Analysis Brief – October 22, 2013


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FY 2014 Powell Bill Allocations Grow… Slightly

NCDOT released their FY 2014 Powell Bill Allocation Report earlier this month. Overall allocations increased 2% compared to last year, with most of the 507 eligible municipalities seeing little to no growth in allocations.

Click here to view “State of Powell Bill” Analayis at

Click here for NCDOT FY 2014 Powell Bill Allocation Report (PDF)

Data Backup Expected After Shutdown

With the end of the Federal shutdown, expect delays in delivery of monthly and quarterly economic data. As it becomes available, it will be featured in future briefs.

Construction Spending Improves

Today’s report showed that August construction spending was up 0.6% nationally in August , with the August increase upgraded to 1.4%. Home improvement activity, which would drive retail sales tax revenue, remains “restrained” according to Wells Fargo, with stronger growth in multi-family construction over the summer than single-family housing.

Slow Job Growth Disappoints


Wells Fargo predicts that Quantitative Easing will continue at existing levels, with August employment report from BLS showing only an increase of 148,000 jobs. The national unemployment rate did drop to 7.2%, but this was once again driven more by labor force contraction rather than employment growth.

NC’s Job Growth Created by Metros

How significant of a difference in job growth in North Carolina’s metropolitan areas compared to the rest of the state?

  • Since January 2007, North Carolina payroll has grown by 75,771 (unadjusted, as of August 2013).
  • In that same timeframe, North Carolina MSA payroll has grown by 135,660. This means non-MSA areas have seen net payroll contraction of nearly 60,000 during the same period.

For the first 8 months of this year (January-August), non-MSA payroll growth (+21,703) kept pace with slower-than-expected MSA payroll growth (+23,482). At the same time, non-MSA payroll growth for the period was its lowest level since 2009.

Analysis shows most of the non-MSA payroll growth in the first 8 months of the year is seasonal, followed by drop-offs in the final four months of the year. Conversely, MSAs continue to see growth in later months, influenced by overall growth, larger presence of holiday retail and year-around employment needs.

In the final four months of 2012, non-MSAs saw net payroll contraction of more than -20,000. Since the start of the last recession, MSAs have contributed more than 80% each year to net job growth in North Carolina (92% in 2012 alone).

As for MSAs themselves, the Top 10 MSA labor markets accounted for nearly 134,000 net payroll increase since January 2007.

Possible Bright Spot on Retirement Contributions

(From NCLM) The Local Government Employees Retirement System Board of Trustees heard this week that the financial condition of the retirement system could allow the FY14-15 employer contribution rates to be reduced 0.13 percentage points below the FY13-14 level. Favorable market returns on invested assets and lower than assumed payroll increases led to the improved financial condition. The Trustees will decide early in 2014 whether to use the improvement to reduce the employer contribution rate by the full 0.13 points, or to use some or all of the available funding to provide a cost of living adjustment to retiree benefits.

Overview of Provisions in Legislation ending Shutdown, Raising Debt Ceiling

(From NASBO) Late in the evening on October 16, Congress voted to pass a bill (HR 2775) to fund the federal government through January 15, 2014 and suspend the debt ceiling until February 7, 2014. The Treasury Department will likely be able to take extraordinary measures to continue borrowing past February 7. The Senate passed the measure by a vote of 81-18, and the House followed by approving the measure by a vote of 285-144. The bill was signed into law by President Obama shortly after midnight on October 17, ending a 16-day long government shutdown and extending the Treasury Department’s ability to borrow to help pay for federal expenses. As part of the agreement, the House and Senate also agreed to establish a bicameral budget committee to negotiate a broad budget deal for fiscal 2014, with instructions to complete a conference report by December 13 to allow lawmakers time to draft and pass appropriations before stopgap funding expires in mid-January.

Key Provisions Included in Bill:
The bill, reflecting an agreement reached by Senate Majority Leader Harry Reid (D-NV) and Senate Minority Leader Mitch McConnell (R-KY), funds most government operations at fiscal 2013 post-sequestration spending levels. The Congressional Budget Office (CBO) estimates that the legislation results in budget authority of approximately $986.3 billion on an annualized basis. The measure makes only one minor change to the Affordable Care Act by providing for stricter income verification requirements for individuals applying for health care exchange subsidies. Other key bill provisions of relevance to states are summarized below. Many of these provisions were added to the measure as new anomalies shortly before the bill was passed.

State Reimbursements: Section 116 of the bill includes explicit language to clarify that states that “used state funds to continue carrying out a Federal program” or furloughed federally-funded employees “shall be reimbursed for any expenses that would have been paid by the Federal Government during such period had appropriations been available, including the cost of compensating furloughed state employees.” The legislation stipulates that this provision applies only to federal programs that states were carrying out prior to the shutdown. The provision applies to any period in fiscal 2014 when a lapse in appropriations occurs, not just the shutdown that took place in October 2013.

Effective Date: Under the bill, fiscal 2014 appropriations are retroactively dated to begin on October 1, 2013, which should help ensure federal grants to states are made whole and do not see any reductions as a result of the shutdown.

Temporary Extensions for Expired Mandatory Programs: The bill extends authorizations for several programs that expired at the end of federal fiscal 2013, such as Temporary Assistance for Needy Families (TANF) and related programs, the Supplemental Nutrition Assistance Program (SNAP), the Emergency Food Assistance Program (TEFAP) Commodities, and the Senior Farmers’ Market Nutrition Program.

Backpay for Furloughed Federal Employees: Section 115 of the measure provides for retroactive pay for federal employees, as well as District of Columbia employees, who were furloughed during the shutdown.

Low Income Heating Assistance Program (LIHEAP): A provision is included to clarify the LIHEAP formula for the distribution of funds to states to ensure funds are allocated consistent with previous years.

Additional Funding for Fire Suppression: Two sections in the bill provide additional funds for the Interior Department and the Forest Service to support firefighting activities.

Disaster Aid for Colorado: One provision raises the cap on federal highway emergency relief funds that can be distributed to the state of Colorado from $100 million to $450 million, to be used to support repair and recovery efforts from recent flood damage.

Budget Autonomy for the District of Columbia: The bill provides the District of Columbia the authority to use local funds to operate throughout fiscal 2014.

Federal Funds Information for States (FFIS) published a budget brief for subscribers providing more in-depth analysis of the bill and its implications for major grant programs for states. This FFIS table, available to the public, lists overall funding levels for major discretionary and mandatory grant programs based on the October 17th budget agreement.

Provisions Excluded from Bill
It is also worth noting several provisions that were excluded from the bill. During the final round of negotiations in Washington over a deal to end the shutdown and raise the debt ceiling, there was talk of a deal that would include additional flexibility for federal agencies to implement reductions under the sequester. However, such a provision was left out of the final agreement. While Congressional Republicans generally favor such a change, Democrats view it as a mechanism to help keep the sequester in place and therefore have been inclined to oppose additional flexibility for agencies. Another item missing from the bill is a provision explicitly allowing for states to be reimbursed for the expenses incurred from opening national parks during the shutdown. The U.S. Interior Department has said it would need explicit permission from Congress to authorize reimbursement to states for such expenses. Companion bills that would do this have already been introduced in both the House (HR 3286) and Senate (S 1572). During negotiations leading up to the agreement, there were also proposals to prohibit the Treasury Department from using “extraordinary measures” to avoid breaching the debt ceiling and delay the need for a debt limit increase. However, no such provision was included in the final bill.

Articles of Interest

McCrory predicts State might be forced to expand Medicaid (NC Spin)

Mental Health Gaps jeopardize Public Safety (Civitas)

Amtrak reaches Agreements with State to preserve Corridors (Press Release)

Amtrak sets Ridership Record (Press Release)



Analysis Roundup: October 22, 2012

Here’s a collection of data and information from the past couple weeks of interest to local budget and financial analysts:

NC Department of Transportation
FY 2013 Powell Bill Allocations Released

The first half of Powell Bill allocations for qualifying municipalities were distributed on September 30th. The remaining 50% will be distributed on or before December 31st.

According to the NCDOT report detailing the September 30th distribution, payouts to municipalities were 3.2% higher than last December. Total payouts were $71.4 million, reflecting a total FY 2013 allocation to cities and towns of $142.8 million, distributed in shares of $20.43 per capita and $1,610.94 per mile.

Bureau of Labor Statistics/NC Employment Security
North Carolina Added 29k Jobs in September, or Did We?

Last Friday saw the release of the latest employment and unemployment numbers for states. North Carolina’s seasonally-adjusted unemployment rate dropped slightly from 9.7% to 9.6%. The state “gained” 29,232 jobs (+0.7%) while the labor force grew by 25,656 (+0.6%).

According to BLS, North Carolina was one of 35 states that saw an increase in jobs, and among 41 with a decrease in the unemployment rate.

The Employment Security Commission provides an overview of distribution of nonfarm employment through their Current Employment Statistics. Comparing September to August, growth looks a lot more murky:

  • Seasonally-adjusted total growth is only 100 nonfarm jobs for September
  • Unadjusted numbers indicate total growth of 11,900 nonfarm jobs, though the private sector contracted by 18,700.
  • Goods producing jobs did increase by 1,900, signalling some help for manufacturing and contraction by more than 20,000 in the private service sector
  • Government jobs grew by 30,600, almost entirely facilitated by education services and the start of the school year

According to BLS, North Carolina has gained 50,839 total jobs since January 2009 (+1.2%), not keeping pace with labor growth of 88,387 (+2.7%).

With respect to nonfarm employment, North Carolina has lost 52,700 jobs since January 2009.

County-level data should be available on or by November 2nd.

NC Department of Transportation
Joint Legislative Committee Reviewing NCDOT Progress

The Metro Mayors Coalition shared several presentations last week from September and October meetings of the Joint Legislative Transportation Oversight Committee. These presentations give us an idea of what NCDOT is work on with respect to several major initiatives:

2040 Plan

Consolidation of Division of Highways

Secondary Roads Program

NC Turnpike Authority Projects

The General Assembly’s Program Evaluation Division also just completed an analysis of the North Carolina Railroad Company, recommending that the company’s “unique relationship” with the State as sole shareholder should facilitate payment of an annual dividend to the State, along with improving reporting requirements.

NC Department of Revenue
August 2012 Retail Taxable Sales Slightly Above Last Year

NCLGBA will start creating monthly reports of retail sales activity, analyzing monthly report distributed by the North Carolina Deparment of Revenue. For August, taxable sales were 0.7% higher than last August. Compared to July 2012, sales were 6.9% less, reflecting seasonal differences.

From the perspective of a 3-month rolling average, August 2012 sales were 3.1% higher than last year. Tax collections were down, reflecting the last month where the difference includes the presence of the 1% temporary sales tax increase that was in place through June 2011.

Click Here to Review Our Analysis

Wells Fargo/ABFM
Economist Vitner sees Continued Economic Slowdown

Wells Fargo Senior Economist Mark Vitner did not express much optimism for improved economic growth through the end of 2012 and into next year, as he shared several concerns during his October 2012 Economic Outlook discussion.

Click Here to Access Video & Review Summary of Topics

Click Here for Wells Fargo’s Latest Economic & Financial Commentary

Lincoln Institute of Land Policy
What’s going on with voluntary nonprofit PILOT’s

This study takes a look at recent activity with voluntary payments in lieu of taxes (PILOTs) by nonprofits to local governments. Here are the highlights with respect to their findings:

  • PILOTs have been received by at least 218 localities in at least 28 states since 2000; these payments are collectively worth more than $92 million per year. This is a much greater number of PILOTs than identified in previous studies, with the increase due to a more expansive methodology.
  • Although more than 90 percent of all PILOT revenue comes from “eds and meds”—college payments are far more important than hospital payments with colleges contributing about two-thirds of PILOT payments and hospitals another quarter.
  • Many other types of nonprofits also make PILOTs even if their contributions are generally small. This report identifies nonprofits that make PILOTs of these types: housing (47), religious organizations including churches (36), social services (15), and arts/culture (11).
  • The Northeast accounts for roughly 75 to 80 percent of PILOT activity, with the  largest share in Massachusetts and Pennsylvania.
  • Most nonprofits make fairly small PILOTs while most revenue generated comes from a small number of multi-million dollar PILOTs. As a result, the average PILOT for all nonprofits ($292,952) is nearly 10 times larger than the median ($30,000).
  • While at least 420 nonprofits make PILOTs, the majority of revenue comes from just 10 organizations: Harvard University, Yale University, Stanford University, Brown University, Boston University, Massachusetts General Hospital, Dartmouth College, Brigham & Women’s Center, Massachusetts Institute of Technology, and Princeton University (in order of payments, beginning with the highest).
  • PILOTs generate little revenue in most localities—accounting for less than 1 percent of total general revenue in 165 out of 181 localities that have information available.
  • Localities use a variety of methods to receive PILOTs; the most common are long-term contracts (used by 58 percent of localities) and routine annual payments (34 percent).
  • Most PILOTs go to cities and towns, but at least seven school districts and four counties also receive PILOTs.
Thanks to Tony McDowell (City of Asheville) for sharing this report.

Click Here to Access the Report

Cobalt Community Research/ABFM
Local Government Employee/Retiree Healthcare Coverage Struggling

“…The report shows 7% fewer local units of government provide health coverage to their active employees than in 2011.  Governments who do provide health coverage are paying a slightly smaller share of the premium.  Fewer local governments are self‐insuring…”

Click Here to Access Report & Summary Press Release

Articles of Interest

San Francisco Chronicle: Prudential Said to be Near Systemic-Risk Tag in US Review of Firm

Prudential, manager of North Carolina’s 401(k) program, is being reviewed by the Financial Stability Oversight Council, an arm of the Treasury Department established by Dodd-Frank. Due to its size in the overall financial market, the insurance and financial services company could be subject to greater federal oversight and restrictions on dividends and buybacks if deemed necessary by regulators following a final round of review and testing. Prudential did not receive any Federal bailout funds.

Charlotte Business Journal: Regulators: Duke Energy improperly sealed Progress merger records

Charlotte Business Journal: Charlotte wins $580 million from Feds for Light Rail Extension

WRAL: 2012 State Fair ends on a high note

WRAL: Amtrak through NC hits highest percentage of growth in the nation

Triangle Business Journal: NCDOT getting plenty of feedback on proposed rate increase




FY12/FY13 State Budget: So far, municipal revenue impact is minimal

FY12/FY13 State Budget: So far, municipal revenue impact is minimal

The House Appropriations Committee of the North Carolina General Assembly approved a bill for the State’s Budget this past Wednesday. Next week, the full House will debate and vote on the State Budget. The Senate will review the bill once it is approved in the House.

This week’s email bulletin from the North Carolina League of Municipalities (NCLM) covers the impact of the budget, and aligned changes with state revenue, on municipal governments. So far, cities and towns appear to be coming out better than counties, though much remains to be done with debate now expanding to the floor.

The budget proposal does impact municipal governments in some ways, particularly with respect to transportation:

  1. Reduction in the time over which Powell Bill funds can be accumulated from 10 years to 5 years;
  2. Division of Powell Bill payments into two installments (October 1 and January 1); with no clarity regarding interest;
  3. Elimination of Powell Bill funding for the seven municipalities that do not maintain any of their own public streets;
  4. 4 percent cut to most public transportation grant funds;
  5. Elimination of funding for State inmate work crews that aid local governments;
  6. Reduction in the Clean Water Management Trust Fund appropriation from $50 million to $10 million;
  7. $4 million reduction is grants for local parks and recreation programs; and
  8. 15 percent reduction in state aid to libraries.
  9. Require that local government support functions of the Department of Revenue and the State Treasurer be paid for out of local sales tax revenues. This proposal would reduce local sales tax revenues by two-tenths of 1 percent (0.2%).

(h/t Karl Knapp, NCLM)

For additional information on the Budget proposal, you can see it on the General Assembly website (H200). You can also learn more about this and other bills and their potential impact on municipal governments by visiting NCLM’s Legislative Overview and checking out additional posts at the NCLM Legislative Advocacy Blog.