HUNTINGTON -- Huntington officials have seen it occur too many times.

A new business sets up shop within a stone's throw of city limits, only to avoid paying city taxes and fees. It's particularly gut-wrenching when a long-standing business in Huntington moves out of the city for the same reasons, they say.

"There's nothing inherently wrong with that. Business is business, and businesses are going to do what they can to limit their tax burden," City Councilman Nate Randolph said. "But I think if we can offer them incentives for the first few years, it might just be enough to get them to locate or stay in Huntington as opposed to somewhere else."

Randolph has put together what he calls a "growth tax rebate program" that rewards new and existing businesses through tax and fee rebates over a set period of time. Although the program is still in the draft stages, Mayor Kim Wolfe's administration and the Huntington Area Development Council already have pledged their support.

"Incentives in economic development are almost a necessity these days," HADCO President Marc Sprouse said. "If we're going to compete, we have to offer incentives.

"This is a positive step for everyone involved, especially since it applies to new and existing businesses. It's also important that the mayor's office and City Council recognize the importance of economic development and are willing to cooperate with HADCO to make things happen. We had little or no cooperation from City Hall under previous administrations."

Under the proposed rebate program, new businesses could recoup 50 percent of their business and occupation taxes, municipal fees and building permit fees during the first five years of operation.

A participating business would pay its taxes and fees in full, but the city would write a 25 percent rebate check back to the business at the end of each year it is in the program. The city would place another 25 percent of the taxes and fees into a trust account. At the end of the five years, the trust account balance would be paid to the business.

The program would work similarly for existing businesses, except their revenue would have to grow by 50 percent over a five-year period to qualify for the rebate.

Randolph said he proposed a rebate program because it doesn't require money from the general fund to support such a program.

"It's all based on a baseline of zero, meaning if it's a new business any tax revenue they create is above what we received last year," he said. "As for existing businesses, we will set an aggressive target for them to grow so they generate more tax revenue than they would if they were just growing at an inflationary rate.

"We need to be cautious not to give everything away, but we want to be competitive at the same time."

The city now offers a 50 percent B&O tax reduction to businesses over a three-year period. The incentive, however, breaks businesses into different categories. Each category requires a business to have a certain number of employees to qualify for the incentive. The tax reduction also can run longer than three years depending on the amount of money a company invests in its operations.

There are only three businesses -- Walgreen's, GC Services and TownPlace Suites by Marriott -- taking advantage of the tax-incentive program now. If the city adopted a new plan, these businesses would be grandfathered in, Randolph said.

"I think we would see more use if we offered incentives that were more lucrative," he said.

Several questions remain about the new incentive program, such as whether the city should offer rebates on user fees and how the city would track the program. Another point worth discussing is whether the city should establish an economic development pool of money with the new incentive program, said Tom Bell, executive director of the Huntington Municipal Development Authority.

"There are many businesses that require feasibility studies and other soft costs up front when they decide to expand or move to a new location," Bell said. "An economic development pool could help them get over the hump with those costs."

It's too early to tell where revenue for an economic development pool would come from, but one-time funding sources such as B&O taxes from construction projects and new business license fees are possibilities, Bell said.

Randolph said he hopes the new incentive program will go before City Council for approval by the end of the year.

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