Introduction

Defining Public Purpose

Appropriate Government Activity

Benefits the Government’s Citizens or Constituents

Private Benefit Ancillary to Public Benefit

Applying Framework to Proposed Government Activity

Funding Nonprofits and Other Private Entities

Introduction

Entities Subject to the LGBFCA

Unit of Local Government

Public Authority

Private Entities Not Subject to LGBFCA

Ensuring Compliance with the LGBFCA

Governing Board

Budget Officer

Duties of Budget Officer

Who Can Serve as Budget Officer?

Delegating Budget Officer Duties in Units with Manager Form of Government

Finance Officer

Duties of Finance Officer

Who Can Serve as Finance Officer?

Who Appoints the Finance Officer?

Special Eligibility Requirements for Finance Officer

Bonding Requirement

Oath of Office

Delegating Finance Officer Duties

Deputy Finance Officers

Duties of Deputy Finance Officers

Who May Serve as Deputy Finance Officer?

Bonding Requirements for Deputy Finance Officers (and Other Officials and Employees)

Tax Collector

Local Government Commission (LGC)

Conclusion

Introduction

Annual Budget Ordinance

Substantive Budget Ordinance Requirements and Restrictions

Balanced Budget

Required Budget Ordinance Appropriations

Limits on Appropriations

Limits on Interfund Transfers

Voted Property Tax Funds

Custodial Funds for Special Districts

Enterprise Funds

Reappraisal Reserve Fund

Service District Funds

Optional Budget Ordinance Provisions

Adoption of Annual Budget Ordinance

Role of Budget Officer

Budgeting Process

Budget Calendar

By April 30: Departmental Requests Must Be Submitted to the Budget Officer

By June 1: Proposed Budget Must Be Presented to the Governing Board

After Proposed Budget Presented to Governing Board but before Its Adoption: Notice and Public Hearing

By July 1: Governing Board Must Adopt Budget Ordinance

Interim Appropriations

LGC Action for Failure to Adopt a Budget Ordinance

Budgetary Accounting

Amending the Budget Ordinance

Changing the Property Tax Levy

Common Budgeting Tools and Techniques

Line-Item Budgeting

Strategic Budgeting

Performance Budgeting

Zero-Based Budgeting

Balanced Scorecard

Financial Plans for Internal Service Funds

Adopting a Financial Plan

Balanced Financial Plan Requirement

Amending a Financial Plan

Capital Budgeting

Capital Projects

Grant Projects

Creating a Project Ordinance

Balanced Project-Ordinance Requirement

Amending a Project Ordinance

Closing Out a Project Ordinance

Justification for Capital Budget

Capitalization and Capital Budget Thresholds

Common Capital Budgeting Tools and Techniques

Capital Improvement Program

Financial Condition and Forecasting

Financial Condition Analysis

General Fund Financial Ratios

Enterprise Fund Financial Ratios

Financial Forecasting

Summary

Introduction

Local Taxes

The Property (Ad Valorem) Tax

Property Tax Base

Tax Rate Limitations and Voter Approval

Tax Levy Formula

Uniformity of Taxation and Special Taxing Districts

Special Taxing Districts

Service Districts

— Process for Establishing a Service District

— Taxing Authority in a Service District

— District Tax Rate

— Providing Services and Projects in a Service District

— Borrowing Money to Fund Capital Projects in a Service District

Other Special Taxing Districts

Local Sales and Use Taxes

Authority to Impose Local Sales and Use Taxes

Collection of Local Sales and Use Taxes

Allocation of Local Sales and Use Taxes

Distribution of Local Sales and Use Tax Proceeds

Distributions of Article 39, 40, 42 Taxes and Article 44 Statewide Pool Moneys

Distributions of Article 46 Taxes

Use of Local Sales and Use Tax Proceeds

“Hold Harmless” Payments and State Contributions

Medicaid Hold Harmless

Transportation Sales and Use Taxes

Other Local Taxes

Taxes Authorized by General Law

Rental Car Gross Receipts Tax

Animal Tax

Short-Term Heavy Equipment Rentals Tax

Motor Vehicle License Taxes

Privilege License Taxes

Malt Beverage and Wine License Taxes

Business Registration Fees

Taxes Permitted by Local Act

Occupancy Taxes

Prepared Food and Beverage Taxes

Real Estate Transfer Taxes

Local Fees, Charges, and Assessments

General User Fees and Charges

Regulatory Fees

Public Enterprise Fees and Charges

Franchise Fees

Statutory Fees

Fees of Public Officers

Sheriff

Register of Deeds

Court Facilities and Related Fees

Special Assessments

State Revenues Shared with Local Governments

Video Programming Services Taxes

Distribution of Supplemental “PEG Channel” Support

Remaining Proportionate Share

Restrictions on Use of Proceeds

Malt Beverage and Wine Taxes

Solid Waste Disposal Taxes

Real Estate Transfer Tax

Scrap Tire Disposal Tax

White Goods Disposal Tax

911 Service Charge

Electricity Taxes

Telecommunications Taxes

Piped Natural Gas Taxes

“Powell Bill” Funds (Motor Fuels Tax)

Permissible Uses of Powell Bill Funds

Other Local Revenues

Alcoholic Beverage Control (ABC) Store Profits

Investment Earnings

Grants

Fines and Penalties

Minor Revenue Sources

Introduction

Non-Legal Considerations

The Big Picture

The Governing Law and the Cast of Characters

Real Property versus Personal Property

Why Cars Are Different

The Property Tax Rate

Tax Rate Uniformity and Tax Districts

Use-Specific Taxes

Setting the Tax Rate

Changing the Tax Rate

The Revenue-Neutral Tax Rate

Listing and Assessing

Appointing the Assessor

What, Where, Who, and How Much?

Situs

Appraisal of Personal Property

Appraisal of Real Property

Changes to Real Property Tax Values in Non-Reappraisal Years

Public-Service-Company Property

Sales Assessment Ratios

Why the Sales Assessment Ratio Matters

Property Tax Exemptions and Exclusions

Exemption and Exclusion Applications

Taxpayer Appeals

Discoveries

Waiving Discovery Bills

Evaluating the Assessor

Collection

Appointing the Tax Collector

Tax Bills

Discounts for Early Payment

Interest

Special Rules: Weekends, Holidays, and Postmarks

Deferred Taxes

Enforced Collection Remedies

Who Can Be Targeted with Enforced Collection Remedies?

Property Taxes and the Register of Deeds

Advertising Tax Liens

Evaluating the Tax Collector: The Tax Collection Percentage

Other Performance Evaluation Measures

Old Taxes

Immaterial Irregularities—Recapturing Lost Taxes

Refunds and Releases

Who Makes the Decision to Authorize a Refund or Release?

Time Limits on Refunds and Releases

Registered Motor Vehicles

The Tag & Tax Together System

Other Local Taxes on Motor Vehicles

Introduction

Potential Administrative Process for Revenue Forecasting

Step 1: Create a Revenue Manual

Step 2: Estimate Major Revenue Sources

Step 3: Ask for Departmental Revenue Forecasts

Step 4: Update Estimates

Forecasting Methods

Qualitative Methods

Judgmental Forecasting

Consensus Forecasting

Strengths of Qualitative Forecasting

Weaknesses of Qualitative Forecasting

Quantitative Methods

Formula-Based Projections

Strengths and Weaknesses of Formula-Based Projections

Trend Analysis

Moving Averages

Univariate Regression

Cumulative Experience Curve

Strengths and Weaknesses of Trend Analysis

Causal Modeling

Strengths and Weaknesses of Causal Models

Overall Assessment of Quantitative Methods

Considerations on Choosing the Right Method

Best Practices in Forecasting Revenues

Forecasting Is Not Perfect

Forecasting: Cautions

Conclusion

Introduction

Current Revenues

Savings

Fund Balance

Primary Purposes

Covering Operating Expenses

Maintaining an Emergency or “Rainy Day” Fund

Saving for Anticipated Capital Expenditures

Proper Amounts of Fund Balance

Using Savings Held in Fund Balance for Capital Expenditures

Advantages and Disadvantages of Accumulating Savings for Capital Expenditures in Fund Balance

Capital Reserve Funds

Creating and Amending a Capital Reserve Fund

Using Savings Held in a Capital Reserve Fund for Capital Expenditures

Advantages and Disadvantages of Accumulating Savings in a Capital Reserve Fund

Special Levies

Special Assessments

“Traditional” Special Assessments

Process of Imposing “Traditional” Special Assessments

“Critical Infrastructure” Assessments

Advantages and Disadvantages of “Critical Infrastructure” Assessment Method

Process of Imposing “Critical Infrastructure” Assessments

Frequency of Use Since Initial Authorization

Special Taxing Districts

Development Exactions

Borrowing Money

Security

Entities Involved

Bond Counsel

Financial Advisor

Other Consultants

Underwriter or Lender

Rating Agencies

Trustee

Local Government Commission

Joint Legislative Committee on Local Government

Types of Authorized Borrowing

General Obligation Bonds

Security and Authority

Requirements and Limitations

Voter Approval Requirements

Exceptions to the Voter Approval Requirement for General Obligation Bonds

— Refunding Bonds

— Two-Thirds Bonds

Net-Debt Limitation

Bond Issuance Process

LGC Approval

— Application Process

Adoption of Bond Order

Preparation of Sworn Statement of Debt and Statement of Disclosures Necessary for Bond Authorization

LGC Approval Criteria

Voter Approval and Issuance of the Bonds

Revenue Bonds

Security and Authority

Requirements and Limitations

Covenants

Bond Issuance Process

LGC Approval

— Application Process

Negotiating the Terms of a Revenue Bond Issuance

Adoption of Bond Order

Issuance of the Bonds

Special Obligation Bonds

Security and Authority

Requirements and Limitations

Bond Issuance Process

Project-Development Financings

Security and Authority

Requirements and Limitations

Financing District

Financing Plan and County Approval

LGC and State Agency Approval

Bond Anticipation Notes

Installment Financings

Security and Authority

Forms of Installment Financing

Vendor Financing

Lending Institution Contracts

Bond Market Financings: Limited Obligation Bonds and Certificates of Participation

Requirements and Limitations

Non-Appropriation Clause

Non-Substitution Clause

Process for Entering into an Installment Financing Contract

Public Hearing

LGC Approval

“Synthetic” Project-Development Financings

Federal and State Loans

State Loans: Clean Water State Revolving Fund, Drinking Water State Revolving Fund, Wastewater Reserve, and Drinking Water Reserve

The Taxability of Interest Paid to Holders of Local Government Debt

Tax Certificates

“Taxable” Debt

Disclosure Obligations for Publicly Offered Debt

Grant Funding for Capital Projects

Federal Grantmaking

Local Government as “Recipient”

Local Government as “Subrecipient”

Complying with the Terms and Conditions of Federal Grants

The Uniform Guidance (2 C.F.R. Part 200)

Basic Compliance Requirements

Remedies for Noncompliance

Opportunities to Secure State Grant Funding

Conclusion

Daily Deposits and Official Depositories

Daily Deposit Requirement

“Officer or Employee”

“Collected or Received”

Vending Machine Proceeds

Sealed Bid Deposits

Cash Seized by Law Enforcement

Deposited Daily “With the Finance Officer or in an Official Depository”

$500 Threshold

Exemptions from Daily Deposit Requirement

Official Depository Requirement

Governing Board Selects Official Depositories

Selection Process

Types of Accounts

Insurance and Collateralization of Deposits

Reporting Requirements

Liability for Losses

Finance Officer Manages Accounts in Official Depository

Investments

Authorized Investments

Custody of Investment Securities

Distribution of Investment Proceeds

Finance Officer Responsible for Investments

Guidelines for Investing Public Funds

Obligating and Disbursing Public Funds

Preaudit Requirement

When Does G.S. 159-28(a) Apply?

Specific Performance Obligations

Continuing (Multi-Year) Contracts

Annual Budget Ordinance Appropriations

Project Ordinance Appropriations

Electronic Transactions

What Does G.S. 159-28(a) Require?

Complying with Preaudit Requirement

Exemptions from Preaudit Certificate Requirement

Resolution

Encumbrance System

Policies and Procedures

Training

Quarterly Reports

What Happens if a Unit Does Not Comply with the Preaudit Requirements?

Disbursement Requirement

Complying with the Disbursement Process

Exemptions from Disbursement Certificate Requirement

Resolution

Policies and Procedures

What Happens if a Unit Does Not Comply with
the Disbursement Requirements?

Governing Board Override

Forms of Payment

Dual Signature Requirement on Disbursements

Electronic Signatures

Local Internal Controls

Governing Board Oversight

Introduction

Establishing a Framework of Internal Control

Internal Control Defined

Responsibility for Internal Control

Management

Oversight Body

Components of Internal Control

1. Control Environment

2. Risk Assessment

3. Control Activities

4. Information and Communication

5. Monitoring

Internal Control over Federal Awards

Summary

The Finance Officer

Official Bonds

The Accounting System

Statutory Requirements

Generally Accepted Accounting Principles for Governments

Counties’ and Municipalities’ Own Needs and Capabilities

The Annual Audit

Contents of the Annual Comprehensive Financial Report

Introductory Section

Financial Section

Statistical Section

The Auditor’s Opinion

Selection of an Independent Auditor

Audits of Federal and State Grants

Additional Resources

General Public Contract Requirements

Contracting Authority and Authorized Purposes

Multi-Year Contracts

Expenditures Supported by Appropriations and Preaudit Certifications

Contract Execution

Form of Contracts and Electronic Contracts

Contract Limitations and Required Clauses

State Law Restrictions

Federal Restrictions and Required Clauses

General Competitive Bidding Requirements

Contracts Covered by Bidding Laws

Contracts Not Covered by Bidding Requirements and Optional Procedures

Exceptions to Bidding Requirements

Specifications

Trade-Ins

Summary of Bidding Procedures

Informal Bidding

Formal Bidding

Advertisement

Sealed Bids

Competitive Proposals

Electronic Bids

Number of Bids

Bid, Performance, and Payment Bonds

Evaluation of Bids and Responsiveness

Cost and Price Analysis

Standard for Awarding Contracts

Local Preferences

Special Rules for Building Contracts

Bidding and Construction Methods

Historically Underutilized Business and Minority and Women-Owned Business Enterprise (MWBE) Participation

Requirements for Design and Surveying Services

Protests and Legal Challenges

Property Disposal

Consideration

Disposal Methods under North Carolina State Law

Sealed Bids

Negotiated Offer and Upset Bids

Public Auctions

Exchange of Property

Trade-In

Private Negotiation and Sale: Personal Property

Private Negotiation and Conveyance to Other Governments

Other Negotiated Conveyances: Real and Personal Property

Economic Development

Community Development

Nonprofit Agencies

Property for Affordable Housing

Fire or Rescue Services

Architectural and Cultural Property

Open Space

Other Private Conveyances

Lease of Property

Grant of Easements

Sale of Stocks, Bonds, and Other Securities

Property Disposal Under the Uniform Guidance

Real Property

Equipment and Supplies

Additional Resources

Ethics in Government: Why It’s Important

Requirements for Local Elected Officials

Ethics Education Requirement

Local Codes of Ethics

Censuring Board Members

Conflicts of Interest in Voting

The Duty to Vote

What Constitutes Financial Interest

Number of People Affected

Extent of the Financial Interest (Benefit or Detriment)

Likelihood That the Financial Impact Will Actually Occur

Conflicts of Interest in Contracting

Contracts for Personal Benefit

Contracts with Nonprofits

Gifts and Favors

Misuse of Confidential Information

Other Financial Gain

Conflicts of Interest for Specific Categories of Officials and Public Employees

Building Inspectors

Project Designers

Public Hospital Officials and Employees

Local Management Entity (LME) Board Members

Housing Authorities

Conflicts of Interest Applicable to Federal Grant Funds

Maintaining Written Conflict-of-Interest Standards

Conflicts of Interest Related to the Selection, Award, and Administration of Contracts

Gifts and Favors from Contractors or Parties to Subcontracts

Consequences of a Violation

Additional Resources

Introduction

Authorized Types of Public Enterprise Services

Scope of Authority

Interlocal Cooperation to Provide Enterprise Services

Franchise Agreements

Other Local Government Public Enterprise Service Providers

Regulating Public Enterprises

Local Government Regulatory Authority

Local Government Commission Oversight

Mandating Participation in Public Enterprise Services

Water and Sewer Enterprises

Solid Waste Enterprise

Using Public Enterprise Authority to Enforce Other Laws and Regulations

Funding Public Enterprises

User Fee Authority

User-Fee Rate Classifications

Special Limitations on User-Fee Rates

Process for Adopting Public Enterprise User Fees

General Fund Subsidies for Certain Utility Customers

Additional Financing Sources

Transferring Moneys from an Enterprise Fund to the General Fund

Collection Methods for Public Enterprise Revenues

Disconnecting Services

Civil Suit

Debt Set-Off

Prohibited Collection Methods

Discontinuing a Public Enterprise Service Altogether

Funding Framework

State Funding

State Funding Responsibilities

Operational Expenses

Position Allotments

Dollar Allotments

Categorical Allotments

Capital Expenditures

State Bonds

Local Sales and Use Tax Authority

State School Construction Funds

State Funding Sources

Local Funding

County Funding

County Funding Responsibilities

Specified Funding Requirements

Additional Funding Requirements

County Funding Sources

County Appropriations of Unrestricted Revenue

County Appropriations of Earmarked Local Sales and Use Tax Proceeds

Municipal Funding

Public Schools

Appropriations within and Outside Municipality

Municipal Funding Directives

Municipal Funding Sources

Impact on State and County Funding

Other Local Funding Sources

Local Fines and Penalties

Dedicated Property Tax Revenue

Dedicated County General Tax

Voted Supplemental Tax

County/School Budgeting Process

Step 1: County Board of Commissioners and Local School Board(s) Communicate on an Ongoing Basis

Step 2: School Superintendent Submits Proposed Budget

Step 3: Local School Board Considers Superintendent’s Budget

Step 4: Local School Board Submits Budget Request to County Board

Step 5: County Board Makes Appropriations to Local School Unit(s)

Budgeting Factors

Fund Balance

County Authority to Direct School Unit Expenditures

Allocating Local Current Expense Appropriations

Allocating Capital Outlay Appropriations

Apportionment of County Funds among Multiple School Units

Interim Budget

Step 6: Local School Board Initiates Dispute-Resolution Process (optional)

Stages of Dispute-Resolution Process

Joint Meeting of Boards

Mediation

Default Funding Formula or Litigation

Local Current Expense Funding Formula if Statutory Funding Formula Not Triggered for Prior Two Years

Local Current Expense Funding Formula if Statutory Funding Formula Triggered in Prior Two Fiscal Years or More

Litigation for Capital Funding Dispute

Step 7: Local School Board Adopts School Budget Resolution

Step 8: Local School Board Amends School Budget Resolution (optional)

Prohibition against Capital Outlay Fund Transfers

Step 9: County Board Monitors Local School Unit’s Expenditures of County Appropriations (optional)

Step 10: County Board Reduces Appropriations to Local School Unit(s) during Fiscal Year (optional)

Additional County Authority and Responsibilities

Approving Certain Local School Board Contracts

Continuing Contracts for Capital Outlay

Installment Finance Contracts

Guaranteed Energy-Savings Contracts

Operational Leases

Conducting Special School Elections

Approving Expenditures for School Sites

Initiating Merger of School Units within a County

Setting Local School Board Members’ Compensation

Constructing School Facilities

Funding Charter Schools

State Funding

County Funding

Municipal Funding

Conclusion

Revitalization and Redevelopment of the Built Environment

Federal Programs

Community Development Block Grants

The HOME Investment Partnerships Program

Other Federal Grant Programs

Federal Tax Credit Programs

State Programs

Approval for Industrial Revenue Bonds

Discretionary Incentive Grants for Competitive Industrial Projects

Tax Credits, Benefits, and Exemptions by County Tier

Industrial Development Fund Utility Account for Infrastructure

Limited Local Government Authority to Participate in Private Development

First Pursue Partnership Options That Involve No Subsidy to Private Entities

Form of Subsidy: Permissible Cash Payments and Impermissible Tax Abatements

Economic Development

Community Development and Revitalization

Urban Redevelopment

Community Development and Affordable Housing

Downtown Revitalization and Business Improvement Districts (BIDs)

Contributing Real Property in a Public-Private Partnership

Conveyance of Real Property for Economic Development

Conveyance of Real Property for Redevelopment

Conveyance of Real Property Pursuant to the Urban Redevelopment Law

Conveyance of Real Property for Housing for Persons of Low and Moderate Income

Conveyance of Real Property in Public-Private Partnership Construction Contracts

Other Purposes for Conveyance of Real Property

Conclusion