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• Huntington's proposed tax reform

HUNTINGTON -- Huntington City Council members unveiled a three-pronged tax reform package Thursday that includes a 1 percent occupation tax and 1 percent sales tax, both of which would take effect within the next nine months.

Portions of the business and occupation tax, viewed by many as a significant hurdle to attracting businesses to Huntington, would be eliminated or reduced as well. The $3-a-week user fee also would be repealed.

The sales tax, occupation tax and changes to the business and occupation tax all appear on the Monday, July 12, City Council meeting agenda as ordinances on first reading. City Council meets at 7:30 p.m. at City Hall, 800 5th Ave.

The proposals are the latest in a series of tax overhaul plans brought forth by the council and Mayor Kim Wolfe during the past three months. None has made it to a vote.

Wolfe introduced a 1 percent occupation tax in April to offset recession-weakened revenues, but it was scrapped by council members amid overwhelming public opposition. Council members have tried their hand at several different forms of comprehensive reform packages since then.

The package rolled out Thursday is the first to include both a 1 percent occupation tax and 1 percent sales tax. The city was given the authority to implement both taxes under its five-year home rule plan, which is now entering its third year.

The home rule program, proposed by Gov. Joe Manchin and approved by the West Virginia Legislature, gives Huntington and three other cities the freedom to try different paths to reach financial stability and deal with ongoing problems such as dilapidated housing.

Council Chairman Jim Insco said he doesn't want state legislators to look at Huntington three years from now and say city leaders didn't use the powers granted to them.

"After everything is approved, this would give us two solid years of numbers to present to the Legislature to review and consider whether it's worth adopting statewide," Insco said of the occupation and sales taxes.

The 1 percent occupation tax would take effect Oct. 1 of this year and trigger the repeal of the user fee. Unlike previous plans, the ordinance caps taxable income at $100,000 per year, or no more than $1,000 per person.

The occupation tax is estimated to bring in approximately $8 million a year, while the user fee generates $4.5 million annually. That means the city would net $3.5 million in additional revenue if estimates prove to be correct.

The first $7 million collected from the occupation tax would go into the city's general fund. Any revenue above the $7 million mark but less than $9 million would be dedicated for capital improvement projects. Any revenue generated above the $9 million mark would be used for further reducing the business and occupation tax, according to the ordinance.

The 1 percent sales tax would not take effect until April 1, 2011. It would generate $3.7 million annually, according to city Finance Department estimates, and apply to the same goods and services as the state sales tax.

Finance Director Deron Runyon said that upon City Council's passage, the occupation tax and sales tax ordinances would be submitted to the state Home Rule Board for its review and approval.

"We don't want there to be any lingering questions about whether the ordinances are the same as what the city was authorized to do two years ago," he said.

The business and occupation tax changes also would take effect April 1, 2011. The tax on manufacturers would be eliminated, while the tax on retail- and service-based businesses would be reduced by half.

The changes would result in an overall tax reduction of $3.775 million. The business and occupation tax is Huntington's largest source of revenue and is projected to generate about 40 percent of the city's $39 million budget this year.

Council members only spent a few minutes on the ordinances during their work session Thursday, although Councilman Mark Bates said he would make an amendment to the occupation tax ordinance on Monday that gives those who live and work in Huntington a 25 percent discount.

Councilman Nate Randolph also expressed concern about the financial complications that would ensue if council members approved only one or two of the ordinances and not all three.

"I guess there's really no solid way to prevent what could potentially be a difficult situation if only one or two pass, but not the whole slate," Randolph said.

File photo/The Herald-Dispatch

Huntington City Hall.