W.Va. cities receive budget cut under proposed bill in Legislature; mayors speaking out against it

Published: Jan. 13, 2022 at 11:39 PM EST
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CHARLESTON, W.Va. (WSAZ) - A bill that is designed to eliminate the business and occupational tax (B&O tax) is on the table inside the West Virginia Capitol, but mayors across the region say it will only hurt their cities.

“If you have the one percent sales tax, which we get through (the) Home Rule Program, within five years you’ve got to do away with that one percent sales tax or your Business and Occupational (B&O) tax,” St. Albans Mayor Scott James said. “Where the problem is, is there’s folks up in Charleston that think the one percent sales tax was supposed to replace our B&O tax. That’s not the way the law reads. We had to eliminate one area of B&O tax to get the one percent sales tax.”

Now, over a year later, lawmakers in West Virginia have drawn up a bill that would require cities to choose between having a 1% sales tax increase, making their sales tax 7% rather than 6%, or having B&O taxes. Mayors’ across West Virginia applied for the 1% sales tax increase, or Home Rule Program, within the last few years.

Cities including Huntington, Charleston, Hurricane, St. Albans and Barboursville have all adopted the home rule and have the money dedicated to bonds, pensions or infrastructure projects. The home rule website lists each city’s application, which shows how they are going to spend the extra sales tax money, if the state allowed them to adopt the program.

“So in some cases and even for us, it is multi-years worth of infrastructure improvements, multi-years of recreational development to develop your sports tourism programs and things of that nature,” said Barboursville Mayor Chris Tatum. “That was all set forth in our application to the Home Rule Board, saying ‘this is what we’re going to do with our funds.’ This is not a cookie cutter model; all cities’ needs are different.”

Mayor Tatum and Mayor James argue the Home Rule tax does not replace the B&O tax since the B&O tax pays for the services of citizens, including fire, police and city workers.

“Can we somehow figure out how the home rule, that was made available to everybody last year, can we make that something that there is a trade-off?” Sen. Rollan Roberts, R-Raleigh County, said. “That’s what (was) supposed to happen originally, but it kind of fell apart and it’s not nailed down in code.”

Roberts said when the Home Rule program was offered last year, cities who wanted to apply for the program had to reduce the B&O tax for only certain businesses of their choosing. However now, the new bill would overrule that stating cities or municipalities would have to eliminate all B&O tax if they adopt the sales tax increase.

“We’re just now to the point to where we got that one percent sales tax to where we’re catching up on a lot of things,” said Mayor James. “Our fire and police pensions were down, the police pension was stronger than the fire pension. The fire pension was only funded at 12 percent, it’s up to 18 percent now.”

Huntington Mayor Steve Williams told WSAZ he was working on adopting the Home Rule Program for the last 12 years. He said once COVID-19 hit, the city of Huntington stopped taxing retail and restaurant businesses for the B&O.

“It didn’t create a hole in our budget because, oddly enough, sales tax revenue increased,” Mayor Williams said.

After realizing there wasn’t a dramatic impact on the city’s budget from suspending B&O taxes from retail and restaurants, Huntington decided to completely eliminate B&O from those two businesses in particular.

Mayor Williams said though he was able to eliminate some of the B&O, it would devastate his city and others to eliminate all B&O completely.

“When you cut that out, with no means to replace it, that means nearly 25 percent of your revenue is gone. You’re defunding the police and defunding the fire department; our cities can’t afford it,” Mayor Williams told WSAZ. “Are they going to be prepared to send State Police in to replace the police service that will be cut?”

Sen. Chandler Swope, R-Mercer County, told WSAZ he did not read the bill in its entirety yet. However, he did read the summary and agreed to sign it, as he is opposed to B&O tax.

“It really discouraged a lot of people from doing stuff in West Virginia because it inflated the cost of construction projects, so I really didn’t like the B&O tax as a tax model,” Swope told WSAZ. “If you don’t require (municipalities) to offset a cut with an add, they won’t do it. So to make them choose, keeps them from being able to take both, keep the B&O tax (or) take the sales tax.”

Senator Roberts, who also is a sponsor on the bill, said the bill is only in its introductory stage, and it has potential to change through the committees.

“We’re trying to make it so that municipalities can be able to stay whole and run their police and fire departments and such, but also that small businesses don’t have to pay everything and really hurt in that way,” Roberts said.

If the bill passes as is, municipalities will have five years to choose between keeping a 1% sales tax increase or keeping B&O taxes generated by businesses in city limits.

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