A BILL TO BE ENTITLED
AN ACT to make certain changes to economic development incentives of the state and to the use of development tiers and rankings.
The General Assembly of North Carolina enacts:

PART I.  Discretionary Economic Development Fund Modifications
SECTION 1.1.(a)  G.S. 143B‑437.51 reads as rewritten:
"§ 143B‑437.51.  Definitions.
The following definitions apply in this Part:
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(6a)	High‑yield project. – A project for which the agreement requires that a business invest at least five hundred million dollars ($500,000,000) in private funds and create at least 1,750 eligible positions for projects located in a high‑growth area, at least 1,600 positions for projects located in a development tier three area, at least 1,200 positions for projects located in a development tier two area, or at least 800 positions for projects located in a development tier one area. If a project will be located in more than one area, the location with the highest designation determines the job creation requirements due under this subdivision.
(6b)	High‑growth area. – The classification assigned to an area pursuant to G.S. 143B‑437.08.
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SECTION 1.1.(b)  G.S. 143B‑437.52 reads as rewritten:
"§ 143B‑437.52.  Job Development Investment Grant Program.
(a)	Program. – There is established the Job Development Investment Grant Program to be administered by the Economic Investment Committee. In order to foster job creation and investment in the economy of this State, the Committee may enter into agreements with businesses to provide grants in accordance with the provisions of this Part. The Committee, in consultation with the Attorney General, shall develop criteria to be used in determining whether the conditions of this section are satisfied and whether the project described in the application is otherwise consistent with the purposes of this Part. Before entering into an agreement, the Committee must find that all the following conditions are met:
(1)	The project proposed by the business will create, during the term of the agreement, a net increase in employment in this State by the business.
(2)	The project will benefit the people of this State by increasing opportunities for employment and by strengthening this State's economy by, for example, providing worker training opportunities, constructing and enhancing critical infrastructure, increasing development in strategically important industries, or increasing the State and local tax base.
(3)	The project is consistent with economic development goals for the State and for the area where it will be located, including the anticipated affect the project described in the application will have on the development factors, as calculated pursuant to G.S. 143B‑437.08, of the area.
(4)	A grant under this Part is necessary for the completion of the project in this State.
(5)	The total benefits of the project to the State outweigh its costs and render the grant appropriate for the project.
(6)	For a project located in a development tier three area, the affected local governments have participated in recruitment and offered incentives in a manner appropriate to the project.
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(c)	Award Limitations. – The following limitations apply to grants awarded under this Part:
(1)	Maximum liability. – The maximum amount of total annual liability for grants awarded in any single calendar year under this Part, including amounts transferred to the Utility Account pursuant to G.S. 143B‑437.61, is twenty million dollars ($20,000,000). No agreement may be entered into that, when considered together with other existing agreements governing grants awarded during a single calendar year, could cause the State's potential total annual liability for grants awarded in a single calendar year to exceed the applicable amount. The Department shall make every effort to ensure that the average percentage of withholdings of eligible positions for grants awarded under this Part does not exceed the average of the range provided in G.S. 143B‑437.56(a). The limitation in this subdivision does not apply to high‑yield projects or to projects located wholly within a development tier one area.
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SECTION 1.1.(c)  The statutory changes to G.S. 143B‑437.51 and G.S. 143B‑437.52(a) in this section become effective July 1, 2017, and apply to agreements entered into on or after that date. The statutory change to G.S. 143B‑437.52(c) in this section becomes effective January 1, 2017, and applies to liability for grants awarded on or after that date.
SECTION 1.2.(a)  G.S. 143B‑437.55(b) reads as rewritten:
"(b)	Application Fee. – When filing an application under this section, the business must pay the Committee a fee. The amount of the fee for projects that are not high‑yield projects is ten thousand dollars ($10,000) for projects located in a development tier three area, five thousand dollars ($5,000) for projects located in a development tier two area, and one thousand dollars ($1,000) for projects located in a development tier one area. The amount of the fee for high‑yield projects is ten thousand dollars ($10,000). If a project will be located in more than one development tier area, the location with the highest development tier area designation determines the fee due under this section. The fee is due at the time the application is filed. The Secretary of Commerce, the Secretary of Revenue, and the Director of the Office of State Budget and Management shall determine the allocation of the fee imposed by this section among their agencies. The proceeds of the fee are receipts of the agency to which they are credited. Within 30 days of receipt of an application under this section but prior to any award being made, the Department of Commerce shall notify each governing body of an area where a submitted application proposes locating a project of the information listed in this subsection, provided that the governing body agrees, in writing, to any confidentiality requirements imposed by the Department under G.S. 132‑6(d). The information required by this subsection includes all of the following:
(1)	The estimated amount of the grant anticipated to be awarded to the applicant for the project.
(2)	Any economic impact data submitted with the application or prepared by the Department.
(3)	Any economic impact estimated by the Department to result from the project."
SECTION 1.2.(b)  This section becomes effective July 1, 2017, and applies to applications filed on or after that date.
SECTION 1.3.(a)  G.S. 143B‑437.56(d) reads as rewritten:
"(d)	For any eligible position that is located in a development tier three area, seventy‑five percent (75%) of the annual grant approved for disbursement shall be payable to the business, and twenty‑five percent (25%) shall be payable to the Utility Account pursuant to G.S. 143B‑437.61. For any eligible position that is located in a development tier two area, ninety percent (90%) of the annual grant approved for disbursement shall be payable to the business, and ten percent (10%) shall be payable to the Utility Account pursuant to G.S. 143B‑437.61. For any eligible position created for a high‑yield project in years in which the business receives the enhanced percentage pursuant to subsection (a1) of this section, irrespective of the location of the project, ninety‑five percent (95%) of the annual grant approved for disbursement shall be payable to the business and five percent (5%) shall be payable to the Utility Account pursuant to G.S. 143B‑437.61. A position is located in the development tier area that has been assigned to the county in which the project is located at the time the application is filed with the Committee."
SECTION 1.3.(b)  This section becomes effective July 1, 2017, and applies to grants awarded on or after that date.
SECTION 1.4.(a)  G.S. 143B‑437.58(a) reads as rewritten:
"(a)	No later than March 1 of each year, for the preceding grant year, every business that is awarded a grant under this Part shall submit to the Committee an annual payroll report showing withholdings as a condition of its continuation in the grant program and identifying eligible positions that have been created during the base period that remain filled at the end of each year of the grant. Annual reports submitted to the Committee shall include social security numbers of individual employees identified in the reports. Upon request of the Committee, the business shall also submit a copy of its State and federal tax returns. Payroll and tax information, including social security numbers of individual employees and State and federal tax returns, submitted under this subsection is tax information subject to G.S. 105‑259. Aggregated payroll or withholding tax information submitted or derived under this subsection is not tax information subject to G.S. 105‑259. When making a submission under this section, the business must pay the Committee a fee of three one‑hundredths of one percent (.03%) of an amount equal to the grant less the maximum amount to be transferred pursuant to G.S. 143B‑437.61. The fee is due at the time the submission is made. The Secretary of Commerce, the Secretary of Revenue, and the Director of the Office of State Budget and Management shall determine the allocation of the fee imposed by this section among their agencies. The proceeds of the fee are receipts of the agency to which they are credited."
SECTION 1.4.(b)  This section becomes effective July 1, 2017, and applies to annual payroll reports submitted on or after that date.
SECTION 1.5.  G.S. 143B‑437.62 reads as rewritten:
"§ 143B‑437.62.  Expiration.
The authority of the Committee to award new grants expires January 1, 2025."
SECTION 1.6.(a)  G.S. 143B‑437.01(a) reads as rewritten:
"(a)	Creation and Purpose of Fund. – There is created in the Department of Commerce a special account to be known as the Industrial Development Fund Utility Account ("Utility Account") to provide funds to assist the local government units of the most economically distressed counties in the State in retaining or creating jobs, including expanding the existing job base. The Department of Commerce shall adopt rules providing for the administration of the program. Those rules shall include the following provisions, which shall apply to each grant from the account:
(1)	The funds shall be used for construction of or improvements to new or existing water, sewer, gas, telecommunications, high‑speed broadband, electrical utility distribution lines or equipment, or transportation infrastructure for existing or new or proposed buildings. To be eligible for funding, the water, gas, telecommunications, high‑speed broadband, electrical utility lines or facilities, or transportation infrastructure shall be located on the site of the building or, if not located on the site, shall be directly related to the operation of the job creation activity. To be eligible for funding, the sewer infrastructure shall be located on the site of the building or, if not located on the site, shall be directly related to the operation of the job creation activity, even if the sewer infrastructure is located in a county other than the county in which the building is located.
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(2)	The funds shall be used by the city and county governments for projects that are reasonably anticipated to result in the creation of new jobs, including expanding the existing job base or retention of existing jobs. There shall be no maximum funding amount per new job to be created or per project.
…."
SECTION 1.6.(b)  This section is effective when it becomes law and applies to grants awarded on or after that date.

PART II.  DEVELOPMENT TIER MODIFICATIONS
SECTION 2.(a)  G.S. 143B‑437.08 reads as rewritten:
"§ 143B‑437.08.  Development tier designation.
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(b)	Development Factor. – Each year, on or before November 30, the Secretary of Commerce shall assign to each county in the State a development factor that is the sum of the following:
(1)	The county's rank in a ranking of counties by ratio of employment to population for the civilian population aged 25 to 64, from highest to lowest, for the most recent 5‑year period for which data are available.
(2)	The county's rank in a ranking of counties by average annual wage from highest to lowest, for the most recent 12 months for which data are available.
	
(4)	The county's rank in a ranking of counties by adjusted assessed property value per capita as published by the Department of Public Instruction, from highest to lowest, for the most recent taxable year.
(c)	Annual Ranking. – After computing the development factor as provided in this section, the Secretary of Commerce shall rank all the counties within the State according to their development factor from highest to lowest. The Secretary shall then identify all the areas of the State by development tier and publish this information. A development tier designation is effective only for the calendar year following the designation.
(c1)	High‑Growth Area. – The Secretary of Commerce shall determine the statewide value for the economic indicators listed in subdivisions (1), (2), and (4) of subsection (b) of this section. The Secretary shall separately designate any county with performance greater than all of these statewide indicators as a "high‑growth area." A high‑growth area designation is effective only for the calendar year following the designation.
(d)	Data. – In measuring employment‑population ratio and average annual wage, the Secretary shall use the latest available data published by a State or federal agency generally recognized as having expertise concerning the data.

(g)	Exception for Two‑County Industrial Park. – An eligible two‑county industrial park has the lower development tier designation of the designations of the two counties in which it is located if it meets all of the following conditions:
(1)	It is located in two contiguous counties, one of which has a lower development tier designation than the other.
(2)	At least one‑third of the park is located in the county with the lower tier designation.
(3)	It is owned by the two counties or a joint agency of the counties, is under contractual control of designated agencies working on behalf of both counties, or is subject to a development agreement between both counties and third‑party owners.
(4)	The county with the lower tier designation contributed at least the lesser of one‑half of the cost of developing the park or a proportion of the cost of developing the park equal to the proportion of land in the park located in the county with the lower tier designation.
(5)	Expired, effective July 1, 2012, pursuant to Session Laws 2009‑524, s. 2.
(h)	Exception for Certain Multijurisdictional Industrial Parks. – An eligible industrial park created by interlocal agreement under G.S. 158‑7.4, and parcels of land located within the industrial park that are subsequently transferred and used for industrial or commercial purposes authorized for cities and counties under G.S. 158‑7.1, have the lowest development tier designation of the designations of the counties in which they are located if all of the following conditions are satisfied:
(1)	The industrial park is located, at one or more sites, in three or more contiguous counties.
(2)	At least one of the counties in which the industrial park is located is a development tier one area.
(3)	The industrial park is owned by three or more units of local government or a nonprofit corporation owned or controlled by three or more units of local government.
(4)	In each county in which the industrial park is located, the park has at least 250 developable acres. A transfer of acreage that reduces the number of developable acres below 250 developable acres in a county does not affect an industrial park's eligibility under this subsection if the transfer is to an owner who uses or develops the acreage for industrial or commercial purposes authorized for cities and counties under G.S. 158‑7.1. For the purposes of this subdivision, "developable acres" includes acreage that is owned directly by the industrial park or its owners or that is the subject of a development agreement between the industrial park or its owners and a third‑party owner.
(5)	The total population of all of the counties in which the industrial park is located is less than 200,000.
(6)	In each county in which the industrial park is located, at least sixteen and eight‑tenths percent (16.8%) of the population was Medicaid eligible for the 2003‑2004 fiscal year based on 2003 population estimates.

	

	
(k)	Report. – By November 30 of each year, the Secretary of Commerce shall submit a written report to the Joint Legislative Commission on Governmental Operations, the Senate Appropriations Committee on Natural and Economic Resources, the House of Representatives Appropriations Subcommittee on Natural and Economic Resources, and the Fiscal Research Division of the General Assembly on the tier rankings required by subsection (c) of this section, including a map of the State whereupon the tier ranking of each county is designated."
SECTION 2.(b)  G.S. 143B‑437.01(a1) reads as rewritten:
"(a1)	Definitions. – The following definitions apply in this section:
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(4)	Economically distressed county. – A county that is defined as a development tier one or two area under G.S. 143B‑437.08.
…."
SECTION 2.(c)  G.S. 143B‑472.127 reads as rewritten:
"§ 143B‑472.127.  Programs administered.
(a)	The Rural Economic Development Division shall be responsible for administering the program whereby economic development grants or loans are awarded by the Rural Infrastructure Authority as provided in G.S. 143B‑472.128 to local government units. The Rural Infrastructure Authority shall, in awarding economic development grants or loans under the provisions of this subsection, give priority to local government units of the counties that have one of the 80 highest rankings under G.S. 143B‑437.08. The funds available for grants or loans under this program may be used as follows:
(1)	To construct critical water and wastewater facilities or to provide other infrastructure needs, including, but not limited to, natural gas, broadband, and rail to sites where these facilities will generate private job‑creating investment. The grants under this subdivision shall not be subject to the provisions of G.S. 143‑355.4.
(2)	To productively reuse or demolish buildings and properties or construct or expand rural health care facilities, with priority given to towns or communities with populations of less than 5,000. The development tier designation of a county shall be determined as provided in G.S. 143B‑437.08.
(3)	Recipients of grant funds under this Part shall contribute a cash match for the grant that is equivalent to at least five percent (5%) of the grant amount. The cash match shall come from local resources and may not be derived from other State or federal grant funds.
(4)	In awarding grants under this Part, preference shall be given to a project involving a resident company. For purposes of this Part, the term "resident company" means a company that has paid unemployment taxes or income taxes in this State and whose principal place of business is located in this State. An application for a project that serves an economically distressed area shall have priority over a project that does not. A grant to assist with water infrastructure needs is not subject to the provisions of G.S. 143‑355.4.
(5)	Under no circumstances shall a grant for a project be awarded in excess of twelve thousand five hundred dollars ($12,500) per projected job created or saved.
(6)	Local government units that receive grants or loans under this section shall be located in either (i) a development tier one or tier two area or (ii) a rural census tract in a development tier three area that is not a high‑growth area. For purposes of this section, the term "rural census tract" means a census tract having a population density of less than 500 people per square mile according to the most recent decennial federal census.
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SECTION 2.(d)  G.S. 143B‑472.128 reads as rewritten:
"§ 143B‑472.128.  Rural Infrastructure Authority created; powers.
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(j)	Powers and Duties. – The Authority has the following powers and duties:
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(2)	To award grants or loans as provided in G.S. 143B‑472.127. In awarding grants or loans under G.S. 143B‑472.127(a), priority shall be given to local government units of the counties that have one of the 80 highest rankings under G.S. 143B‑437.08.
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SECTION 2.(e)  This section becomes effective January 1, 2018, and applies to economic development awards made and related determinations occurring on or after that date.

PART III.  Improve Project Impact
SECTION 3.(a)  G.S. 143B‑437.07 reads as rewritten:
"§ 143B‑437.07.  Economic development grant reporting.
(a)	Report. – The Department of Commerce shall publish on or before October 1 of each year the information required by this subsection, itemized by business entity, for each business or joint private venture to which the State has, in whole or in part, granted one or more economic development incentives during the relevant time period. The relevant time period ends June 30 preceding the publication date of this subsection and begins (i) for incentives not awarded under Part 2G of this Article with the 2007 calendar year and (ii) for incentives awarded under Part 2G of this Article with the 2002 calendar year. The information in the report shall include all of the following:
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(3)	The name, mailing address, telephone number, and Web site of the business recipient, or recipients if a joint venture, and the physical location of the site receiving the incentive. If the physical location of the site is undecided, then the name of the county in which the site will be located. The information regarding the physical location shall indicate whether the physical location is a new or expanded facility.
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(b)	Online Posting/Written Submission. – The Department of Commerce shall post on its Internet Web site a summary of the report compiled in subsection (a) of this section. The summary report shall include the information required by subdivisions (2), (9), (11), and (12) of subsection (a) of this section. By October 1 of each year, the Department of Commerce shall submit the written report required by subsection (a) of this section to the Joint Legislative Commission on Governmental Operations, the Revenue Laws Study Committee, the Senate Appropriations Committee on Natural and Economic Resources, the House of Representatives Appropriations Subcommittee on Natural and Economic Resources, and the Fiscal Research Division of the General Assembly.
(c)	Economic Development Incentive. – An economic development incentive includes any grant from the following programs: Job Development Investment Grant Program; the Job Maintenance and Capital Development Fund; One North Carolina Fund; and the Utility Account. The State also incents economic development through the use of tax expenditures in the form of tax credits and refunds. The Department of Revenue shall report annually on these statutory economic development incentives, as required under G.S. 105‑256.
(d)	County Performance Reports and Assistance. – The Department of Commerce, using the economic indicators required by G.S. 143B‑437.08, shall create an annual report on the performance of each county underperforming the statewide value in one or more economic indicators, shall provide the applicable portion of the report to each county, and shall offer assistance to each county, upon request, regarding improving performance relative to the statewide values identified. The Department shall publish and submit an annual progress report to the Joint Legislative Economic Development and Global Engagement Oversight Committee on providing, at a minimum, a (i) comparison of the performance of each county to the statewide performance in each economic indicator where the county underperformed the statewide value for the year and (ii) comparison of that performance to the county's performance in the previous year. The Department shall submit a copy of the progress report on or before April 1 of each year."

part IV.  RURAL ASSISTANCE
SECTION 4.  The Department of Commerce shall study methods to support data‑driven analysis and assistance for each Collaboration for Prosperity Zone and each labor market area within a Prosperity Zone, including publication of available facilities for commercial development and potential uses of the facilities. The Department of Commerce shall report to the Joint Legislative Economic Development and Global Engagement Oversight Committee by January 1, 2018.

part V.  Use of economic development tiers and rankings
SECTION 5.(a)  All entities, including, but not limited to, the entities listed in this section, shall, no later than January 1, 2018, elect whether to continue or discontinue the use of the development tier designations determined pursuant to G.S. 143B‑437.08 for all purposes and programs, including taxes, the North Carolina Development Farmland Preservation Trust Fund, the Spay and Neuter Program, the Abandoned Manufactured Home Cleanup Grants Program, the State Wastewater Reserve, the State Drinking Water Reserve, the Public Safety Assistance Points Grant Program, Oral Health Preventive Services, Medication Assistance, Qualified Allocation Plan for Low‑Income Housing Tax Credits, and the Strategic Prioritization Funding Plan for Regional Impact Transportation Investment Projects. This section applies to the following:
(1)	The Department of Agriculture and Consumer Services.
(2)	The Department of Environmental Quality.
(3)	The Department of Information Technology.
(4)	The Department of Health and Human Services.
(5)	The North Carolina Housing Finance Agency.
(6)	The Department of Transportation.
(7)	The Department of Revenue.
SECTION 5.(b)  Each entity electing to discontinue the use of the development tier designations pursuant to subsection (a) of this section shall independently develop criteria designed to achieve each program's objectives to be used in place of development tier designations and shall report by October 1, 2017, on the developed criteria to the Fiscal Research Division, the Joint Legislative Economic Development and Global Engagement Oversight Committee, and to their respective joint oversight committees, including, but not limited to, the following:
(1)	The Departments of Agriculture and Consumer Services and Environmental Quality to the Joint Legislative Oversight Committee on Agriculture and Natural and Economic Resources.
(2)	The Department of Information Technology to the Joint Legislative Oversight Committee on Information Technology.
(3)	The Department of Health and Human Services to the Joint Legislative Oversight Committee on Health and Human Services.
(4)	The North Carolina Housing Finance Agency to the Joint Legislative Oversight Committee on General Government.
(5)	The Department of Transportation to the Joint Legislative Transportation Oversight Committee.
(6)	The Department of Revenue to the Revenue Laws Study Committee.
SECTION 5.(c)  An entity electing to discontinue use of the development tier designations pursuant to subsection (a) of this section shall continue to update, as of January 1 of each calendar year, usage of the development tier designations to those published latest by the Department of Commerce until the developed replacement criteria are enacted into law.
SECTION 5.(d)  Each entity electing to continue the use of the development tier designations pursuant to subsection (a) of this section shall report by October 1, 2017, on the analysis that supports the continued use of the development tier designations, including an analysis of how targeted programs match the use of the tier designations, to the Fiscal Research Division, the Joint Legislative Economic Development and Global Engagement Oversight Committee, and to their respective joint oversight committees.
SECTION 5.(e)  The Joint Legislative Economic Development and Global Engagement Oversight Committee shall study and make legislative recommendations in the following matters to the 2018 Regular Session of the 2017 General Assembly:
(1)	Study the purpose of the economic development tier system including the appropriate factors to designate the level of economic development in counties and multicounty areas.
(2)	Study the use of the tier system for noneconomic development purposes including the appropriate factors to identify counties for targeted programs.
(3)	Propose legislation that renames and redefines the "Commerce Tiers" to more accurately identify counties based on economic indicators and that defines an alternative tier system for noneconomic development for targeted programs.
(4)	Propose legislation that renames the economically distressed counties to more appropriately describe the classification.
(5)	Study methods to promote regional economic development activities.
(6)	Solicit and study any recommendations from the EDPNC Economic Development Advisory Council.
(7)	Study the NCWorks Apprenticeship program.

Part vi.  Effective Date
SECTION 6.  Except as otherwise provided, this act is effective when it becomes law.