The House approved legislation Wednesday that would allow property owners to petition to withdraw from Municipal Service Districts, or not be included in the districts when they are formed.
In Municipal Service Districts (MSD), sometimes called business improvement districts, businesses pay an extra tax that goes to benefit that area of the city specifically.
The bill passed in an 84-27 second reading vote before a final voice vote on the proposal.
HB1023 will, if approved in the Senate and signed by the governor, give business owners a way to petition their city council and withdraw from MSDs that they don’t believe are serving them.
To be removed from a MSD, a property owner would “submit a written request to the city council to remove the owner’s tract or parcel of land from a service district.”
The owner of the property would specify the parcel he or she wanted removed from the MSD and why the parcel is not “in need of the services, facilities, or functions of the proposed district to a demonstrably greater extent than the remainder of the city.”
The city would then be required to hold a public hearing on the matter. If the parcel were to be found to not be in need of the services the MSD provides, the council could, by ordinance, redefine the district to exclude the parcel.
The process to not include a parcel in an MSD from the outset of the formation of the district would be very similar, but with the stipulation that the petition to be excluded from the district be made within five days after a public hearing on the formation of the district.
The bill would also allow for MSDs that are based on the boundaries of a municipality’s historical districts could be expanded to include new parcels.
MSDs based on historic districts that have been reduced could be also reduced to exclude the parcels removed from the historic district.
The bill would also change the process for annexing areas into an MDS to an ordinance from a resolution, meaning that the process would require two meetings of the city council as opposed to a resolution, which requires only one city council meeting to complete.
Under state law MSDs may be formed for a specific set of purposes, including beach erosion control and flood and hurricane protection, municipal utility projects, downtown and urban area revitalization projects, transit-oriented development, drainage projects, sewage collection and disposal, off-street projects, watershed improvements and conversion of private residential streets to public streets.
MSDs are most closely associated with downtown revitalization movements across the state in many municipalities, including Raleigh, Greensboro, Morrisville, Goldsboro, Wilmington, Fayetteville and Waynesville.
The bill would essentially allow member properties of the MSDs to vote with their feet if they believe the district does not serve them adequately for what they are paying, without physically leaving the area, or allow them to withdraw from the district at the beginning of the process.
In MSDs, property taxes are set at a level to pay for the projects taken on by the MSD, but are designed so that the funds will be spent and not accrue year after year.
If the additional tax burden in the MSD were to exceed the cap established under general statute, which is $1.50 per $100 of valuation, the rate must be approved by a majority of the qualified voters residing in the district.