RALEIGH — The issue of whether counties should be allowed to change their sales tax distribution method without providing prior notice to their municipalities has been a point of contention with North Carolina lawmakers for years, though a bipartisan bill put forward to change that in the last legislative session stalled in the Senate.

House Bill 557, drafted by the North Carolina League of Municipalities, passed the House unanimously on June 26, 2019. Whereas existing law only requires that a board of county commissioners to decide whether they will change their sales tax distribution method within the month of April, H.B. 557 would require counties to notify their municipalities that they planned to make this change by Feb. 15 of the year the change is being considered. A new state law of this nature would not have any retroactive effect on decisions that have already been made, by Richmond County or any other local government.

The Richmond County Board of Commissioners voted in April to change their sales tax distribution method from per capita to ad valorem without any prior notice to the municipalities, despite the huge chunks of revenue they would each lose annually. This prompted outrage by all six municipalities, culminating in a united rebuke of the county in which their leaders each passed resolutions calling on the commissioners to overturn their decision, which the county did not do.

The League of Municipalities has reached out to local municipal leaders, including Rockingham City Manager Monty Crump, for insight into how this issue played out. Crump said he has had discussions with Harold Owen of the League regarding changing counties’ responsibilities to their municipalities through legislation. Instead of a Feb. 15 deadline to notify municipalities of a change in sales tax distribution method, Crump has advocated for counties being required to give advanced notice a year out from the change taking effect.

“No other city or town in North Carolina should be subjected to this type of treatment and poor decision making,” Crump said. “That’s just simply not the way to conduct the public’s business.”

Crump added that he is doubtful any new law could be presented in the 2020-2021 legislative session because COVID-19 is likely to dominate the agenda. Owen has also been in contact with other local officials seeking perspective on a state law to address this issue.

Scott Mooneyham, director of political communication and coordination for the League of Municipalities, said that H.B. 557 would allow municipalities to modify their budgets in preparation for the change in distribution method. After passing the House, the bill was referred to the Senate Standing Committee on Rules and Operations of the Senate, where it remained.

“We look at (H.B. 557) as improving a problem — it won’t be a panacea but at least it would give some local municipal officials some notice that this is going to happen,” Mooneyham said. “We don’t think the system, as it’s set up, is a very good one.”

He blamed the system for the “ill will” that has been inflamed between Richmond County and the municipalities since the April vote.

“Local governments should work hand-in-hand cooperating, but when you have a system like this any cooperation is undermined and it creates animosity,” Mooneyham said.

Mooneyham explained the League of Municipalities’ broader stance on the issue, saying that 80% of all jobs in North Carolina are within municipal borders, yet only one-third of local sales tax revenue is distributed back to the municipalities.

“Is that equitable?” he asked. “The state has changed dramatically over the last 50 years and become more urbanized, jobs that were spread out have become more concentrated within municipal borders … that in itself needs to be looked at.”

Rep. Gale Adcock (D-41), one of the primary sponsors of H.B. 557, said she doesn’t know why the bill didn’t go anywhere in the Senate. Calls and emails to Sen. Bill Rabon and Sen. Harry Brown, the chair and vice chair of the Senate Standing Committee on Rules and Operations of the Senate, were not returned Tuesday.

“(H.B. 557) is a collection of what we believe to be non-controversial policy changes to assist local governments in multiple ways,” Adcock said in email Tuesday. “Section 2(a) would ensure that a decision to change the tax distribution method in a county would not come as a surprise to local governments as they plan their budgets. The bill had bipartisan support in the House and passed 3rd reading unanimously. I have no explanation for why the bill was sent to Senate Rules and never heard.”