Does a newly incorporated North Carolina town have to actually deliver four municipal services to qualify for Powell Bill street-aid money, or is budgeting for them enough?

Plain-English summary

Michael Burgner, counsel for the Town of Midland (incorporated November 7, 2000), asked the AG whether Midland's plan to provide solid waste collection for only half the fiscal year (January 1, 2002 through June 30, 2002) would be enough to qualify for Powell Bill street-aid funds and other state tax reimbursements. Out of an abundance of caution, Burgner had advised the Town to also pursue alternative ways of meeting the fourth required municipal service.

Senior Deputy AG Reginald Watkins and Special Deputy AG Robert Crawford answered that Midland's approach was already sufficient. The statute requires only that funds be appropriated, not that services be delivered for a particular length of time.

The Powell Bill (N.C. Gen. Stat. §§ 136-41.1 to 136-41.3) requires DOT to pay each qualifying municipality, from the Highway Fund and on or before October 1 each year, an annual allocation equal to 1-3/4 cents on each taxed gallon of motor fuel. The money must be used to maintain, repair, construct, reconstruct, or widen streets and public thoroughfares.

Eligibility under § 136-41.2 has four requirements:

(1) The municipality conducted its most recent charter-required or general-law election.
(2) It levied at least $0.05 per $100 ad valorem tax for the current fiscal year and collected at least 50% of the prior fiscal year's ad valorem tax.
(3) It formally adopted a budget ordinance showing all revenue sources.
(4) For municipalities incorporated after January 1, 2000, "funds have been appropriated" for at least four of eight designated services: police protection, fire protection, solid waste disposal or collection, water distribution, street maintenance, street construction or right-of-way acquisition, street lighting, and zoning.

The fourth requirement was added in 1999 by S.L. 1999-458, s. 5 ("An Act to Revise the Municipal Incorporation Process So As To Provide More Scrutiny"). The General Assembly was responding to a perceived problem of paper municipalities being incorporated to receive state revenues without providing real local government services.

The key textual point: § 136-41.2(c) says "funds have been appropriated," not "services have been delivered" or "services have been provided for a minimum period." The AG applied Union Carbide Corp. v. Offerman's rule that a statute's plain and definite meaning controls, with no judicial power to add provisions. So the statute means what it says: appropriation is enough.

The AG also relied on the deference principle from Frye Regional Medical Center v. Hunt: the interpretation of a statute by the agency charged with administering it gets great weight. DOT, through Powell Bill Program manager Betsy Williams, had told the AG that DOT interprets budgetary appropriation as sufficient for eligibility, and that Midland's certified application (received July 18, 2001) had relied on appropriation for fire protection, solid waste collection and disposal, street maintenance, and zoning. DOT had accepted that representation and qualified Midland for 2001 Powell Bill funds.

The legislative-intent layer reinforced the textual answer. The 1976 AG opinion to the Town of Stallings explained that the Powell Bill eligibility requirements exist to ensure that municipalities budget for and tax for certain minimum governmental services in the same fiscal year they receive the motor fuel funds. Midland's budgeting for four required services through the budget process satisfied that purpose, even with solid waste service starting mid-year.

Because the excise, franchise, and sales/use tax reimbursement statutes all cross-reference Powell Bill eligibility ("No municipality may receive funds under this section if it was incorporated with an effective date of on or after January 1, 2000, and is disqualified from receiving funds under G.S. 136-41.2"), Midland's Powell Bill qualification also opened the door to those other tax reimbursements.

Currency note

This opinion was issued in 2001. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. The General Assembly has periodically tightened municipal incorporation review since 2001, and the Powell Bill statutes have been amended. Anyone advising a newly incorporated municipality on Powell Bill or related tax reimbursement eligibility should consult the current text of §§ 136-41.1 to 136-41.3 and current DOT Powell Bill program guidance.

Background and statutory framework

The Powell Bill program. Named for the legislator who championed it, the Powell Bill is North Carolina's principal state-funded street-aid mechanism for municipalities. It transfers 1-3/4 cents per gallon of state motor fuel tax to qualifying cities and towns each October 1 for use on local streets. The program is administered by DOT and runs continuously.

The 1999 incorporation-reform tightening. Before 1999, the General Assembly worried that some newly incorporated municipalities existed mainly to collect state-shared revenues without providing meaningful local government. S.L. 1999-458 added the fourth eligibility requirement: post-January-1-2000 municipalities had to appropriate for four of eight designated services to qualify for Powell Bill funds (and therefore for the cross-referenced tax reimbursements). The General Assembly chose "appropriated" as the operative verb, not "provided" or "delivered."

Why "appropriated" is a deliberate choice. Statutory drafting uses verbs carefully. "Appropriated" refers to the legal act of including the spending authority in a budget ordinance. "Provided" or "delivered" would refer to actual service operation. The General Assembly knows the difference; using "appropriated" signals that the eligibility test is met at the budget-ordinance stage, not at the service-delivery stage.

The deference layer. The AG's reliance on Frye Regional Medical Center is standard agency-deference doctrine. Where the agency charged with administering a statute has a workable interpretation, courts and AGs generally defer. DOT's Powell Bill staff had to apply § 136-41.2(c) every year to dozens of small municipalities and had settled on the "appropriation is enough" reading. That reading is reasonable, consistent with the statute's text, and entitled to weight.

The cross-reference web for state-shared revenues. Powell Bill eligibility is the gateway statute for several other state-shared revenues. The excise tax reimbursement (§ 105-113.82(h)), franchise tax reimbursement (§ 105-116.1(e)), sales and use tax reimbursement (§ 105-472(d)), and supplemental sales/use tax reimbursements (§§ 105-486(d), 501) all reference § 136-41.2. By design, a post-January-1-2000 municipality that fails Powell Bill eligibility loses all of these revenues. That sharply increases the stakes of the fourth requirement.

The Town of Stallings precedent. The 1976 AG opinion to the Town of Stallings established that the Powell Bill eligibility requirements exist to ensure that municipalities provide for minimum governmental services in the same fiscal year they receive motor fuel funds. The AG in 2001 read this purpose as compatible with the budgetary-appropriation test: a town that budgets for services has committed itself to providing them, even if some services start mid-year.

Why mid-year service starts are a real-world concern. New municipalities often have a staggered service rollout. Contracts have to be negotiated, vendors selected, and operations stood up. Requiring all four services to be fully operational on day one of the fiscal year would make incorporation impractical for small towns. The General Assembly's choice of "appropriated" recognizes this operational reality.

Common questions

Q: What if a town appropriates funds for a service but never actually spends them?

A: The opinion does not address that scenario. If a town consistently fails to deliver any appropriated service, DOT or the General Assembly might revisit the appropriation-is-enough framework for that town. The 2001 opinion addresses Midland's circumstances, where appropriations represented genuine plans to deliver services.

Q: Can a town count contracted-out services toward the four-of-eight test?

A: The eight categories (police, fire, solid waste, water, street maintenance, street construction, street lighting, zoning) do not specify in-house versus contracted delivery. A town that contracts with a county or private vendor to provide a designated service should be able to count the appropriated contract amount.

Q: What happens to a municipality that was incorporated before January 1, 2000?

A: The fourth requirement of § 136-41.2(c) does not apply. Pre-January-1-2000 municipalities qualify for Powell Bill funds by meeting only the first three requirements (election, ad valorem tax levy and collection, and budget ordinance).

Q: Does this opinion bind future DOT actions?

A: AG opinions are persuasive but not binding. DOT can change its administrative interpretation through rulemaking. A future statutory amendment by the General Assembly could also change the test.

Citations from the opinion

• N.C. Gen. Stat. §§ 136-41.1 to 136-41.3
• N.C. Gen. Stat. § 136-41.2
• N.C. Gen. Stat. § 136-41.2(c)
• N.C. Gen. Stat. § 105-113.82(h)
• N.C. Gen. Stat. § 105-116.1(e)
• N.C. Gen. Stat. § 105-472(d)
• N.C. Gen. Stat. §§ 105-486(d), 501
• 1999 N.C. Sess. Laws 458, s. 5
• Union Carbide Corp. v. Offerman, 351 N.C. 310, 526 S.E.2d 167 (2000)
• Frye Regional Medical Center, Inc. v. Hunt, 350 N.C. 39, 510 S.E.2d 159 (1999)
• Brown v. Flowe, 349 N.C. 520, 507 S.E.2d 894 (1998)
• Opinion of Attorney General to Town of Stallings, 46 N.C.A.G. 17 (1976)

Source

• Landing page: https://ncdoj.gov/opinions/eligibility-of-town-of-midland-to-receive-powell-bill-funds-and-other-state-tax-reimbursements/

Original opinion text

Re: Advisory Opinion: Eligibility of Town of Midland to Receive Powell Bill Funds and Other State Tax Reimbursements; N.C.G.S. § 136-41.2(c)

Dear Mr. Burgner:

This will respond to your letter dated June 27, 2001, addressed to Special Deputy Attorney General George Boylan in the Revenue Section of the Attorney General's Office. We apologize for the delay in our response. Robert Crawford represents the Department of Transportation ("DOT") and is familiar with the State Street-aid Allocation Law, commonly referred to as the "Powell Bill" Program (N.C.G.S. §§ 136-41.1 – 41.3). Analysis of these statutes seem most pertinent to your inquiry.

Under the Powell Bill Program, the North Carolina Department of Transportation is required to pay from the Highway Fund an annual allocation to all active and qualifying municipalities a sum equal to 1-3/4 cents on each taxed gallon of motor fuel and to be paid on or before October 1. The allocations are to be used for maintaining, repairing, constructing, reconstructing or widening of any street or public thoroughfare.

You have requested, as counsel for the Town of Midland (incorporated November 7, 2000), an opinion whether Midland's provision of solid waste collection service for half the fiscal year, from January 1, 2002, through June 30, 2002, would be sufficient to satisfy as one of the four municipal services required to be provided under N.C.G.S. § 136-41.2(c) in order to qualify for Powell Bill funds and, in turn, qualify for various other tax reimbursements from the State of North Carolina. The Powell Bill statute is referenced by statutes providing reimbursements for Excise Taxes (N.C.G.S. § 105-113.82(h)), Franchise Taxes (N.C.G.S. § 105-116.1(e)), Sales and Use Taxes (N.C.G.S. § 105-472(d)), and Supplemental Sales and Use Taxes (N.C.G.S. §§ 105-486(d), 501). Each of those tax statutes states that "No municipality may receive funds under this section if it was incorporated with an effective date of on or after January 1, 2000, and is disqualified from receiving funds under G.S. 136-41.2."

In short, a municipality may not receive these tax reimbursements unless it is qualified to receive Powell Bill funds. In order to be eligible to receive Powell Bill funds under N.C.G.S. § 136-41.2, a municipality must show:

(1) that it has conducted the most recent election required by its charter or general law;
(2) that it has levied for the current fiscal year an ad valorem tax of at least $.05 per $100 valuation on all taxable property and collected at least 50% of the ad valorem tax for the previous fiscal year;
(3) that it has formally adopted a budget ordinance in compliance with state municipal law showing revenue from all sources; and
(4) for those municipalities incorporated after January 1, 2000, that "funds have been appropriated" for at least four of eight designated municipal services (police protection, fire protection, solid waste disposal or collection, water distribution, street maintenance, street construction or right of way acquisition, street lighting, zoning).

This fourth requirement was added by the General Assembly in 1999 with the enactment of "An Act to Revise the Municipal Incorporation Process So As To Provide More Scrutiny" (S.L. 1999-458, s. 5).

You correctly point out that N.C.G.S. § 136-41.2(c) does not establish any specifications for such municipal services, such as, for how long or to what extent those services must have been available. The Town of Midland anticipates that solid waste services will be provided to its citizens on or about January 1, 2002. Because the service is only provided for half the fiscal year, and out of an abundance of caution, you have advised the Town to pursue other options for fulfilling the fourth required service.

As a general rule of statutory construction, a statute must be construed as written. Where the language of a statute is clear and unambiguous, it must be given its plain and definite meaning. A court is without power to superimpose provisions not contained therein. Union Carbide Corp. v. Offerman, 351 N.C. 310, 526 S.E.2d 167 (2000). N.C.G.S. § 136-41.2(c) is plain and unambiguous; only the appropriation of funds is required. Accordingly, it is our opinion that the appropriation of funds in a municipality's budget is all that is necessary under the fourth requirement of N.C.G.S. § 136-41.2. Therefore, Midland's budgeting for solid waste services beginning January 1, 2002, is sufficient to satisfy as one of the designated services under N.C.G.S. § 136-41.2(c).

In further support of this conclusion, it is also a general rule of statutory construction that the interpretation of a statute given by the agency charged with carrying it out is entitled to great weight. Frye Regional Medical Center, Inc. v. Hunt, 350 N.C. 39, 510 S.E.2d 159 (1999). DOT is responsible for carrying out the provisions of N.C.G.S. § 136-41.1 et seq. DOT's interpretation is that budgetary appropriation is sufficient to meet the requirements for eligibility to receive Powell Bill funds. We are advised by Betsy Williams, the DOT Powell Bill Program manager, that the Town of Midland has qualified for receipt of Powell Bill funds in 2001. In its certified application received by DOT on July 18, 2001, the Town of Midland relied upon the appropriation of funds for fire protection, solid waste collection and disposal, street maintenance, and zoning. DOT accepted the representation that the funds for those services have been appropriated.

The purpose of the requirements for eligibility to receive Powell Bill funds are to ensure that municipalities budget for and provide for taxes for certain minimum governmental services in the fiscal year in which the motor fuel tax funds are received. See, Opinion of Attorney General to Town of Stallings, 46 N.C.A.G. 17 (1976). You have stated that it is your opinion that the law was enacted to prevent municipalities from receiving state monetary benefits without providing a corresponding benefit to their citizenry. We concur with your opinion. We also believe our interpretation is consistent with the intent of the General Assembly as evidenced in the plain wording of N.C.G.S. § 136-41.2 and the 1999 amendment. The intent of the legislature controls the interpretation of a statute. Brown v. Flowe, 349 N.C. 520, 507 S.E.2d 894 (1998). Midland's efforts to provide the required services through its budget process, albeit for half the fiscal year, satisfies the purposes of the law.

In summary, the Town of Midland has properly qualified for the receipt of Powell Bill funds by budgeting for four municipal services. Therefore, nothing else appearing, the Town of Midland also qualifies for reimbursements from the State of North Carolina for excise, franchise, and sales and use taxes.

We trust that this advisory opinion will be helpful to you. Please call Robert Crawford if you would like to discuss this matter further.

Sincerely,

Reginald L. Watkins Senior Deputy Attorney General Civil Division

Robert O. Crawford, III Special Deputy Attorney General Transportation Section