The North Carolina General Assembly returned to Raleigh this week, but only for an administrative session, with no significant business conducted in either chamber. Outside of the legislative complex, a panel of judges issued a temporary injunction against SB 749: No Partisan Advantage in Elections, a new law intended to transfer election board appointment powers from Governor Roy Cooper to legislative leaders. The Governor vetoed the bill, but that veto was overridden by the legislature.

In another political development, Senate President Pro Tem Phil Berger (R-Rockingham) endorsed Lieutenant Governor Mark Robinson in the 2024 Republican primary for Governor, telling reporters, “I think he is the right person at the right time." Lieutenant Governor Robinson is the current front runner for the Republican nomination, running against State Treasurer Dale Folwell, former State Senate Andy Wells, and prominent attorney Bill Graham.

2023 Session Recap: Transportation Policy

Although the North Carolina General Assembly is not currently in session, the ideas suggested, and bills enacted during the 2023 long session are in the process of being evaluated or implemented ahead of the 2024 session. Over the next several weeks we will provide overviews of the bills and laws introduced in 2023 that affect key issue areas. This week we will focus on Transportation.

Over the past few years, transportation policy has undergone significant changes, influenced by a range of factors including technological advancements, environmental concerns, and changing consumer behaviors. With the rise in popularity of electric vehicles (EVs) and incentives available for consumers from the federal government, state and local governments are increasingly focusing on policies to encourage EV adoption. Additionally, the proliferation of fuel-efficient and electric vehicles has led to a decrease in gas tax revenues, which traditionally fund road maintenance and infrastructure projects.

Lawmakers and regulators in North Carolina have worked over the past several years to suggest ideas for how to mitigate the effects of changing transportation trends, particularly how to balance the anticipated decrease in gas tax revenue and increase in transportation spending needs.

Many meaningful changes to transportation, affecting both revenue collections and policy provisions, were included in HB 259: 2023 Appropriations Act, the biannual state budget bill.

Transportation-Related Provisions in the NC Budget

Revenue:

In the recent North Carolina state budget, significant changes were made in the transportation sector aimed at adjusting revenue streams in light of evolving transportation trends. Notably, Section 41.14D(a) addresses the growing prevalence of electric and hybrid vehicles by increasing the registration and renewal fee for electric vehicles from $140 to $180, alongside instituting a new $90 fee for plug-in hybrid vehicles. This move likely aims to counterbalance the reduced gas tax revenue from these more fuel-efficient vehicles.

Further supporting specialized sectors, Section 42.11(b) extends the sales tax exemption on jet fuel for professional motorsports teams until 2029, acknowledging the importance of the motorsports industry in the state's economy. Additionally, Section 42.14(a) expands the sales tax exemption on fuel for boats transporting freight, a step that could incentivize maritime freight activities.

In a novel approach to revenue generation, Section 42.19(a) introduces a tax on for-hire ground transport services, with different rates for exclusive (1.5%) and shared-ride (1%) services, tapping into the burgeoning ride-share market.

Emission Standards:

The budget also addresses emission standards, defining the General Assembly’s stance on environmental regulations related to transportation. In a significant move, Section 12.6(a) bars the North Carolina Department of Environmental Quality, or any other agency, from mandating the sale or purchase of zero-emission or electric vehicles. This decision suggests a preference for market-driven choices over regulatory mandates in adopting cleaner vehicle technologies.

Complementing this, Section 12.7(a) eliminates the annual emissions inspection for drivers in all counties except Mecklenburg.

These sections collectively indicate a deliberate approach towards emission standards, one that seeks to balance environmental concerns with regulatory flexibility and market dynamics.

Special Statewide Projects:

The budget outlines several statewide projects that emphasize North Carolina's commitment to modernizing its transportation infrastructure. Section 40.4(A) earmarks $2 million for the deployment of Electric Vehicle Fast Chargers, a critical step in supporting the state's growing EV market.

The provision of $30 million for the construction of a flight training and corporate office facility at the NC Global TransPark indicates a strategic investment in the state's aviation sector.

Similarly, the allocation of $4.5 million for transportation analytics services and an additional $4 million for planning regional economic development transportation projects underscore the importance placed on data-driven planning and regional connectivity.

Furthermore, the significant allocation of $150 million for general road maintenance and additional funds for the Powell Bill Program, which go directly to local governments, reflect a comprehensive approach to infrastructure maintenance and development.

DMV:

Finally, the budget includes provisions impacting the operations of the Department of Motor Vehicles (DMV). Section 41.14C(a) initiates a process to explore the feasibility of privatizing the DMV, indicating an openness to restructuring for potentially enhanced efficiency and service delivery.

In addition, Section 41.14E(a) allows the DMV to implement transaction fees on electronic payments, capped at 2%. This move could be seen as an effort to modernize the DMV's revenue model, adapting to the increasing trend of electronic transactions while ensuring the financial sustainability of the department.

From revenue adjustments and emission standards to large-scale infrastructure projects and administrative reforms, the provisions demonstrate a forward-looking perspective that aims to align the state's transportation policies with consumer trends and future requirements.

Additional Transportation Bills Not Passed

While the state budget included a plethora of meaningful updates to North Carolina’s transportation policies, lawmakers who are leaders in the transportation sector suggested ideas within several bills that did not pass.

SB 354: NC TEN was a bill written by a working group, including legislators and stakeholders, that explored various transportation revenue options. The proposed bill aimed to generate an additional $70 million annually for state transportation projects. This increase was to be achieved by raising electric and hybrid vehicle registration fees from $140.25 to $180, eliminating the $2,000 cap on the highway use tax, and introducing a new fee on ride-sharing services. However, SB 354 did not receive a vote in the Senate.

SB 365: Orphan Roads was written to tackle the issue of “orphan roads,” which are roads often constructed by developers without adhering to municipal or county standards, and whose maintenance responsibilities are left to private citizens. Communities with such roads frequently face challenges in getting them accepted into the state road network due to their substandard condition and the high costs of necessary upgrades. SB 635 proposed a solution wherein roads would need to meet NCDOT standards for potential inclusion in the state highway network. Additionally, it required developers to post a bond covering 20% of the construction cost to ensure these roads meet the necessary standards for transfer to the state system. The bill did not receive a vote.

SB 637: STIP Grant Anticipation Notes sought to modify the process under the State Transportation Improvement Program (STIP) for accelerating beneficial city projects. The STIP outlines a 10-year plan detailing the timeline and funding allocation for various projects. The legislation aimed to empower local governments to expedite transportation projects classified as regional impact or division need by permitting them to borrow funds in anticipation of future state or federal funding. This approach would have allowed local governments to enter into agreements with the state to borrow the necessary funds and commence construction ahead of the scheduled funding allocation. The bill did not receive a vote.

Upcoming Legislative Meetings

No legislative business is scheduled for next week.