once we pass this bill which I believe is the right thing to do to make sure that we sit down and come up with a permanent long term fix for transportation funding in this state. The gas tax as it is currently written will work. For lack of a better reason and I've been in this building for only two and a half years, just over two and a half years, it feels like a lot longer sometimes. This bill gives us the incentives for lack of a better term, to do the right thing and actually come up with a permanent solution so we can go back to being the good road state that we are. I cannot stress as much how much is important this bill is to getting us on the track to coming up with a permanent solution working together across aisles across urban and rural across all these little pockets we like to put ourselves in. Let's fix this for North Carolina, let's pass this bill and let's fix it before we get outta here hopefully in July. [Speaker Change] Thank you representative Jeter, representative Hall [Speaker Change] Just a comment on the bill. Thank you Mr. Chairman and I can appreciate the comments about what's been happening for the last two and a half years that representative Jeter talked about, I've had a lot of objections about what's happening the last two and a half years as well but on this particular matter it doesn't seem that this is a permanent fix. This is not a permanent fix, I think he indicated this on the road to talking about trying to do something later on. So we're kicking the can down the road we shouldn't put this forward as a permanent fix and then my question is if we don't do something in the time allotted what happens to the tax? And so does this actually move us somewhere are we doing anything regarding a permanent fix today? [Speaker Change] Representative Brawley. [Speaker Change] This is I would say part of a plan to do a permanent fix this does buy us some time this is not the permanent fix.
As for the need to solve this problem, I certainly look forward to your support and involvement in us coming up with a good answer, Representative Hall. And the last question, should we not take action and come without us having replaced this bill, the gas tax will go, I believe, it's been forecast at 26.1, which would be about $500 million a year reduction in the transportation funding. So there definitely be pressure under us to move forward. So there would be a substantial reduction in the gas tax on January 1, even with this bill passing, if we do not replace it with a more permanent solution. [SPEAKER CHANGES] Representative Stam. [SPEAKER CHANGES] Yes. Big problem, great solution, and I'd like people to go out of here rejoicing because this big problem is caused by three really good thing. Much lower gas prices. Is that good or bad? Good. Second, improved of gasoline mileage, which is what's [?? tape fades out] Is that a good or bad thing? It's good. And then the third thing is, of course, you got more vehicles that are going out there using up the roads without using gas. Is that good or bad? Good. So my point is this is not your typical...like what we had four or five, six years ago when we were faced with the financial disaster where we had to make hard choices. Here we have a hard choice because of good things. [SPEAKER CHANGES] And there was much rejoicing. We're waiting on the amendment. We're close on the amendment. Any one else wishing... [SPEAKER CHANGES] Mr. Chair, unless someone has a question... [SPEAKER CHANGES] Representative Jones. [SPEAKER CHANGES] ...if I may just make use of the time while the amendment's being prepared, I think people filing in... [SPEAKER CHANGES] We need some filler, Representative Jones, so that'd be great. [SPEAKER CHANGES] Thank you. I promise not to do any singing and dancing. Why am I going to offer this amendment to basically reset the date to October 1st? This is my purpose. Basically, it's two-fold. Number one, we don't need to buy enough time for the legislature to be here until October 1st for this session so that we can solve a problem with the January 1st date if they need three months notice. I don't really want to incentivize us being here until the fall to solve the problem. So that's number one. People use the time you give them and if we have an October 1st date, I believe we can solve this problem by July 1st, which is when a lot of us would like to be out of here anyway. We all know that when the summer comes that we're going to have a budget to deal with. There's going to be other things on the table. So I think October 1st, that reset date, would give us adequate time to be able to solve the problem. Number two, let's take out some of the political posturing here. Quite frankly, I don't want to see one side trying to sell this as a tax cut and the other side trying to say, "Well, it's a reduction for three months, but you're actually going to increase it for the next six months over what it would have been." So I think it makes sense. Staff has just told us their on a quarterly system. It's not going to change the world if we have a reset date of October 1st instead of January 1st. I think it makes sense. For that reason I think it's a good amendment and I ask people to support it. [SPEAKER CHANGES] Very good. Anyone else wishing to speak? Representative Lewis. [SPEAKER CHANGES] Thank you, Mr. Chairman. It gives me...it's not often I find myself opposed to my good friend. The reason this committee is being asked to consider this bill today is to provide stability to the road funding system. To be able to pave the roads that we need to pave and fix the potholes we need to fix, replace the bridges that we need to fix. I have great hope in the goals of Representative Brawley and Torbett and Iler and Senator Rabin. All the folks that are really committed to trying to fix this transportation issue, but it looks like to me we would be wise if, like me, your vote today is on trying to stabilize the funding in the transportation system to go ahead and allow it to be stable for those six months instead of the three months that the gentleman's amendment would create. [SPEAKER CHANGES] Thank you, Representative Lewis. [SPEAKER CHANGES] Mr. Chair, can I...
EBKHLQ [0:00:00.0] You can, Representative Jones. [SPEAKER CHANGES] I appreciate Representative Louis’s comments, I would just say this—I think it should be all about stability and that’s what it’s all about. [SPEAKER CHANGES] Let me sign on. [SPEAKER CHANGES] This does stabilize from April 1st and to October 1st to six months I believe. So we have got a stable rate for six months and I’m not gonna repeat the reasons I just gave but I don’t see moving from January 1st to an October 1st reset day, it hurts our stability, I think this bill, this effort needs to be all about stabilizing the rate, it doesn’t need to be about the political posturing, it doesn’t need to about three months increase, six months of decrease, how you wanna put that? So I agree completely with the comments that my colleague from Harnett just said except for I don’t understand how it’s changing from January 1st to October 1st reset date hurts that stability. It does give us a six month rate from April 1st to October 1st, and so I still think it’s a good amendment, thank you. [SPEAKER CHANGES] Thank you Representative Jones. Representative Hall? [SPEAKER CHANGES] Thank you Mr. Chairman and I know we have discussed both the amendment and the bill back & forth so just to clarify the discussion going forward for the vote; I like to call for the ayes or no’s on the actual bill, the ayes and no’s on the actual bill. [SPEAKER CHANGES] This is sustained. Alright thank you. Representative Steinberg? [SPEAKER CHANGES] Mr. Chairman… [SPEAKER CHANGES] One moment Representative Steinberg. [SPEAKER CHANGES] Thank you Mr. Chairman, I don’t know whether this comment would be more appropriate for the bill or for the amendment but anybody here had kidney stones? I’m telling this is absolutely unbelievable, when we are trying to compare the challenges that are facing us in terms of funding transportation with, the challenges which the other states has surrounded we mentioned the South Carolina, Tennessee, and Virginia, and for political posturing purposes among other reasons we are stating that our gas taxes are so much higher than the states that surround us. I think we need to keep in mind that just like an education and transportation North Carolina does thinks a lot differently than these states surround us and that is, and that is funding transportation, we are talking care of secondary roads in this state, the other states are not responsible for doing that, and that is one of the reasons why our gas tax is higher. Now, we can drop at 16 cents, we can drop at 20 cents, we can drop at 25 cents, and we can bring it down to 0 but the problem is going to be those real estate taxes and all of the counties are gonna fall upon the counties to pick up the nut and I can tell you there are a lot of unhappy folks back home if that were the case and probably none of us would become back here for another session. So let’s keep in mind that we are, when we are trying to politically posture we are not talking about apples versus apples at all, this is completely different here in North Carolina than those three states and borders. So I just wanna to make that comment Mr. Chairman and I appreciate it, thank you. [SPEAKER CHANGES] Thank you Representative Steinberg, Representative Luke and Representative Jordan? [SPEAKER CHANGES] Thank you Mr. Chairman, Representative Brawley a moment ago reference to rule that one-fifth of the membership of the committee has to support Representative Hall’s request for the ayes and no’s, I don’t believe most members of the committee understand that, if that’s what it means. So if you like to have an ayes and no’s on the vote you would just, you would have to raise your hand, and I understand the rule and you understand the rule but I’m not sure the membership does and so I would just ask if we could request that again, if we don’t have we don’t have it but at least the membership needs to understand what that rule means, it’s an obscure rule and so I’m asking if we could… [0:05:00.6] [End of file…]
RKJMVV [0:00:00.0] And one more time and see if one-fourth of the membership would be willing to have an eye and nose, if you would… [SPEAKER CHANGES] For those who would like to have the eyes and nose raise your hand please and those opposed raise your hand. Reading clearly and fit but I wanted to make sure that we saw that, very well thank you, Representative Jordan. [SPEAKER CHANGES] Thank you Mr. Chairman, thank you. I guess this is a question for Representative Brawley, something that I don’t understand here we are talking about reaching a long-term solution to fix the problem of funding transportation because the gas tax is not working and we want to put this plan into place now to force us to get that done this session but if we get a long-term solution done by July 1 why do need this stabilizing plant in first place, why we are even doing this now, why aren’t we focusing on a long-term solution to get that in place before the July 1 day, I guess that’s my confusion. [SPEAKER CHANGES] I thank to gentleman for his question, a long-term plan or we would need some stability during the budget process to have some idea of what the minimum number which we must deal. Also, there is a question—would we come to a complete agreement by July 1? Decisions had to be made these were the dates that we were picked, we could argue over what date we cut if off, or what date we go in, these are all choices, a lot of people say, “Why can’t we do this?” There is lot of reasons why, we had to make a decision and move forward to it and to some extent I think we are arguing over the arrangement of the deck chairs instead of just keeping the ship of the iceberg. [SPEAKER CHANGES] Representative Louis and then Representative Hager did you want to speak? [SPEAKER CHANGES] Okay. [SPEAKER CHANGES] Representative Louis. [SPEAKER CHANGES] Thank you Mr. Chairman, I just wanted to make a quick inquiry to staff if I could in partial as a follow up. Representative Jordon, it’s my understanding that by statue what the gas tax is effective July 1st is actually set March 31st because it takes three months to get it done which is the reason there is an urgency to pass this bill. Could staff speak to that? [SPEAKER CHANGES] I’m Amina Cameron, before I enter Representative Louis’s questions, I did want to acknowledge there is an error in the fiscal note in terms of Representative Stam’s amendment, and those 500 positions that were eliminated should be shown as a negative, should be shown as a negative number for the expenditures for next year if that amount should be a negative 18.75 million and then in the last three fiscal years that should be shown as a negative 25 million, and to indicate the loss of those positions, to answer Representative Louis’s question the way the gas tax formula works right now is it’s based on a six month figure, the July rate would be based on from October 1 to March 31st but we don’t have those figures on March 31st, the preliminary figures for the current month will come in May but they won’t we finalized until June. So we actually don’t know what the tax rate will officially be until the Department of Revenue releases those figures and that happens by law on June 15th or December 15th each year. [SPEAKER CHANGES] Thank you, Representative Hager. [SPEAKER CHANGES] Thank you Mr. Chairman, I just want to voice my support for this amendment, I think Representative Jones has a right, we need to fix this issue, don’t let it linger, let’s get this amendment pass so we can get a permanent fix of this problem so we are not hash this thing out again next year and the next year, and the next year. [SPEAKER CHANGES] Representative Jones I think we have your limit ready and we will think as a motion…Representative Collins, Miss. Griffin if you read the amendment to us please we don’t have the copies. [SPEAKER CHANGES] So the amendment next changes in two places in the bill if you are in the PCS on page 4, the paragraph at the top, line 2 it’s going to change September 30th to June 30th. And then online five, it removes the word calendar… [0:05:00.2] [End of file…]
refers to the year, it changes January 1st to October 1st, again there on line five. On line 16 it removes the word calendar and then if you turn to page seven, in the effective date, there are two references to January 1st, 2016 and both of those on lines 44 and 46 would be changed to October 1st, 2015. [SPEAKER CHANGES] Any questions for staff on that reading of the amendment? Seeing not, recognizing Representative Jones for the amendment. [SPEAKER CHANGES] Thank you, Mr. Chair. I just wanted, if I understood what the staff just told us, it seems to me that that's one more good reason why it would be good to go to the October 1st effective date. Because if I understood what she said, we don't really have those numbers in place by March the 31st and by changing the effective date we would actually know what the numbers were beforehand. So that may be one more good reason, if it's not then okay but I'm not going to repeat all the things I've already said. I think this does help us. I don't think it does any harm and I hope that we'll support the amendment. [SPEAKER CHANGES] On the amendment, I've got Representative Jeter and then Representative Stam. Representative Jeter? [SPEAKER CHANGES] Point of clarification and if I could, maybe for staff, assuming for a second that Representative Jones's amendment passes, the effect on October 1st, what would the gas tax be in North Carolina on October 1st? [SPEAKER CHANGES] Staff? Ms. Cameron. [SPEAKER CHANGES] Representative Jeter, we would have to do a quick analysis but it should be very close, still, to the 29.9 rate. [SPEAKER CHANGES] Representative Stam. [SPEAKER CHANGES] Just an observation, very similar to the one I made on my amendment, it's fine to put ourselves in a box where we have to work but what the amendment does is to put mayors and city councils and road planners in a state of uncertainty as to what will be happening in the fall and what roads can be built and be planned for, so I'm not going to vote for it. [SPEAKER CHANGES] Thank you, Representative Stam. Seeing no others, there's a motion with a proper second on the amendment, all those in favor please signify by saying aye. Those opposed. Appearing to the chair the no's have it, the no's do have it. The amendment is adopted. I'm sorry, the amendment fails. Thank you. [SPEAKER CHANGES] Thank you. [SPEAKER CHANGES] I don't do early mornings, by the way. Seeing not, Representative Brawley for a motion. [SPEAKER CHANGES] Thank you, Mr. Chairman. I move that the PCS to Senate Bill 20 as amended be engrossed into a new PCS, that we report favorable to the new PCS with serial referral to appropriations, unfavorable to the original bill. [SPEAKER CHANGES] We have a motion, do we have a second? We have a proper second. Any other discussion? Seeing none, all those in favor, signify by saying aye. Those opposed? The bill passes and I think moves on to appropriations next. Up next we will have House Bill 117 as we discussed last night, if the sponsors of that bill would come forward. [SPEAKER CHANGES] Mr. Chair. [SPEAKER CHANGES] Representative Stam. [SPEAKER CHANGES] A request while she's coming forward? [SPEAKER CHANGES] Go ahead with your request. [SPEAKER CHANGES] Could my amendment be, being passed out, and the reason I say that is, under House rules you can argue against an amendment by telling about the merits of your amendment and the amendment is in the packet that I would argue against because another amendments coming. If I could just have it passed out I'd appreciate it. [SPEAKER CHANGES] We can have that passed out for you, certainly. We have a motion that House Bill 117 be before us by Representative Martin, do we have a proper second? We have a second. All those in favor signify by saying aye, those opposed? The bill is before us. Representative Martin, you are recognized. [SPEAKER CHANGES] Thank you, first I want to apologize for the length of the committee and please don't hold it against me that you've had all this long debate. I will try to net this out as simply as possible. I was going to have staff go over the bill but I might just start by trying to give you the high level components. There's a lot in it but it really nets out pretty simply. Can you all hear me okay? [SPEAKER CHANGES] If we could have a little order please? Thank you. [SPEAKER CHANGES] Thank you. Okay, there's a lot of
greater debate about the programs, but let's just talk about what this legislation does. It expands the ability to grant JDIG awards until 2020. So currently, this program is set to expire in 2016. It gives us additional financial availability of funds. The current program, we have $25,000 of availability if we have a project that commerce has a positive return on investment and wants to make a grant, we are not in a position to award any grants at this time. We do have $7.5M in the budget that's already been allocated made available from July until December. So what this bill does is it collapses that time period and makes that immediately available if the right project comes along now, we could reach forward and take that $7.5M for somebody making a decision today who's not waiting until July and we also authorize $50M for this calendar year of additional funds to made available. And we'll talk more about the program overall. There is a re-branding in here of some of our incentive tools of the job, the JDIG, and the One NC to job growth reinvestment capital for One NC and people for JDIG. There's the marrying of funds that were put in the budget last year, appropriated, they are currently out there, $20M dollars were set aside for the job catalyst fund provided that passed. That did not get enacted last year so we have $20M dollars sitting there that does not have a program around it. We also have a program that was effectively used to recruit Merck and has been depleted of funds so does not have funds available but it has all of the requirements of the committee reviewing it, a return on investment, and it's been successfully utilized so it's not as much of a walking-around money, people were very uncomfortable last year just putting money in there and essentially a closing fund. So this is much more controlled. So it's marrying funds that are already available with a program that's already out there that doesn't have funds. That is the site infrastructure development fund and is re-named. There's a slight modification to the single sales factor, I might let staff go over that and we are looking at extending the sales tax refund for passenger air carriers exactly the same way that we're doing it today. We're asked to completely eliminate that, we're not able to do that financially, and then there's a slight modification to the data infrastructure act. I'm going to see if there's, I guess what maybe I'll start with is ask Commerce to come forward, there's a handout that I've asked to go out that Commerce has put together that further explains these programs and I want to make one really important point. A lot of us don't care of incentives and we want to just be a competitive state, we don't want to have to play these games. The way that recruitment works these days, a lot of things get done on the computer based on software and they check a box and determine if you wind up in the top three and the incentives box needs to be checked and then you get to come to the table and once we get to the table in North Carolina, we want to have the best business environment from a tax standpoint, regulatory environment, infrastructure, education, of any state. So that when they look at what it takes to do business in North Carolina, what you need from an incentive is going to be really, really a small part of the package and eventually none. But if we don't check the box, we don't get to come and prove that to other folks and it's our job, as we go forward, to create that better environment, but we're not in a position where we can just say, "We're not going to play that game, period. We just don't want to be, that's not going to be where we lead. So we need to be out there, there's been a lot of reports about, "Oh, these are not successful, you see the percentages," the reason that is true is that by design of the program, where we don't pay out unless the jobs are actually there. So when the economy is not performing and there's a recession and we're not creating jobs, automatically that gets reduced. That's good news, folks. That is not bad news. And we'll get more in to that. Now that the economy is growing is when we do want to have the availability because people are looking at expanding and we can't just say, "Well, we don't want to take them right now." If people are looking at relocating, this is the time that we need to be leveraging that and folks are saying, "Well, we're doing well so maybe we don't need these programs." Well folks, we have had these programs. This is part of the package that is helping us to compete. So some of those points, I'd like to have Commerce to make a few comments and then we could have staff go over some of the financial impacts. I know there's some amendments, and then we'll get to questions and hopefully we can facilitate moving the conversation along. [SPEAKER CHANGES] Thank you, Representative Martin. We'll recognize someone from Commerce. I believe I see Secretary Skvarla, if you would press the button, hold that button, state your name and who you're with for the committee.
Mr. Skvarla, we cannot hear you. Let's see if we can try that again. [SPEAKER CHANGES] Still not working. Is that working? [SPEAKER CHANGES] That works, thank you. [SPEAKER CHANGES] I'm John Skvarla. I'm the Secretary for the Department of Commerce. [SPEAKER CHANGES] Welcome to the Finance Committee, sir. [SPEAKER CHANGES] Thank you for having me this morning. And I'd like to begin by thanking Representative Martin. She has dug into this issue and truly understands the attendant ramifications of what we're talking about here. And your work and your knowledge and your understanding of this has been superlative, and we can't thank you enough for the job that you've done on this, Representative Martin. Thank you. I'm going to say the one thing that we all are going to agree on. Everybody in this room. Nobody likes incentives. The practical reality is that our competitive pool is not only just the United States, but foreign countries. And if you look out at our immediate competitive pool, it's probably ten southeastern states, nine of which are controlled by Republican governors and generals assembly. They all have incentive programs. The reality is we must be competitive, as Representative Martin just said. There's no question that incentives are the first box that is checked by anyone looking at North Carolina. We need these tools. I believe you have a fairly comprehensive package that was just handed out that the Department of Commerce has prepared late into last night. And it talks about the various programs, so I'm not going to get into the detail. We have a plethora of staff here that can answer questions on the detail, but the reality is these tools are discretionary. They create a return on investment to the state of North Carolina. The money is only spent after economic vitality has been created. They're targeted. They address big companies and small companies. They range from Murphy to Manteo, from Nash County to McDowell County. Everyone benefits. Whether it's the JDIG program, or the utility fund that's part of the JDIG program, or the One North Carolina program, which is specifically targeted to infrastructure in smaller areas. We need these tools. We have a pipeline full of projects and at least as to the JDIG program, as the governor says, the emperor has no clothes. We have no ability to compete. And I'm going to close by reading you something that I just received from the state of South Carolina dated February 27, 2015. And I'm going to read you two sentences from their eNewsletter: "There's no question that the auto industry has played a significant role in evaluating, in elevating our economy to its current status as beast of the southeast." It's our understanding that South Carolina paid incentives to Boeing to move to Charleston for 2500 jobs. Boeing now has 10,000 workers in that plant. And South Carolina didn't pay anything for the 7500 additional jobs. Since 1983, South Carolina has issued 459 bonds totaling more than $8.6 billion, which in turn resulted in the retention and creation of more than 215,000 jobs. We have a program that is discretionary, and we have a program that is targeted. And we have a program that ?? [SPEAKER CHANGES] Secretary Skvarla, if you could. I think your finger might have went off the mike there. [SPEAKER CHANGES] Sorry. [SPEAKER CHANGES] Thank you. [SPEAKER CHANGES] We have a program that is targeted, discretionary, and creates a positive return on the investment. We need the tools. Thank you very much. [SPEAKER CHANGES] Thank you, Mr. Secretary. Representative Martin. [SPEAKER CHANGES] Secretary Skvarla, can you or someone from your team explain what these maps are in the handout, so that we can draw members' attention to the various maps, please? [SPEAKER CHANGES] Secretary Skvarla, you're recognized. [SPEAKER CHANGES] Is that still on? Make sure I get them in the right order here. [SPEAKER CHANGES] No problem. I know there's a lot of
?? [SPEAKER CHANGES] The first one... Is this on? [SPEAKER CHANGES] You're on. [SPEAKER CHANGES] The first one is a map that represents the investment in the utility fund. And the utility fund is a program that is part of the J-DIG program, or better, the Job Grow People program, where money invested in J-DIG also is allocated to utility fund, an infrastructure fund that can only be used in 80 counties. It can not be used in the top 20 economically more viable counties. And if you look at the data, since the inception in 2003 there have been 70 utility fund projects. If all the J-DIG awards are in fact made... Or I'm sorry, today, there's 37.2 million out of the 193.4 million in J-DIG awards made that's on the left side. And there was another $11 million from that fund that was diverted last year by the general assembly for other uses. So the reality is almost $50 million has gone into the utility fund that benefits only 80 counties. MetLife has been a topic of discussion of recent days, and that was a tier 3 project. MetLife potentially could receive $116 million in J-DIG award, of which 29 million alone would go into the utility fund. So every time a J-DIG award is made, the entire state of North Carolina benefits. It does not just necessarily go to tier 3 counties if the award is made there. The second map you should have... is where the J-DIG awards have been made. And very clearly, the disproportionate number has been to tier 3 counties. But remember there's a salient feature in J-DIG, and that is the determination of the award is a function of the estimated withholding. It's capped at $6,500 per person. And it's also capped at 75% of that estimate. And to make a long story short, what that means is that where jobs pay more, which is generally in the tier 3 counties, there is excess income tax created that will not be used for the program, to use for other purposes in the state. It's harder to achieve that in the more rural areas where the jobs don't pay as well. So even though there's been a disproportionate percentage in the tier 3's, the tier 3's are contributing to the overall economic well-being of the entire state, and that's your choice as to how to use those funds. The third map talks about the one North Carolina. And that's a program that requires a local match, and if you look at the map, it is spread all over the state. 407 projects, almost 15,000 direct jobs, an investment of $4.4 billion in private capital along with the one North Carolina program. So I think these three maps represent a good explanation of how the programs work in tandem, and the fact that the programs are working for the entire state of North Carolina. [SPEAKER CHANGES] Thank you. [SPEAKER CHANGES] Thank you miss secretary. Representative Martin. [SPEAKER CHANGES] Thank you. There's been a lot of information about this bill out there, so I'm kinda torn if we want to have staff go through in detail or if we just want to go to member questions. So, gonna throw it out there, if there's a recommendation... [SPEAKER CHANGES] I'm hearing staff. Staff, if you would, walk us through the bill please. [SPEAKER CHANGES] Okay, good morning. Looking at part one of the bill that deals primarily with J-DIG, section 1A, well under current law, the maximum J-DIG commitment for 2013-15 biennium is 22.5 million, and the maximum J-DIG commitment for the perion for 7/1/15 through the end of the calendar year is ??
.5 million dollars. Section 1A collapses these two caps on these two time periods into one time period from 7/1/13 through 12/31/15. It makes the 7.5 million that would come online as of 7/1/15 immediately available, and it also provides an additional 15 million dollars for the program. Section 1B of the bill rebrands the program to the Job Growth Reimbursement Opportunities Program. Section 1C of the bill eliminates prioritization of JDIG funds for eco-industrial park projects. Section 1D of the bill eliminates reference to the minimum health coverage, as recommended by the Small Employer Carrier Committee, pursuant to 58-5125, as the applicable provisions of that statute were eliminated with conforming the statute with the Affordable Care Act. Section 1E modifies the relevant time period against which increases in employment are measured. Under current law, the business must maintain employment levels at the level of the year immediately preceding the base period. The base period is the period of the time… it’s the ramp-up period in which new hires are made to fill the created eligible positions. The bill would change the relevant comparison point for employment levels from immediately preceding the base period to the greater of the employment levels at the date of application or the date of award. Section 1F. Under current law, the authority to make new JDIG commitments expires as of 12/31/15. The bill would extend the authority to make new JDIG commitments until 12/31/19, or it will expire 1/1/20. Part 2 of the bill rebrands the One NC Fund as the Job Growth Reimbursement Opportunities Capital Program. Part 3 of the bill, as Representative Martin indicated, would take the 20 million dollars that was earmarked in last year’s budget for the Job Catalyst Fund, which did not pass, and would reallocate that to the Site Infrastructure Development Fund to reactivate it for site development functions. The bill would also change the outmoded statutory reference about minimum healthcare requirements, similar to what was done in JDIG in Part 1, and it would rebrand the program to the Site Acceleration Fund. Part 4 of the bill deals with single sales factor. Corporations that do business in more than one state apportion income tax and franchise tax to each of the states with which it has Nexus. North Carolina, generally speaking, uses a double-weighted sales factor apportionment formula, but for qualified capital intensive corporations, North Carolina uses a single sales factor formula. The big requirement for a qualified capital intensive corporation, or a QCIC, is that it invests at least 1 billion dollars over nine years in a tier 1 or tier 2 area. There are also wage and health insurance standards and job maintenance requirements that are associated with that tax benefit. The bill eliminates the requirement regarding corporations’ property factor. It eliminates the requirement that the facility for the QCIC be located in a tier 1 or tier 2 area. It converts… Currently if you have the single sales factor benefit and you don’t make your investment over the nine years as required, then that tax benefit expires and you lose the benefit moving forward, but there’s no recapture of previous years, so the bill would convert the expiration of the tax benefit into a recapture provision should the QCIC fail to make the required investment or otherwise fail to meet the eligibility requirements. The bill would set forth explicitly the wage standard instead of incorporating it by reference. Regarding the healthcare coverage requirement, you see a similar provision that we’ve seen twice before in the bill; it eliminates an obsolete reference to the minimal coverage recommendations by the Small employer Carrier Committee. And finally in this part, it eliminates the sunset for the single sales factor benefit for QCICs. This is set to expire in 2019 if no corporation qualifies as a QCIC by that time. This would eliminate that sunset. It also eliminates the prohibition against coupling the single sales factor tax benefit with incentive funds from JDIG and/or One NC. Part 5 of the bill. Under current law, businesses whose primary business is scheduled passenger air transportation and interstate commerce or passenger air carriers are allowed a sales tax benefit in the form of a refund of sales tax paid on fuel in excess of 2.5 million. The refund tax benefit is repealed for purchases made on or after 1/1/16, and this draft would… the bill would extend the tax benefit for four years to 1/1/20. Finally, Part 6 of the bill. Under current law, data centers receive
receive tax benefits for certain purchases under certain qualifying conditions. Most similar to this bill, data centers receive a tax exemption for sales of electricity and data center equipment if they invest $250M dollars over a period of five years. This draft would create an additional sales tax exemption for data center equipment and electricity if a $75M dollar investment is made over five years. [SPEAKER CHANGES] Thank you, I also want to point out that in your packet, in addition to the bill summary and the fiscal memo, there's a job growth program overview that staff put together for me and that is because the bill just talks about how it changes but if you're not as familiar with the way that the current programs operate there's a lot more information that's maintained that we're not discussing. So you have that summary as well if there are questions and I'll open up for discussion. [SPEAKER CHANGES] Mr. Chair? [SPEAKER CHANGES] Questions. [SPEAKER CHANGES] Mr. Chairman? [SPEAKER CHANGES] Representative Adams, I'm sorry, Representative Stam, I had you first, and then Representative Adams. I apologize. [SPEAKER CHANGES] Could I ask Secretary Skvarla two questions, if he would? [SPEAKER CHANGES] Secretary Skvarla, if you would approach the podium. Representative Stam? [SPEAKER CHANGES] Yes, [SPEAKER CHANGES] A question. [SPEAKER CHANGES] Secretary Skvarla, these are two questions I asked our non-partisan staff a week ago and they properly declined to answer so they, I would suggest that they ask you. [SPEAKER CHANGES] May I also properly decline? [SPEAKER CHANGES] According to the fiscal note, the big part of this bill, of course, is JDIG, somewhere between 281 and 900 million dollars. So this is about JDIG. Suppose we had one large company, right, in Pittsboro say, doesn't matter where it is, and they employ ten thousand people and we refund to them a portion of the withholding, which is how JDIG operates as I understand it. [SPEAKER CHANGES] Well, we refund a portion of the income tax paid buy the new employees, the withholding is simply the methodology to calculate the, but the withholding technically belongs to the employee. [SPEAKER CHANGES] Representative Stam? [SPEAKER CHANGES] Right, and that's my point, is you're actually refunding some of the tax paid. The question is, and this is if it's all working correctly, not if it doesn't work, but it's working correctly, who pays the taxes to educate the children of those workers and who pays for law enforcement to arrest the people who victimize them and who pays for all the other services for these now people? Would it not be fair to say that that's the people in other parts of the state who are paying it? This is not a perpetual motion machine, it's actually paid by the rest of us. [SPEAKER CHANGES] Well, not necessarily. First of all the award is limited to a period of years. The award is not a perpetual motion machine. Secondly, with the 75% limitation on the withholding calculation and a $6,500 limit on the amount of the withholding that can count. The idea is that more taxes than will be reimbursed to the company are created for general use purposes, that was my point. So the idea is that there will be net dollars to do all of those things. If the world works perfectly there will be net dollars and we'll be getting net dollars from people that were never North Carolina employees paying taxes. [SPEAKER CHANGES] Second question. [SPEAKER CHANGES] Follow-up for Secretary Skvarla. [SPEAKER CHANGES] Yes. On the One North Carolina Fund, the testament we had of a week ago was that the typical award for One North Carolina Fund was $2,000, $3,000, $4,000 per job, and I assume there's- [SPEAKER CHANGES] Depending on the tier, it varies by tier. [SPEAKER CHANGES] Right, right. You've been in business a long time. Do you think $1,000, $2,000, $3,000, $4,000 is enough to, a one time pay, is enough to induce anybody to hire anybody? [SPEAKER CHANGES] Well, remember, the One North Carolina Fund has a local match. So if the- [SPEAKER CHANGES] Including the local match. [SPEAKER CHANGES] Absolutely. In tier one and tier two counties, 20 jobs, 25 jobs is huge, absolutely. [SPEAKER CHANGES] Follow-up. [SPEAKER CHANGES] Very brief follow-up. The question's not how many jobs but per job, if you're in business, whatever you're, engineering, would you have induced to hire an additional employee by somebody agreeing to pay you one time, $3,000, $4,000, $5,000? [SPEAKER CHANGES] Sure, because that fund is used for infrastructure and equipment, absolutely. If it will defray the cost
most of my infrastructure and my equipment? Absolutely. Without a doubt. [SPEAKER CHANGES] Mr. Chair, if I may? [SPEAKER CHANGES] You may. [SPEAKER CHANGES] Comment on that? [SPEAKER CHANGES] Representative Martin. [SPEAKER CHANGES] And I think this is the example of where once you get around the table, you show that the incentive portion does not need to be huge. You're trying to make the business case that this works for this company to expand or relocate and grow jobs in this area, and the amount of it that's in an incentive versus just a good business environment should be low. [SPEAKER CHANGES] Thank you for sharing it. Representative Warren, did you have a question for Secretary Skvarla? [SPEAKER CHANGES] No, actually. [SPEAKER CHANGES] Okay. You're recognized. Go ahead. [SPEAKER CHANGES] On page one, lines 25 through 29, it refers to, actually gives a definition of a full-time employee as someone whose compensation is under $150,000, and it says it's relevant to that subsection. So on page three, lines 2 through 6, in talking about the acceleration fund, I guess, or the site infrastructure, that definition isn't given for employee. So my question is, is it the same criteria, or are we looking at a 40-hour workweek or a 30-hour workweek? What classifies as a full-time employee under that section? [SPEAKER CHANGES] Can I get staff assistance with that? [SPEAKER CHANGES] Staff, could you assist? [SPEAKER CHANGES] I don't know that answer off-hand. I don't think the wage requirement is there. I think that it's something along the lines of 1600 hours in the year, but I can get more information and get back to you on that. [SPEAKER CHANGES] Thank you. [SPEAKER CHANGES] Follow up? [SPEAKER CHANGES] Follow up, yes. If we don't specify the compensation as a criteria like we do on the first page, would those positions then fall under ACA for a 30-hour workweek, or would we have to mandate something is my question I guess? [SPEAKER CHANGES] And it could be in the statute, but we're not changing it, so that's what we need to clarify, if what's spelled out. [SPEAKER CHANGES] Mr. Edify??. [SPEAKER CHANGES] The only thing I would add is, so the requirements that you're seeing in the bill are dealing with health insurance requirements for employers to employees in order to qualify for the program. It doesn't try to adjust what is the federal requirements or anything like that. It's simply saying in order for you to be eligible for site infrastructure or for JDIG you have to provide a health benefit for your full-time employees. So I don't know exactly the difference between the full-time employees for these two programs, how they line up, but I'll get you that information. [SPEAKER CHANGES] Thank you, Mr. Warren. [SPEAKER CHANGES] Mr. Chair, Mr. Chair. [SPEAKER CHANGES] Representative Warren, yes? [SPEAKER CHANGES] Just to follow up on that point? [SPEAKER CHANGES] I'll let you follow up and then Representative Adams, Representative Luebke. [SPEAKER CHANGES] Thank you. Just to follow up on that. Is there a definition of health coverage? What does it mean to have health care coverage? I mean, do you have bare-bones or do you have a decent plan such as the state health plan? [SPEAKER CHANGES] Representative Martin or staff? [SPEAKER CHANGES] Staff. [SPEAKER CHANGES] Mr. Edify. [SPEAKER CHANGES] So currently the way the bill is drafted there is no minimum standard for health care coverage that has been put in. We could reference other statutory standards, but currently there is no minimum health care coverage standard in the bill. [SPEAKER CHANGES] And in some of that discussion, what was taken out was things that became obsolete because of the federal laws. And so because it's a little bit in flux we felt that we should maybe not tackle that right now, and if we see an issue we might want to come back and specify it to North Carolina. But we do intend that these would be good, high-paying jobs that would have health coverage and meet the OSHA requirements, those kinds of things. [SPEAKER CHANGES] Thank you. Representative Adams, then Representative Waddell, then Representative Jones. Representative Adams. [SPEAKER CHANGES] My question has to do with the utility account. It says here the utility account provides funds to use for utility and infrastructure improvement projects in tier one and tier two areas if reasonably anticipated to create jobs. I come from an area that has abundant conventional utilities: water, sewer, electricity, natural gas, that are a legacy of our lost manufacturing base. My question is, what other utilities might be eligible for economic development, and specifically would or could these utility funds be used for, or applied to, a fiber-optic broadband project? [SPEAKER CHANGES] Representative Martin, or? [SPEAKER CHANGES] Let me give that to Dan. [SPEAKER CHANGES] Mr. Edify. [SPEAKER CHANGES] So the types of utilities that may be covered through the utility account are water, sewer, gas, telecommunications, high-speed broadband, electrical utility distribution lines or equipment, transportation infrastructure for existing and new or proposed buildings. [SPEAKER CHANGES] Thank you. [SPEAKER CHANGES] Representative Waddell. [SPEAKER CHANGES] Thank you, Mr.
Mr. Chair, my question is basically I guess for the bill sponsors on the bill summary on page 4. It refers to the ?? requirements to the corporation property factor and the requirement that the facility be located in a tier 1 or tier 2 area. Does this mean that the single sales tax could be used…? It wouldn’t be an enticement for those folks to be moving into a rural area or depressed area? [SPEAKER CHANGES] Yes, the bill does remove the restriction on where a qualified capital investment corporation that’s going to invest a billion dollars over nine years would have to locate to anywhere in the state, and we believe we need that flexibility. There’s other programs that we definitely want to incent them to locate in a tier 1 or tier 2, but if the option is somewhere in North Carolina or in Texas or South Carolina, we don’t want to have that restriction on there. [SPEAKER CHANGES] Follow-up. [SPEAKER CHANGES] I understand the fact that you may need to draw those corporations into other areas of the state, but in looking at rural areas and how depressed some of the rural areas are, wouldn’t this be a carrot that we could stick out there, really, to help convince those folks? Because I really understand about single sales tax and what possibilities it could have for increasing property values, which would be property tax and also your payroll that you’re going to be putting into these economies. We lost a lot of income in those rural areas, and this looks like to me would be another panacea to try to moot it. [SPEAKER CHANGES] Representative Collins. [SPEAKER CHANGES] Representative Waddell, if I may, and Secretary Skvarla or one of our staff, maybe you can correct me if I give incorrect information here, but as I understand it, I think there’s only one corporation in North Carolina that actually qualifies for this. Isn’t that correct? And that if we pass this…well whether we pass that particular change or not, the only other corporation that I’m aware of that could benefit from it is one that’s already… or actually one of three that are looking at a tier 1 area already, so in practical terms, I don’t think it’s going to affect anything currently possible that we’re looking at right now. I guess the key is if a company this big, and what we’re talking about is something like one of the auto manufacturers that’s looking in eastern North Carolina… something this big comes around and they want to locate in outside Charlotte or outside of Raleigh or whatever, we don’t want them to go to another state just because we don’t want them to locate in that particular area. [SPEAKER CHANGES] For a follow-up? [SPEAKER CHANGES] Last follow-up. Maybe the possibility might be you’ve got the billion dollars in there… maybe the possibility might be to lower that amount or something. [SPEAKER CHANGES] Representative Collins. [SPEAKER CHANGES] I think you’re going to see that. I think you’re going to see that probably when this bill goes over to the Senate. [SPEAKER CHANGES] Representative Jones, you’re recognized. [SPEAKER CHANGES] Thank you, Mr. Chairman, and I want to thank the bill sponsors and everyone that’s come forward with this. It’s very difficult for me to say that I’m going to ask my colleagues to join me in voting against this bill. It’s difficult because I know the administration wants it, and it’s I know believe they’re doing the right thing for the right reasons. We all want to see more jobs in this state. Jobs becomes a very emotional issue. I represent two depressed tier 1 counties, and I’ve seen firsthand what it means to live in a depressed area where unemployment is higher than the state average – sometimes significantly higher, and I understand when a legislator wants to do everything they feel like they possibly can to be able to go back and tell their constituents that I did something to create a job. I’m just going to make a few comments, and I’ll probably have more to say later, and I know we’re somewhat time-limited, but just some of the things that I’m hearing. We keep hearing we have to do this – we have to do this to compete, and we’ve heard all about how South Carolina’s kicking our rear end and Georgia’s kicking our rear end, Tennessee’s kicking our rear end. I just looked at the latest unemployment rate figures. North Carolina, 5.5%. South Carolina’s at 6.5%. Georgia’s at 6.9%; Tennessee, 6.6. So apparently we must be doing something right. We must be doing something right in North Carolina. Another thing: Let’s just think about… you never hear about the opportunity cost. People say “Well it works. It works.” If you were to go out and spend a half a million dollars on a car, I hope
[SPEAKER CHANGES] It would work? [SPEAKER CHANGES] I hope it would work really good. But, the fact of it is, if you’re a person like most of us are with limited resources and choices to make on how to spend those resources. You have to tell yourself that maybe I could have spent 25-times less money on that car, and spend that money on something else. And we all know that North Carolina has a lot of needs. You know the art of politics if you will, is taking limited resources and making important decision on how those limited resources are going to use. I will give you the works, if you spend enough money you can create a job, it works. I would refer you back to- and there are so many studies; we don’t have time to even go there. From the left, from the right, from the so-called nonpartisan, the independent, the universities, the journals, but just look at our own UNC, Kennan Flagler, Kennan Flagler Study from 2009, look at the previous decade of J- Dig and looked at the 3 billion dollars that state had spent, and concluded that we had created 300 net, new jobs. It worked, it created some jobs. But how much money did we spend per job? You know, as I said, my county is deeply depressed. And I was a county commissioner, and knew what it was to try and fight for a few crumbs from the table, when the state was putting this money out there, and to try to go up against the giants, and to try to get a few crumbs to come back to our county. What makes me sick, when I look at my county is, when I look at the 3 billion dollars spend and I do the math, and I recognize that my county’s proportional share of that money would have been 30 million dollars. I can’t imagine what 30 million dollars, right now would mean to my county, because of the needs that we have. You know, we that oppose this type, are often dismissed, and we’re marginalized as ideologues, we’re either right-wing or left-wing ideologues, we’re close mined, we’re riding on our high horse, I’ve herd it all. You know, there are not too many things out there where you see The Conservative John Locke Foundation and Civatas agreeing with The Liberal and North Carolina Justice Center and Policy Watch, but this is one of them. It’s kind of interesting, they are all looking at the same factual data, that’s coming from the universities, that’s coming out of the nonpartisan think-tanks, that’s coming from the left leaning groups, that’s coming from the right leaning groups, and their all interpreting through their own lenses, whether it be from the right or the left, and they all despise it. They say that it’s not good; they say it’s a bad deal. The other thing we hear, that it’s always the right time, we heard, this is the right time, the economy is good. You know, when I came here in 2011, North Carolina was looking at unemployment rates of 10 to 11%. We had the fifth worse unemployment rate in the nation. We heard the ox is is in the ditch, we’ve go to do this; this is the time. We’ve got to increase our incentives; we’ve got to do something we’re in trouble. So, now we’ve cut the unemployment rate in half. North Carolina is around the nation average, I think, this particular month, ahead of the national average. So it’s the right time, It’s always the right time to spend more to do this. You know, we’ve heard it’s bad for everybody, but it’s especially bad for the rural counties. And since 2002, the reports were in, 59% of these J-Dig awards, went to only 3 counties. So if you’re one of those 3, I guess you brought home the bacon, I don’t know, I would vote against it, even if I were there. 91% of the awards went to urban counties, so I can go back to my 2 rural counties, and you know; we’ve got 9%, whoop-de-do, that’s great. [???], I can’t support this, and you know, you can say its ideological, I don’t know. Frankly, I don’t know if I despise this more because I’m a conservative on the right or if I would despise it more if I were a liberal on the left. Because I can stand here today, as a conservative who believes in a limited government and I could spend the rest of the day making a list of things, where North Carolina needs resources. You know, you could start, and probably make a really long list, regardless if you sit with the left or the right today. So I would just say, when you hear that it works, of course it works. We’re going to spend money we are going to create something. But, I just cannot accept the fact, that we take money from the many and give to the privileged few, less than 1 tenth of 1%, of all the businesses in North Carolina. I want for North Carolina to be a leader, I want for us to work for a better way. I, actually believe, I actually believe in a free market and fair competition, an equal playing field. And I believe, with all my heart, that North Carolina could be the leader. You know, the final…
thing I'll say is this, you know Raleigh's here, if the Federal Government would just change the rules, we hear the sports analogy, this is the game, we got to get in the game, this is a game changer, I'm a sports fan, that's all great. We hear the military analogy, we can't have unilateral disarmament, I don't want to disarm, I want to go out there with a better weapon and a better weapon is a better tax climate for everybody. So that those 800,000 small businesses in North Carolina can create jobs. So we're not taking from them to give to a few. I beleive we can do better than this. So I'm not against jobs and I'm certainly not against the people who are trying to promote this today and I'm not against my governor. I asked some of the people on my side of the aisle, would you be jumping up behind this if Governor Perdue were still governor? I'm just trying to look at the facts. I'm just trying to look at the facts. So, members, I can't support this. I hope that many of you will join me in not supporting this, and let's make North Carolina a leader, let's do something better and support jobs in a better way, thank you. [SPEAKER CHANGES] Thank you, Representative Jones. You mentioned your good friends up front here and I kind of liken it when your sponsoring a bill, you're kind of like Ricky Bobby and you don't know what to do with your hands when you stand up here. So I appreciate you all suffering through what we need to do. Representative Collins, you have a comment, and then Representative Stam. [SPEAKER CHANGES] Yeah, I'd just like to say I agree with my good friend, Representative Jones, that we're on the right track and we've been doing the right thing for the last four years in making our state much more business friendly and it is paying dividends when you look at the statewide numbers. I like Representative Jones too, though, represent tier one counties and I haven't seen that improvement in my county yet. Maybe he has, I don't know, but I'm living in one of those counties. It seems like all the decrease in unemployment so far is centered around Mecklenburg and Wake and a few other counties. It hasn't reached my area yet to the extent that I'd like to see it reach. I would like to comment on a few, because like him I like facts, and so I'd like to comment on a few things he said. Number one, that his county missed out on $30M dollars because of what's been allocated to JDIG, that's really not true. That money wouldn't have been there if those companies hadn't of come and paid those payroll taxes in. So it's not like we've got, we're snatching money away from people, that money wouldn't have been there to begin with. So there would have been no $30M dollars to disperse because that's just a part of the taxes they paid in. Plus I'm sure his county's like mine have benefited from the utility fund that JDIG pays into. So there actually are some benefits there that would not have been there had we not awarded those grants. Number two, well I want to talk about unemployment being down but it's not down across the state. Number three, as far as, and I was concerned about this too, it is true that most of the JDIG grants go to tier three counties but JDIG is not the only incentive program we have. We've also got a One North Carolina fund and that one goes primarily to the rural counties, to the the tier two and tier three counties. In fact, I think the most recent numbers we heard were 65% of the grants and 55% of the money goes to to tier two and tier three counties, which obviously, that's probably a great over representation by population because my counties don't have the population that Wake and Guilford and Mecklenburg and these other counties have. So you have to look at them in balance. It is true, JDIG primarily works for large metropolitan areas because it works primarily for large companies that invest a lot of money and pay high salaries because those three things have to come in play in order for the JDIG formula to work. So, unfortunately, if a company can create 1,000 paying $80,000 in Charlotte and my county can create 1,000 jobs paying $40,000 in Nash County, it's not going to work under JDIG. It might work under the One North Carolina Fund, but that's a different part of the mix. But you have to take those two together to understand how we attract businesses to the different areas. But anyway, I agree with him, we're on the right track and I'd love for us to get to the point where we're so good we don't need any of this stuff. But as I've said before, we're just not quite there yet. I think we're headed there, I just don't think we're there yet. [SPEAKER CHANGES] For the members, I'm referring to the sponsors of the bill then I'll get to Representative Stam and then Representative Szoka. Representative Martin and then Representative Steinburg. [SPEAKER CHANGES] Thank you for that and I just want to thank my fellow members, even those who are arguing against it. These are all really important conversations to have and I don't disagree with a lot of the comments that you're making and as Jeff commented, that we are making progress in unemployment, we have had these tools and the fact that we've been utilizing these as companies are growing is evidence that our current JDIG amount that we're able to commit has been committed because companies are coming and that is just one part of the package. I want to point out again this job grow program summary that's in your folder. This highlights some of the research
about incentives and some of the progress we've made that talk about that incentives, under incentives were tax credits and discretionary programs that have defined metrics and defined criteria, performance criteria, and can be more strategic. And the recommendations were move away from tax credits, the discretionary programs are more effective in really growing jobs. We have made great progress in here because we had the really hard job of tax reform, which we're not done with, to move away from as many tax credits and still having some discretionary programs. So I want to point that out. A lot of people are talking about that study and this is staff's analysis of the summary of the key points there. And also in there goes over all of the protections and the process for turn on investment that are required for these programs. So I want to make sure people fully understand that piece. [SPEAKER CHANGES] Representative Steinburg. [SPEAKER CHANGES] Good morning, everyone. I would like to start out by saying that in the last three campaigns I bashed my opponents over the head repeatedly for embracing economic incentives and Representative Jones had mentioned Governor Perdue and some of the efforts she had and I can honestly say that I was absolutely, without question, opposed to that. Well it's funny how folks can change and especially once you get in office and you start actually dealing with constituents on a day-in day-out basis and not just your friendly, familiar circle of people that you see every day. And in doing that, what I have come to the conclusion of is that we, in both Eastern and Western North Carolina have been depressed, that wasn't a revelation, but have been economically depressed for a significant number of years. This bill is an opportunity to change the board in a very, very big way. If you look at, and there are several automobile manufacturer's, for example, that are looking at North Carolina right now, most of you know we lost Mercedes-Benz to Georgia because the Senate and the House were unable to cobble a deal together last year to make that happen. We are the only state in the southeast that we compete with that does not have an automobile manufacturer. Now let me get back to those folks back home, and not just in my district but those folks back home throughout the east and the west and other depressed areas of the state. Some of these people have been hoping for change for about ten years now. Now, I agree that the best way to create jobs is to eliminate the state income tax and to eliminate or lower significantly the corporate tax, and that in itself, if we could do that tomorrow, I believe that is the best way to create jobs and bring these folks to North Carolina. Sadly, that's not going to happen. It may not happen for two years, it many not happen for five years. So now we're talking about folks back home who have been looking for a good job, any job, for ten years and now we're asking them just to hang on another five years and that's what's going to happen if we don't do anything. They'll be having to hang on another five years. That's fifteen years. What is the average number of years somebody is employed before they retire? Thirty years, thirty-five years, forty years? Well certainly that fifteen years is a very, very significant part of their working opportunity. We are one North Carolina, and I'm not talking about the fund, we are, and I believe a lot of my friends here int he legislature who are metropolitan, they represent metropolitan areas and urban areas, I believe they understand the crisis we face and I believe they understand that the only way we can turn this state around is that everybody needs to share in the prosperity. Things are getting better over our way, things are getting a little better in many parts of the west, but we still got a long way to go and for us, for us to turn our nose up at an opportunity like this and say, "Folks, we're just going to ask you to hang on a bit longer, we're working on getting it right,
And we are and we will get it right and we will but we just want you to wait a little bit longer. Look into those hollow eyes and see the exasperation and the frustration. I don't know of any legislature anywhere, unless it was because of maleficence, has never been re-elected by a or failed to been re-elected by a resounding margin if that's what we're thinking about just the politics of it because the created jobs. I'm not voting for him, my god he created nine hundred jobs over here. That's not the candidate I want. This, we're talking about human lives, we're talking about people that have been hurting for a very long time. I came to Raleigh with one specific purpose in mind and I believe a lot of my colleagues did as well. And that is to bring opportunity not just to parts of North Carolina but to bring opportunities to every single corner of North Carolina. And it's about time we started thinking as one in this chamber and we started thinking as one in the other chamber and we unite to do what we've been called to do. And that is to bring economic opportunity to each and every one of the people that have entrusted us to come to Raleigh to do exactly that. So I commend each and every one of you to please, please, for god sake, support this legislation, let's make let's turn hope into reality. Thank you. [Change Speaker] Thank you representative Steinburg. Representative Stam I believe your next on my list. [Change Speaker] Yes, I offer an amendment which is at the desk and has been passed out. And if I might be recognized. [Change Speaker] Your recognized for a motion. [Change Speaker] OK, and after my explanation the Chair of the committee may decide to break this into three sections or take it as a whole. But I'd like to explain it first. The first [Change Speaker] Representative Stam, my I interrupt you are the copies of this amendment at each desk do we know? [Change Speaker] Yes. It was passed out early. [Change Speaker] If you'll suspend for just a moment. Everyone's nodding they do have it? Yes? OK, alright. Just want to make sure we're all on the same page. Thank you sir. Go ahead, proceed. [Change Speaker] It's four version two. [Change Speaker] Representative Stam. [Change Speaker] Well first of all I'm not going to make a speech against the bill it's no secret I'm going to vote against it but this is not a catfish amendment. I stopped doing that many years ago. If you adopt and your in favor of the bill this will make it easier to justify your vote. Some votes for it. What I'm trying to do here is to coordinate the feelings about what the bill should be with the actual text. Now the first section you hear a lot about we've got to help the rural areas and you also know that ninety percent of JDIG stuff went to tier three counties I believe last year even though some money went to the grants went to tier three although some money went to the infrastructure. This amendment was inspired by a conversation I had heard between the governor and the by far the most successful business person in North Carolina. Was a public conversation, I heard it in which this fella said I really don't mind if you want to have some incentives for rural areas but it really irritates me when your paying my competitors here in the triangle to, you know, to compete against me. And he's right, I am from one of the most prosperous districts in the state and believe it or not I'll get away with proposing that we have a limit of sixty percent of JDIG grants to tier three counties. Probably should be twenty percent but I'd ask you to vote for sixty percent limit on tier three counties. Section two, well part of section one also addresses a phenomena we heard in finance, you know we have this claw back where the economic investment committee may require part of the money to come back and this just says they shall require it to all come back. That's matching the rhetoric with the bill. Section two addresses the one North Carolina fund. I don't, we paid a million dollars per job I believe it was for Apple or Google and that really did induce jobs I'm sure. We probably over paid but never the less it induced jobs. And typically when it's about somewhere around twenty thirty
[SPEAKER CHANGES] 40,000 it's right on the tipping point of whether it actually induces a job. But when we're paying out three, four, five thousand I don't believe that that's enough for a businessperson to actually make that decision on that basis. So, but they have to say it to us. So all we're doing in Section 2 is letting them say it under oath so they'll at least think about it twice rather than it just being a box they check on a form. Section 3 deals with clawback, and we hear about, you know we always claw it back, but it's a slippery glove. It's not a true clawback and the example of course is Dell. I offered this similar amendment to the Dell deal eleven years ago, they didn't adopt it and Dell didn't pay all the money back because it wasn't a real clawback. What this requires is that there be security for the clawback and it needs to be real security. Now the very last sentence of the provision on page three allows the Department of Commerce to subordinate that security to ?? try to interfere with things. But if you don't have security, either a bond or a letter of credit, or a lien on the property, then if you go, if that company goes into bankruptcy, the state of North Carolina is a general creditor and it's not going to get anything. So that's what's there in Section 3 and I hope-I'm still not going to vote for the bill, but you'll take-my speech will be 80% less than if you don't because you have taken away half my talking points. [SPEAKER CHANGES] Fascinating, that is a motion. [SPEAKER CHANGES] A bargaining chip there, I don't know. [SPEAKER CHANGES] I believe, I think we have a proper second for the amendment. We have a second from Representative Setzer. Any discussion? [SPEAKER CHANGES] Yes we wanted to ?? [SPEAKER CHANGES] Okay, we'll get you. Representative Goodman I'm going to go to you first. [SPEAKER CHANGES] Thank you Mr. Chairman. I was fascinated by that presentation there and the thing that really bothers me about that amendment. If you assume that 60% of ?? grants have been spent already, and the state of North Carolina gets an opportunity to land another company that wants to come to the triangle, then we're going to say we're sorry, but we have this money, but we can't use it because it's been designated for Tier 1 counties. To me it ties one arm behind the backs of the Department of Commerce. The other thing is I really don't believe that saying that 40% of the money has to go to Tier 1 counties is going to guarantee that Tier 1 counties get any other jobs, because companies locate where it serves their best interests, so I just don't see that as being a practical provision. The second thing is if I were a company that we were negotiating with and you told me I had to say under oath that I was going to do something it would really be like spitting in my face. I would consider it-I just don't think that is a good way to negotiate anything, so I'm going to vote against the amendment. Thank you. [SPEAKER CHANGES] Thank you Representative Goodman. Representative Martin. [SPEAKER CHANGES] Yes, just to note that the bill sponsors are opposed to this amendment, and not to some of the ideas that he's going after. I do have another amendment that I will send forth that I will try to address some of these concerns about the money and the tiers and some of the clawbacks that I think will accomplish it in a more reasonable approach that doesn't have some of the issues that Representative Goodman brought forward. So we ask you to vote against the amendment and a few other comments. [SPEAKER CHANGES] Representative Jeter. [SPEAKER CHANGES] I think Representative Goodman hit the nail on the head, which is we run the risk of losing the big fish with the 60% cap, because there's other ways to incentive or solve the problem to ensure that Tier 1 and Tier 2 counties are included. But if you get a Boeing, if you get a MetLife, if you get whomever it is, that is the biggest whale in the ocean, the numbers are going to exceed 60% and then we just killed the bill. I would argue that this is a unintentional catfish amendment, because what you're saying is no big companies are going to be eligible if they desire to be in a Tier 3 county. That's what the effect of this amendment does. We'd ask you strongly to defeat the amendment. [SPEAKER CHANGES] Representative Collins and Representative Dollar. [SPEAKER CHANGES] Yeah I'd like to speak to what seems like the most probably innocuous part and that's
Part two and I agree with what representative Jeter just said but I have the biggest problem with the second change because I actually have a large employer in my district which just opened a new plant for a new type of business this year and hired a lot more people. And the president of that business told me one of the things, that they actually turned down state money I don't know if it was JDIG or something else. But it was one of those where you had to check this box that says I would not have done this expansion in their case if I hadn't received state money. He said, I couldn't tell them that cause I was going to do it anyway. And I think that's well to me to make somebody say that I would not have done this project without the money, I don't think that's the deal. If we're creatin if new jobs are going to be there and maybe this guy, these folks have been a good employer for a long time and they were expanding their business and so forth. I wouldn't have been opposed to helping them with that but anyway to make them say it under oath I think is even worse. I would like, I would be for eliminating that check box in the application to start with would be my personal opinion on that not to make it more binding than it is now. [Speaker Change] Representative Dollar. [Speaker Change] Thank you Mr. Chairman, I think it's worthy noting and I don't know if representative Martin mentioned it but representative Martin does have a an amendment that assume will be taken up that's sittin here on the desk that is better than the far preferred than the Stam amendment but certainly addresses some of the concerns you know in one sense the percentage is irrelevant because we can always make the program bigger. But why go through all the trouble, why limit yourself to sixty percent when we know we can always come back at some point in time and make the thing bigger in order to accommodate something that we need to do. All we're doing by putting in this sixty percent figure on this is ensuring that we have to raise to cap on JDIG bigger in the future if we're trying to accommodate some major projects that may come our way. It's kind of self defeating it seems to me. Representative Goodman I just can't improve on his comments they are exactly correct and the comments have been made by him as well as representative Collins on section two that's, your not going to sell the state that way that's not a rationally way to sell this state. And the other thing I'll just mention very briefly, is that so HCL they came to an area not far from where I live, they've grown they've got some incentives, they invested they're a world wide company they're an international company based in India. They could have gone anywhere I mean literally anywhere in the globe and they've gone a lot of places in the globe. But they wanted to be here, to have a presence here and to take advantage of the markets here as well as to take advantage of the quality of people here. They had an opportunity to expand, the state stepped in the county stepped in the local government stepped in and enticed them to bring a thousand more jobs to our area. Well, all those people don't live in one particular legislative district or one particular county. They come up US one from Lee county, from Harnett county, they come over from Johnston county, they come from Chatham county to take those jobs and those are areas that are looking for jobs. And you know when we have those jobs there is a multiplier effect, somebody gets a job they are able to spend money in the grocery store and get their hair cut, and go to the dentist and everything else that you want to have done. So your either going to, gonna, we should either do this the right way or not do it at all. And, but the amendment offered by the gentleman and while I respect him greatly put you in sort of the nether world that you shouldn't really be in. We should do it right or not do it at all. And I would recommend the defeat of this amendment. [Speaker Change] Thank you representative Nelson. [Speaker Change] President Stam. [Speaker Change] Yeah, speak the second time very briefly. If you look at your fiscal note the maximum potential liability is nine hundred.
hundred million dollars over the course of this long grant. So suppose you get this big fish this year – the really big fish. You could offer that company over $500,000,000. Well you’ve got to take out the percentage for the infrastructure, so it’s more like 400,000,000, or in that area. That’s a lot of money, but I think the very best argument made for this amendment and for the defeat of the bill was made by Representative Collins, and I’ll take you back to his discussion of Section 2 where this company didn’t take the money, didn’t want to sign the form because they were coming there anyway, and that’s what we know. That’s what we know, is almost all of these companies are coming anyway, and I’ll take you back – I’ll send it; I’ll pass it out by email, but there’s an article in Journal of World Business where the company’s put these incentives down at item number 10 on their list, and the top three things of course are transportation, labor and energy costs, and this is, like, number 10 on the list, and they’re coming anyway. [SPEAKER CHANGES] Let’s see. I have… Representatives Szoka and Bradford, I’ve not forgotten you, but you were on my list prior to the amendment, so next on the amendment, Representative Jordan. [SPEAKER CHANGES] Thank you, Mr. Chairman. If you’ve been listening carefully, I’ve been kind of astounded at the schizophrenic argument that’s been going on here. The last three supporters of this bill have basically said companies come because they want to. It has nothing to do with incentives, and that’s this whole debate we’re having here. I was originally going to ask Representative Stam why he’s got this 60%. You’re granting that most of this stuff is already going to the wealthy counties, and I’ve got two that are not the wealthy counties, so why would I support 60%? Why wouldn’t I support none of this going to the wealthy counties? Because global companies want to come to the triangle because of everything that’s already here. Well they’re not coming to my area because of what’s already there because we don’t have the same things, so doesn’t it make sense that that kind of incentive would need to be for my kind of county and not the big counties? I think the fact that all of these incentives have gone historically to the wealthy counties shows you exactly what this is, which is corporate entitlements. This is welfare for corporations, and it forces them to say they’re coming somewhere because of the but-for clause. Of course they’re not going to take that box off because if they say they didn’t come but-for, then they don’t get the money, so of course they’re going to say “Well yeah, we came because of incentives.” How do we know that that’s true? It’s probably not true, so I like the idea that Representative Stam has put in here of making them actually sign a certification. That’s great. At least that will get them for something, but when we get back to the bill, I’ve got a lot more to say, so I’ll stop right there. [SPEAKER CHANGES] Thank you, Representative Jordan. I think just for the folks at the back of the room, we’ll put you down as a maybe. Representative Alexander. [SPEAKER CHANGES] Thank you, Mr. Chairman. This has been an interesting debate. I find myself somewhat confused in that people who I would have anticipated would have been on one side tend to be on the other, and having listened to all of this and read through all of this material, I was greatly tempted by the position that Representative Stam brought forward. I was tempted because much of the discussion that I’ve heard has centered around a sense that too much has gone to tier 3 counties – a position that I vigorously oppose, quite frankly. I do believe that at the end of the day, corporations are going to come to North Carolina for business reasons. It’s nice to have incentives, but if there is no business reason to be here, they’re going to go somewhere else, and because of that, at the end of the day, I cannot support the amendment as presented. I’m sorry, Representative Stam. You almost got me.