Senator Rucho Pitches State Tax Reform to REBIC

State Senator Bob Rucho doesn’t think North Carolina has an inefficient tax system. He doesn’t believe our tax code should be tweaked, modified or streamlined. He doesn’t even think we need to look at lowering our rates.

No, Senator Rucho thinks the state’s entire system of taxation should be thrown to the curb and replaced with something else.

Earlier this week, the six-term senator from Matthews visited with members of REBIC, the Charlotte HBA and the Charlotte Regional REALTOR® Association to present the details of his Tax Modernization Plan, which he expects to introduce shortly after the 2013 General Assembly gets underway at the end of January. Opening his remarks with a compelling case about the failure of North Carolina’s current tax system to either generate reliable revenue or attract new economic growth, Rucho made his pitch for shifting the state from a model that taxes production to one that targets consumption.

In short, Rucho’s plan would eliminate both the state’s Personal Income Tax (currently 7.75% at the top bracket) and Corporate Income Tax (currently 6.9%), as well as the Franchise Tax (now .0015% of a corporation’s taxable assets). In their place would be three new taxes:

  1. A broad-based state Sales Tax of 8.05% (state and local) on all retail goods and services. While only slightly higher than the 7.25% currently charged in Mecklenburg County, the new tax would be levied on more than 180 services that are not currently taxed, including medical care, legal and tax services, association dues, and Realtor and brokerage commissions. But as Rucho envisions this, almost all business to business sales and services would be exempt from the sales tax. This could potentially include attorney or consulting fees for rezonings and entitlements, land planning and architecture fees, site grading and development costs and all materials involved in the construction of a new home or commercial building.
  2. A Real Estate Conveyance Tax of 1.0%, paid each time a deed transfers hands from one property owner to another. So by the time a new home closes, it will potentially have had this tax levied three times – when the land is purchased by the developer, when the developed lot is purchased by the builder, and when the finished product is purchased by the homeowner. The Conveyance Tax would replace the state’s existing Deed Stamp Tax, currently levied at just 0.02% on each real estate transaction.
  3. An annual Business License Fee of 1%, assessed in the following manner:
    • For corporations, the tax is levied annually against the value of the firm’s capital stock, paid-in capital (excluding retained earnings valued under GAAP). For multi-state corporations, the rate would be apportioned to North Carolina using single sales factor apportionment.
    • For sole proprietorships, partnerships, LLPs and LLCs, the 1.0% tax is levied annually against the owner’s equity determined under GAAP (generally assets less liabilities), with a $500 minimum.

Rucho 2Some other aspects of Rucho’s proposal:

  • Residential or commercial leases longer than 90 days would not be subject to either the Sales Tax or the Real Estate Conveyance Tax. Leases less than 90 days would be taxed at the 8.05% rate.
  • Residential remodeling services would be taxed at the 8.05 rate, but commercial remodeling jobs would be exempt as business-to-business transactions.
  • Rucho said the proposal was modeled with the assumption that some retail sales will disappear into South Carolina, and that the Department of Revenue would aggressively go after any North Carolinians who try to avoid paying the tax on goods purchased over the state line. We’re still concerned about the impact a higher sales tax would have on retailers, service providers and commercial property owners in South Mecklenburg County.
  • The tax proposal is designed to be revenue-neutral for state budgeting purposes, and Rucho suggested that a constitutional amendment may be considered as part of the package, to ensure that the General Assembly couldn’t revive the state income tax at some later date.

The Civitas Institute, a conservative think tank in Raleigh, just released a analysis of Rucho’s plan, which makes the case that had a consumption tax been implemented in 2000, North Carolina families would have seen $6,000 – $10,000 in higher personal incomes, and the state would have created an additional 378,000 jobs. You can review the study in its entirety on the Civitas website.

REBIC and our member associations still have a number of questions about Senator Rucho’s proposal, and are in the process of formulating specific feedback at his request. Tax Reform has repeatedly been identified as a top priority for the state in 2013, by everyone from Speaker Thom Tillis to Governor-elect Pat McCrory. But Rucho has thus far been the only lawmaker to put forth an actual proposal, and we appreciate his commitment to making North Carolina more competitive when it comes to attracting new jobs and economic development.

If you can provide any specific feedback about how this tax proposal will impact your business, please e-mail me the details at Joe.Padilla@REBIC.com. We plan to meet again with Senator Rucho by the middle of January to discuss our ideas.

Charlotte Proposing Changes to Land Development Standards Manual

Charlotte is proposing a series of changes to its Land Development Standards Manual, which governs new development in both the city and the ETJ.

One proposed change would require street name signs and stop signs to be installed in the planting strip, at least 2′ from the face of the curb, while another would increase the intermediate paving thickness on an arterial street from 2.25″ to 2.5″ to match existing SuperPave spec requirements.

You can review the entire package of changes HERE. The city is asking for all comments to be submitted by e-mail to Brendan Smith, PE, Senior Engineer, Land Development Division at bmsmith@charlottenc.gov. The comment period ends January 1, 2013.

Mecklenburg Code Director Honored for Extraordinary Service

JimBartl150X188Jim Bartl, director of Code Enforcement for Mecklenburg County, has been named recipient of the AIA (American Institute of Architects) Dietrick Service Medal.The award is presented annually to an AIA North Carolina member who exhibits extraordinary service to the community, profession or AIA North Carolina. The medal is named in honor of the late William Henley Deitrick, FAIA, a former president of AIA North Carolina.

For more than 12 years, Bartl has led all of AIA North Carolina’s code enforcement efforts, integrating codes for better flow, helping to improve processes and efficiency. Since 1996, he has served as Mecklenburg County Code director and has led the department to conduct much of its business online, streamlining customer service and greatly reducing the need for paper transactions.

In 2002, Bartl helped craft the North Carolina Rehab Code, the first written specifically for existing buildings, moving away from the dependence on new buildings as the standard measuring safety guide.

Prior to coming to Mecklenburg County, Bartl practiced architecture in St. Louis, MO, with one of the largest architecture firms in the country.

REBIC congratulates Jim on this prestigious honor, and thanks him for his service to the county and to the building industry!

Source: Mecklenburg County

 

NC Supreme Court Issues Landmark Ruling Against NCDOT

The Supreme Court ruled NCDOT cannot condition driveway permits on offsite improvements such as a new railroad crossing

The Supreme Court ruled NCDOT cannot condition driveway permits on offsite improvements such as a new railroad crossing

The North Carolina Supreme Court ruled last week that the state Department of Transportation exceeded its statutory authority in conditioning a developer’s access to a public road on offsite improvements to a railroad crossing at least a quarter-mile away from the development.

The ruling in High Rock Lake Partners v. NCDOT, written by Justice Paul Newby, reverses an Appeals Court decision that gave NCDOT the authority to conditionally deny a driveway connection to an approved 60-lot subdivision on High Rock Lake in Davidson County. By conditioning the driveway access to the developer’s improvement of a railroad crossing more than a quarter mile from the subdivision entrance, the Supreme Court ruled, NCDOT had exceeded its authority under the Driveway Permit Statute.

In finding for the developer, Newby writes that “DOT possesses only those enumerated powers along with any implied powers necessary to fulfill the agency’s purpose.” Specifically with regard to the approval of driveway connections, he says NCDOT is authorized to:

require the construction and public dedication of acceleration and deceleration lanes, and traffic storage lanes and medians by others for the driveway connections into any United States route, or North Carolina route, and on any secondary road route with an average daily traffic volume of 4,000 vehicles per day or more.

Nothing in the Driveway Statute, the court says, gives NCDOT the right to require a developer to make offsite improvements as a condition of receiving a driveway permit. Neither does it authorize the agency to condition its permit on the applicant’s ability to obtain the approval of another property owner, as NCDOT did here when it required the High Rock Lake developers to negotiate with two railroad companies over improvements to a crossing.

“The DOT’s argument,” Newby writes, “ignores the plain language of the Driveway Permit Statute. This Court adheres to the long-standing principle that when two statutes arguably address the same issue, one in specific terms and the other generally, the specific statute controls.”

Friday’s ruling, along with another earlier this year that invalidated an APFO ordinance in Cabarrus County, are a clear indication that the state Supreme Court will recognize only specific statutory authority granted to a local government or state agency. We applaud the decision, and hope the court and the General Assembly will continue to take steps to rein in excessive regulation that violates state law and stifles economic growth.

Inclusionary Housing Incentive Proposal up for Public Hearing Monday Night

On Monday night, December 17, the Charlotte City Council will consider a proposed text amendment that would provide a single-family density bonus of up to 3 units per acre above the base zoning density for developments in targeted areas of the city where median home values currently exceed $153,000. This bonus could be elected by right (no rezoning required) in the R-3, R-4, R-5, and R-6 zoning districts, as long as at least 50% of the additional units allowed by the bonus are priced within reach of buyers earning no more than 80% of Area Median Income (currently $168,000 for a family of 4).

  • Reduced development standards, including smaller front and rear-yard setbacks, and the ability to apply the cluster provisions for lot size and lot width of the zoning category.
  • Ability to include duplex, triplex, and quadraplex buildings within a subdivision, as long as they are on internal lots and make up no more than 50% of the bonus units in the development.
  • The total number of affordable units shall to exceed 25% of total housing units in the development.
  • The exterior of all affordable units within the development must blend in architecturally with the market-rate product (similar roof pitches, foundations, window types, building materials).
  • To ensure continued affordability, the City or a nonprofit housing agency shall have first right of refusal on the purchase of any affordable unit for the first 15 years following the initial sale, and any rental properties in the development must remain affordable forthat same period.

REBIC and our member associations were instrumental in the development of this voluntary, incentive-based program, and fully support its adoption by Council. We believe it provides an opportunity for the city to encourage the construction of affordable housing in specific areas of Charlotte where that supply is quickly disappearing, including South Park, Ballantyne and Steele Creek. For builders and developers, it offers a way to achieve higher residential densities with no rezoning, while serving a segment of the market that would not otherwise be able to buy in some of the most desirable areas of our community.

We particularly encourage home builders, developers and any other interested members to plan on attending Monday night’s public hearing, which will begin at 6 p.m. in the Council Chambers, 600 East Fourth St. in Charlotte.

A second text amendment to encourage mixed-income multifamily development will be up for a public hearing in January, and REBIC will soon be gearing up to support that effort, as well. If you’d like to learn more about the city’s Incentive-Based Inclusionary Housing Initiative, you can check out the most recent presentation to Council’s Housing & Neighborhood Development Committee, which approved the text amendment earlier this month.

Iconic Developer Henry Faison Dies

Henry-Faison*280Henry Faison, one of Charlotte’s most successful and respected developers, and a longtime supporter of REBIC, died suddenly Friday morning at the age of 78.

Throughout his long career, Faison built many of Charlotte’s most recognizable shopping centers and office buildings, including Eastland Mall, One Independence Center, and 101 West Trade. His company, Faison & Associates, also oversaw the $100 million expansion of SouthPark Mall. In 1998, he sold his firm to Trammell Crow Co. for $39.1 million, but later repurchased the retail development business.

Today, Faison Enterprises is a full-service real estate investment, development and management company that manages more than 7.5 million square feet of retail, commercial and residential properties throughout the mid-Atlantic and Southeast.

Funeral services will be held on Monday, December 3 at 11 a.m. at Christ Episcopal Church, 1412 Providence Road in Charlotte. Family will receive guests at the church following the service.