Will the General Assembly wreak havoc on downtowns? | Triangulator | Indy Week
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Will the General Assembly wreak havoc on downtowns? 

There are lots of issues tied up in Jones Street's ongoing budget negotiations, now two and a half months behind schedule, with the next deadline, Sept. 18, fast approaching. Some are big, and their ramifications will be felt statewide for decades—e.g., Medicaid privatization under the guise of "reform"; a constitutional amendment to reduce and lock in tax rates and spending caps; the erosion of environmental regulations.

Others, however, are smaller in scope and have lingered largely under the radar—dense but nonetheless important issues. This is one of them: What will become of the state's 57 municipal service districts?

Quick primer: MSDs are, in essence, tax districts, municipality-created zones where property taxes are hiked to fund revitalization projects in those zones, which are often but not always in downtowns. These have existed in the state since 1973 and have been mostly uncontroversial—until now.

Earlier this year, state Sen. Trudy Wade, the Greensboro Republican (and veterinarian and sci-fi author) who's spent the session trying to redistrict her hometown's Democrats out of office and eliminating zoning protest petitions, decided that MSDs have entirely too much power and need to be curtailed. She arrived at this conclusion, it seems, at the behest of her political consultant, who was fighting with a historic-preservation board over a retaining wall.

Under her initial proposal, if 15 percent of registered voters within an MSD signed a petition to repeal the district, it would go to a district-wide referendum. If a majority of registered voters voted against it, the MSD would disappear.

"There really isn't an exit clause for citizens," Wade told the Greensboro News & Record in July. "This is just clarifying a way to abolish [the special tax district] if they see the need to do that." (Wade did not return the INDY's phone calls last week.)

Slight problem with that: Most MSDs are primarily commercial districts, not residential districts, so under Wade's plan a small minority of self-interested residents could make decisions that affect the entire district, including property-tax-paying businesses.

Downtown groups, which rely on these funds, pushed back, and had some degree of success. The proposal's language—which, as N.C. Downtown Development Association president Diane Young points out, "was buried on page 300 and something" of the 500-page Senate budget—has gone through several iterations since it was first introduced, often changing the thrust of the legislation altogether.

There was the version that allowed individuals within MSDs to petition to opt out of paying the additional tax, even though they would reap the benefits of the improvements. There was the version that prohibited MSDs from saving money for future infrastructure projects. There was the version that forbade cities from awarding MSD contracts to outside organizations for more than a year at a time. And so on.

"The situation is fluid," says Scott Mooneyham, a communications strategist with the N.C. League of Municipalities. "There are different proposals going around about this. It's difficult to know what a final version will look like."

One thing seems clear, though: There will be a final version. On Friday the NCDDA emailed its members an update on the status of the legislation. Even though the organization had hired a lobbyist and defeated some of the more onerous provisions, the NCDDA has been told that "total removal is out of the question."

Even so, in the latest version—version 7—they got most of what they wanted: MSD contracts can last as long as five years. There's no longer an opt-out clause, and MSDs can stockpile money to finance long-range plans, though the language urges cities to keep tax rates low enough that there "is no accumulation of excess funds."

"This has been a hard fight," Young wrote in that email. "... While we continue to advocate for complete removal, we have together through our efforts brought about changes to what was a disastrous amendment, making it something that is not 100% acceptable but certainly much easier to live with."

Reach the INDY's Triangulator team at triangulator@indyweek.com.

  • The state Senate looks to rein in municipal service districts

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