BOC Minutes October 17 2016 approve
October 17, 2016
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PERSON COUNTY BOARD OF COMMISSIONERS OCTOBER 17, 2016
MEMBERS PRESENT OTHERS PRESENT
David Newell, Sr. Heidi York, County Manager
Tracey L. Kendrick
Jimmy B. Clayton Brenda B. Reaves, Clerk to the Board
Kyle W. Puryear
B. Ray Jeffers
The Board of Commissioners for the County of Person, North Carolina, met in
regular session on Monday, October 17, 2016 at 9:00am in the Commissioners’ meeting
room in the Person County Office Building.
Chairman Newell called the meeting to order. Vice Chairman Kendrick gave an
invocation and Commissioner Jeffers led the group in the Pledge of Allegiance.
DISCUSSION/ADJUSTMENT/APPROVAL OF AGENDA:
A motion was made by Vice Chairman Kendrick and carried 5-0 to approve the
agenda.
RECOGNITION:
PRESENTATION OF NC DOT AWARD TO PERSON AREA
TRANSPORTATION SYSTEM:
County Manager, Heidi York recognized Person County’s Person Area
Transportation System recent award on September 13, 2016 by NC Department of
Transportation with presentation of a 1st place award in Performance Excellence in Peer
Group 3. Ms. York noted this award was in the Community Transportation Category and
was for accomplishments in system reviews, reporting, financial and, above all, in safety.
Ms. York presented the awarded plaque to Transportation Director, Kathy Adcock
who told the group the merits of the award were earned by the team of staff in the
department.
October 17, 2016
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PUBLIC HEARING TO CONSIDER THE APPROPRIATION OF COUNTY
GENERAL FUNDS TO ASSIST PROJECT G-2 WITH A FINANCIAL GRANT
INCENTIVE ESTIMATED AT $518,254.45:
A motion was made by Vice Chairman Kendrick and carried 5-0 to open the duly
advertised public hearing to consider the appropriation of County General Funds to assist
Project G-2 with a financial grant incentive estimated at $518,254.45.
Economic Development Director, Stuart Gilbert stated the purpose of the public
hearing was for Board consideration to appropriate County General Funds to be made
available to Person County Business and Industrial Center, Inc., in compliance with
applicable law, to assist Project G-2 to locate manufacturing in Person County. The project
will include 57 new jobs in 2018-2020 at an average wage of $43,000 and approximately
$31.8M of new capital investment for the same time period. Mr. Gilbert stated a financial
grant incentive based on net new capital investments over a seven-year period of time
subject to property taxes was estimated at $518,254.45 in total costs. Mr. Gilbert explained
the incentive included a percentage of the property taxes starting at 80% and decreasing
over the seven-year period and would be based on the actual net new capital investment.
Mr. Gilbert stated that there was an opportunity for more than 57 jobs to be created.
Mr. Gilbert said the Person County Business & Industrial Center, Inc. Board of
Directors unanimously recommended to the Board of Commissioners approval of the
financial grant incentive as presented.
There were no individuals appearing before the Board of Commissioners to speak
in favor nor in opposition to the appropriation of County General Funds to assist Project
G-2 with a financial grant incentive estimated at $518,254.45
A motion was made by Commissioner Clayton and carried 5-0 to close the public
hearing to consider the appropriation of County General Funds to assist Project G-2 with a
financial grant incentive estimated at $518,254.45.
CONSIDERATION TO GRANT OR DENY REQUEST FOR AN
APPROPRIATION OF COUNTY GENERAL FUNDS TO ASSIST PROJECT G-2
WITH A FINANCIAL GRANT INCENTIVE ESTIMATED AT $518,254.45:
A motion was made by Commissioner Clayton and carried 5-0 to approve
appropriating $518,254.45 to Person County Business and Industrial Center, Inc. to assist
Project G-2 to locate manufacturing in Person County based on new capital investment of
$31.8M and 57 new jobs in 2018-2020 as presented.
October 17, 2016
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PUBLIC HEARING FOR CONSIDERATION TO APPROVE FISCAL YEAR 2018
COMMUNITY TRANSPORTATION PROGRAM APPLICATION:
A motion was made by Commissioner Puryear and carried 5-0 to open the duly
advertised public hearing to consider approval of Fiscal Year 2018 Community
Transportation Program Application.
Transportation Director, Kathy Adcock requested Board consideration to approve
the FY2018 Community Transportation Program Application by resolution for grant
funding.
Ms. Adcock stated the Community Transportation Program Application for grant
funding assisted with funding for the County‘s transportation system for the FY 2017/2018
budget year for Administration expenses ($155,988 requested with a 15% local match of
$23,398) and Capital expenses ($123,000 requested with a 10% local match of $12,300.)
The total estimated amount requested for the period July 1, 2017 through June 30,
2018 is as follows:
Project
Total Amount Local Share
Administrative
$ 155,988 $ 23,398 (15%)
Capital (Vehicles &
Other)
$ 123,000 $ 12,300 (10%)
TOTAL PROJECT $ 278,988 $ 35,698
Total Funding Request Total Local Share
There were no individuals appearing before the Board of Commissioners to speak
in favor or in opposition to approval of Fiscal Year 2018 Community Transportation
Program Application.
A motion was made by Commissioner Jeffers and carried 5-0 to close the public
hearing to consider approval of Fiscal Year 2018 Community Transportation Program
Application.
CONSIDERATION TO APPROVE FY2018 COMMUNITY TRANSPORTATION
PROGRAM APPLICATION BY RESOLUTION:
A motion was made by Commissioner Jeffers and carried 5-0 to approve the
FY2018 Community Transportation Program Application by resolution for grant funding
as presented.
October 17, 2016
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October 17, 2016
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INFORMAL COMMENTS:
There were no comments from the public.
DISCUSSION/ADJUSTMENT/APPROVAL OF CONSENT AGENDA:
A motion was made by Vice Chairman Kendrick and carried 5-0 to approve the
Consent Agenda with the following items:
A. Approval of Minutes of October 3, 2016,
B. Budget Amendment #9,
C. Records Retention and Disposition Schedule, Standard 8: Program Operational
Records - Sheriff Records,
D. County Sheriff’s Office Records Retention Schedule Amendment for Standard 8,
E. County Management Records Retention Schedule Amendment for Standard 6
Emergency Services Records, and
F. Tax Adjustments for October 2016
NEW BUSINESS:
CONSIDERATION FOR A LETTER OF SUPPORT TO THE STATE TO EXTEND
WELL WATER TESTING BEYOND THE HALF-MILE BOUNDARY FROM
COAL ASH BASINS AND THE LANDFILL AND TO SUBSIDIZE THE FEES
ASSOCIATED WITH WELL WATER TESTING FOR ENVIRONMENTAL
HAZARDS:
Commissioner Clayton requested consideration for a letter of support be sent to the
state to extend well water testing beyond the half-mile boundary from coal ash basins and
the landfill as well as to waive the fees associated with well water testing for environmental
hazards. Commissioner Clayton said Person County residents living near the Duke Energy
Coal Ash Basins and the privately operated Upper Piedmont Landfill need the assurance
that their drinking water is safe for use and consumption noting he desired assistance from
the Department of Water Quality to provide adequate testing of wells. Commissioner
Clayton advocated for the Department of Water Quality to extend the perimeter of the
private well testing beyond the half-mile radius of the coal ash basins up to an additional
mile for a total of a 1.5 mile radius for both the ash basins and the landfill and to subsidize
the testing fees for those residents in these targeted areas. Commissioner Clayton advocated
for the request for state relief, and/or an opportunity for reduced costs for residents.
Vice Chairman Kendrick countered Commissioner Clayton’s request on the basis
that the data did not support wells with drinking water that did not meet the federal drinking
water standard. Vice Chairman Kendrick referenced the May 28, 2015 letter of
correspondence from Gary Leung, PhD., NC Department of Health and Human Services,
October 17, 2016
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NC Central Cancer Registry for the Division of Public Health related to the state’s
examination of age-adjusted cancer incidence rates in Person County for a five year period
of 2008-2012 finding that the rates were similar to the state rates for colorectal,
lung/bronchus, female breast and prostate cancers. In addition, Vice Chairman Kendrick
noted the letter stated that cancers that were shown to be associated with environmental
risk factors for Person County between 1990 and 2014 identified a total of 870 cases over
the 25-year period without any concentration during that time. For the area surrounding
the landfill for the same 25-year period there were 473 cases reported in the 2-mile radius
area around the site with no consistent pattern of cases for a higher occurrence of cancers
in the populations usually associated with environmental factors or any evidence of a
clustering of cancer cases in any of these areas.
Commissioner Jeffers voiced no issue with submitting a letter to the state for
consideration.
Vice Chairman Kendrick, the commissioner representative on the Board of Health
asked the Health Director if there was any financial assistance in place for individuals
requesting such to test well water. Ms. Janet Clayton, Health Director noted Clean Water
NC has assisted Person County several citizens in funding for well water testing panels for
coal ash and hexavalent chromium.
County Manager, Heidi York stated the County Attorney has determined that any
adjustment in the fee schedule would apply for the entire county and recommended that
the Board of Health have an opportunity to review the fee schedule, compare with other
counties, and determine actual administrative costs. Ms. Clayton noted the Board of Heath
would be meeting on October 24, 2016 and would study and benchmark the data for a
recommendation to the Board of Commissioners.
Chairman Newell recommended a unified request which included the Board of
Health.
A motion was made by Commissioner Puryear and carried 5-0 to table action on
this item and defer to the County’s Board of Health to give a recommendation to the Board
of Commissioners at its next meeting.
October 17, 2016
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APPEAL OF VALUATION OF NEW EQUIPMENT FOR SPUNTECH’S LINE 5:
Tax Administrator, Russell Jones told the Board of Commissioners that outside the
time period for the special Board of Equalization and Review’s session, the Board of
Commissioners may be called upon to serve in this capacity for an appeal from a taxpayer.
Mr. Jones noted Spuntech has filed a timely appeal of the assessment of their 2016 Business
Personal Property Taxes. Mr. Jones further noted that discussions with Spuntech have
narrowed the appeal to the new equipment for their new line, known as Line 5. Mr. Jones
stated the real estate (land and buildings) and other equipment was not being appealed with
the appeal based on whether Line 5 should be depreciated for 2016, or was the equipment
still under construction. Mr. Jones said the Line 5 equipment was currently assessed at
100% of the installed cost, or $57,706,408.
By reference to the terms, Mr. Jones provided the Board of Commissioners with
the definition and explanation of Construction in Progress (CIP) and a definition of
Depreciation from the North Carolina Department of Revenue, an excerpt from the
Personal Property Appraisal and Assessment Manual:
Construction in Progress
The investment in production equipment which has not been placed into operation is
typically identified in the taxpayers accounting records as CIP. The CIP account
represents tangible personal property and is to be listed. Our position with regard to the
appraisal of this property is that it should be appraised at 100% of the investment as of the
date of appraisal (January 1, 2016). The property has suffered no physical wear and tear,
and therefore no allowance for depreciation is warranted.
It is important to point out that there are differences in the Federal IRS rules
(Depreciation-accounting) and NC Property Tax rules (Depreciation-appraising). For
example, under the NCGS that govern Property Taxes, an asset that is still being used and
fully depreciated would still have a taxable value (normally at 25% of original value). The
IRS often has special or bonus accelerated depreciation to encourage spending and
investments that do not apply to our Property Taxes.
Depreciation in appraising
A decease in the upper limit of value due to physical wear and tear, functional
obsolescence, and/or economic obsolescence. A loss in value from all causes.
Depreciation-accounting
The amount of annual expense taken as a reduction of income necessary to recapture the
cost of an asset and does not represent actual losses in value.
October 17, 2016
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Mr. Jones told the group the Line 5 was not in a "ready state" on the valuation date
of January 1, partially due to the fact that the building was not certified to be occupied until
March 7, 2016. A temporary Certificate of Occupancy (CO) was issued on January 5,
2016, which permitted the stocking of the offices and the starting up the line. The Line 5
required employees, serving as operators, to be located at various locations throughout the
manufacturing line. Since employees were not legally permitted to be in the building under
construction, the new line could not be in a "ready state". Mr. Jones noted that even if a
temporary use of the new line was allowed for testing/calibration, the line was not able to
be placed in a "ready state", since the purpose of the manufacturing line was not met as
"Property is first placed in service when first placed in a condition or state of readiness and
availability for a specifically assigned function."
Mr. Jones said that he and Economic Development Director, Stuart Gilbert met with
Mr. Daniel Sharon, Chief Finance Officer for Spuntech in December 2015, and discussed
the methodology that would be used to assess the equipment associated with Line 5. At
this meeting, Mr. Jones indicated the County’s position was disclosed to conclude that Line
5 must be assessed as a CIP, at full cost without depreciation unless a full CO was obtained
prior to January 1.
Mr. Sharon appeared before the Board to appeal that the equipment was placed into
service when it is ready and available for a specific use, whether in a business activity, an
income-producing activity, a tax-exempt activity, or a personal activity. Mr. Sharon stated
that even if you are not using the property, it is in service when it is ready and available for
its specific use. Mr. Sharon noted he had pictures of commercial production imitation of
products subsequently sold the 10th day of December 2015. Mr. Sharon stated the CO had
no relevance and argued that the equipment begins depreciation upon its being placed into
service for the use in for its trade or business or for the production of income.
Mr. Sharon referenced the following case law noting no cases determine a CO as
the sole element to determining when “placed in service” occurs and was viewed as a “one
mean” among others for determination for buildings but never for machinery. Mr. Sharon
opined that the following cases did not use the CO as the determining factor.
Spuntech offered a court case, STINE, LLC V. UNITED STATES EX REL.
INTERNAL REVENUE SERV., as their evidence. While this court case deals with IRS
rules which can be very different than North Carolina Property Tax General Statutes, in
this instance, the facts are very similar.
Spuntech offered a court case, STINE, LLC v. USA as their evidence. The STINE
case does not directly compare to the Spuntech case, however there are references included
in this case to other federal cases that are very helpful.
October 17, 2016
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Mr. Jones provided that the STINE case involves special "Go Zone" legislation for
non-residential real property, and a special immediate 50% deduction for this property for
IRS purposes. The case was about real property, not equipment. The building was
completed and had obtain the proper CO before January 1, the valuation date. Although
the building was completed, the "official" opening had not occurred. The court ruled that
the building should be depreciated since it was in a state of "readiness", even though the
official opening occurred at a later date. "It is undisputed that both stores had been issued
certificates of occupancy." "Property is first placed in service when first placed in a
condition or state of readiness and availability for a specifically assigned function." And
"the determination of readiness or availability of the building shall be made by taking into
account the readiness and availability of such machinery or equipment."
Spuntech offered a court case, BROWN VS. COMMISSIONER as their evidence.
The BROWN case, which was referenced in the STINE case, was a great indicator of how
to handle business personal property depreciation. The BROWN case involved an airplane
(business personal property) that was used by the taxpayer on December 30 and flown over
4,000 miles. The $22 million airplane was complete, with the exception of the installation
of a customized conference table for on-flight meetings and upgrades to the installed
computer monitors (changed from 17" to 20" monitors), which was completed by the end
of January. "The court concluded that because the taxpayer testified that use of a conference
table and larger enhanced display screens was necessary to meet the specific needs of his
business clients, without these added components, the asset was not fully functional. Thus,
the tax court found that the taxpayer did not place the airplane in service for this insurance
business during the tax year at issue." "Brown understood that taking delivery wasn’t
enough to capture the bonus depreciation he was hunting. So his eventful day had only just
begun. In what the Commissioner calls “tax flights,” Brown proceeded to take several trips
in the Challenger." "Cases [citations and names omitted] tell us to look at the taxpayer—
he’s the one who gets to determine what an asset’s specifically assigned function is. And
here that asset’s function wasn’t just to fly Brown around; it was to be configured in a
particular way to meet his very particular business needs. Even though an asset like the
Challenger may be operational, it’s not placed in service until it is operational for its
intended use on a regular basis."
Spuntech offered a court case, SEALY POWER, LTD v. CIR as their evidence.
The SEALY case, which was another case referenced in the STINE case, also involved
business personal property. This case involved equipment related to a solid waste
incinerator, and the by-product was electricity. "Thus, the placed-in-service test requires
that before property can be considered placed in a condition or state of readiness and
availability for a specifically assigned function, it must be available for service on a regular
basis." "Only after the facility was complete and working on regular basis could the assets
be considered to be placed in service. Thus, in order for any part of the facility to be
considered placed in service, the entire facility must be functioning for its intended purpose
of generating electricity."
October 17, 2016
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Spuntech offered a court case, VALLEY NATURAL FUELS v.
COMMISSIONER as their evidence. The VALLEY NATURAL FUELS case, again
another case referenced in the STINE case, involved an ethanol distillation plant. In
December, the ethanol produced at the facility was less proof than required. Other
equipment had to be installed in order for the facility operate as designed. "We similarly
conclude that the ethanol still, which was constructed in 1983, the molecular sieve, which
was installed in 1984, and the additional equipment, which was installed in 1985, were
component assets of the facility and functionally formed a single property. Only after all
of these component assets were installed and functioning did the facility constitute a
complete unit that was operational and served the purpose intended by petitioner, to wit,
the production of 198.2 proof ethanol." "Accordingly, we conclude that the facility was
not placed in service for purposes of depreciation and the investment tax credit and
business energy credit prior to that date."
Mr. Jones concluded that based on the facts above, the equipment associated with
Line 5, housed in a building without a CO as of the valuation date (January 1, 2016), must
be assessed at the full value of $57,706,408. The equipment was not in a "ready state", the
building was not safe to occupy, to occupy the building in a production state would be
unlawful, and the equipment had suffered no depreciation (no wear/tear). Mr. Jones
requested Board consideration to uphold the assessed value of Spuntech’s Line 5 of
$57,706,408.
Mr. Jones addressed the emails between Spuntech and Person County staff that
confirmed on December 18, 2015 that the building was not ready. Delays in receiving
the CO were not due to scheduling issues with the County’s Inspections Department. Mr.
Jones stated there were several life safety issues, among other items, that delayed the CO.
Mr. Jones confirmed that County’s Inspections’ staffing issues did not hinder Spuntech
from receiving its CO in a timely fashion noting staff gave this project priority.
Chairman Newell referenced the written comments submitted from the County
Attorney, C. Ronald Aycock related to the Spuntech property tax appeal as follows:
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Spuntech has appealed the valuation of a portion of its personal property. The basic issue
presented to the BCC is whether any “depreciation” should be allowed in determining the
proper valuation. Spuntech contends that IRS depreciation rules should be applied. The
proper rule is not the IRS rule, but the rules governing property tax valuation. The IRS
income tax depreciation rules are intended to reflect the amount of reduction in value as a
result of a business taking an expense and thereby reducing the basis (value) in the
property. The property tax depreciation rules are intended to reflect a reduction in value
because of wear and tear or functional or economic obsolescence on/of the property.
A basic feature of the NC property tax system is that there must be a uniform valuation
date to ensure equity among and between all taxpayers. That valuation date is January 1.
All property is valued as of that date. The Spuntech personal property must be valued as
of January 1. Spuntech did not receive a certificate of occupancy until January 5.
Therefore, there could not have been any property tax eligible depreciation as of the
valuation date (January 1) since there was no use authorized and no wear and tear.
Spuntech apparently argues that the reason that they did not get a certificate of occupancy
by January 1 was because of the failure of the Person County Inspections Department to
act in a timely manner. The letter from the head of the Person County Inspections
Department clearly shows that there were multiple deficiencies and failures by Spuntech
in getting the property and equipment in position to receive a certificate of Occupancy by
January 1.
It is my legal opinion that Spuntech is not entitled to take any depreciation as a reduction
in the value of the subject personal property.
A motion was made by Commissioner Clayton and carried 5-0 to uphold the
assessed value of Spuntech’s Line 5 of $ 57,706,408 as per the legal opinion of the County
Attorney that Spuntech was not entitled to take any depreciation as a reduction in the value
of the subject personal property.
The Board conveyed to Mr. Sharon the right to appeal the Board of Commissioners
decision to the NC Property Tax Commission. Mr. Jones confirmed he would send a letter
of the appeal action to Spuntech outlining the procedure to further appeal.
October 17, 2016
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PERMISSION TO ACCEPT FEDERAL LAND AND WATER CONSERVATION
FUND GRANT AND APPLY FOR 2017 NORTH CAROLINA PARKS AND
RECREATION TRUST FUND GRANT:
John Hill, Director of Recreation, Arts, and Parks Department noted that in May of
2016 the Person County Recreation, Arts, and Park Department applied for the North
Carolina Parks and Recreation Trust fund grant (PARTF) with a contingency to be
considered for the Federal Land and Water Conservation Fund Grant (LWCF) if the
PARTF Grant was not awarded. Person County was not awarded the 2016 PARTF Grant.
Mr. Hill stated Person County received notification that the County has been recommended
to receive a matching grant for funding of the 2016 LWCF Grant in the amount of $250,000
with $264,432 as the amount to match.
Mr. Hill further noted that Parks and Recreation had applied for a waiver of
retroactivity for the 2016 PARTF Grant that allows more time to apply for the 2017 PARTF
grant for the same Sports Plex project. With this waiver Person County has the opportunity
to improve the last 2016 PARTF grant application and submit for consideration of the 2017
grant funding cycle. Mr. Hill said that Person County also has the opportunity to use the
current $250,000 LWCF Grant award as the match for the 2017 PARTF Application. Mr.
Hill requested Board consideration to grant permission for Parks and Recreation to proceed
through the process of accepting the LWCF Grant and applying for the 2017 PARTF Grant
using the LWCF grant funds as the match. Mr. Hill stated once awarded, the funds would
be used for the Sports Plex facility and programs to increase the quality and marketability
of the Recreational Complex.
Vice Chairman Kendrick asked Mr. Hill to confirm if the two separate parcels were
excluded from the Sports Plex facility as previously discussed to which Mr. Hill replied
affirmatively.
A motion was made by Commissioner Puryear and carried 5-0 to accept the
Federal Land and Water Conservation Fund Grant in the amount of $250,000 with a local
match of $264,432 and to apply for the 2017 NC Parks and Recreation Trust Fund grant as
presented.
The NC division of Parks and Recreation 2016 Land and Water Conservation Fund
Compliance Certification follows:
October 17, 2016
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October 17, 2016
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CHAIRMAN’S REPORT:
Chairman Newell urged all citizens to vote in the upcoming election.
MANAGER’S REPORT:
County Manager, Heidi York recognized this date as Boss’s Day and extended her
best to the Board of Commissioners and County Department Directors.
COMMISSIONER REPORT/COMMENTS:
Commissioner Jeffers reported two upcoming candidate forums; one was scheduled
for Tuesday, October 18, 2016 at 7:00pm hosted by the NAACP and held in the City
Council Chambers, and the other scheduled for Thursday, October 20, 2016 at 6:30pm
hosted by and held at the Roxboro Community School.
Commissioner Clayton commented on the environmental health disaster needs by
those victims of Hurricane Matthew. County Manager, Heidi York stated Person County
deployed a medical response team to Johnston County and then in Kinston for medical
assistance and decontamination from flood water. Chairman Newell added that many
businesses and school systems that would be in a rebuilding state noting his plans to
contribute mops to assist in the cleanup efforts.
Commissioner Puryear had no report.
Vice Chairman Kendrick had no report.
ADJOURNMENT:
A motion was made by Vice Chairman Kendrick and carried 5-0 to adjourn the
meeting at 10:07am.
_____________________________ ______________________________
Brenda B. Reaves David Newell, Sr.
Clerk to the Board Chairman