Related:

• Gallery: Huntington's proposed occupation tax meeting

HUNTINGTON -- Huntington City Council members proposed sweeping changes to the city's tax structure Thursday night during a Finance Committee meeting that also saw a 1 percent occupation tax ordinance advance to the full council without a positive or negative recommendation.

The occupation tax, which would be imposed on the gross earnings of anyone who works in the city and makes more than $10,000 per year, has been in the public spotlight since Mayor Kim Wolfe unveiled the plan last week. The $3-per-week user fee also would be repealed upon the tax's July 1 implementation date.

At least four council members, however, said enacting an occupation tax and eliminating the user fee is a money grab cloaked in the name of tax reform. Council members will have to make further reforms if they want the city's tax structure to become conducive to business growth, they said.

At the end of a nearly three-hour meeting, Finance Committee Chairman Steve Williams instructed city attorney Scott McClure to prepare two additional ordinances for consideration at the next committee meeting on Friday, April 30. One of the ordinances would phase out the municipal service fee by July 1, 2013. The other would eliminate the business and occupation tax for manufacturers on July 1.

"This creates a tax-reform package," Williams said. "In doing so, we're sending an overall message to residents, businesses and beyond that we're willing to make bold changes to encourage business development and put people to work."

Anyone who owns property in the city, whether it be residential, commercial or industrial, pays the municipal service fee. It is a flat $120 fee on each parcel in addition to 7.35 cents per square foot of property owned. The fee generates about $6.3 million a year, or 15 percent of Huntington's $40 million budget.

The B&O tax by far is Huntington's largest revenue stream and viewed by many as the most unfriendly form of taxation for businesses because it is assessed on gross sales. The tax is projected to bring in $15.4 million next year, although manufacturing businesses are estimated to account for only $120,000 of that amount. The bulk of the tax comes from service-based businesses ($4.4 million), utilities ($3.8 million) and retailers and restaurants ($2.8 million).

Phasing out the municipal service fee is favored by a growing consensus of council members because it would provide relief to both residents and businesses, Williams said. And while the manufacturing portion of the B&O tax is minuscule, it sends a message to businesses that Huntington welcomes their presence, he said.

It also appears at least one significant change will be made to the occupation tax ordinance. Council Chairman Jim Insco, who is not on the finance committee but attended the meeting, recommended placing a $250,000 cap on the income amount that the city can assess each worker.

The city also must be able to show the public where the occupation tax revenue would go, Insco said. Implementing the 1 percent tax and repealing the user fee would net the city $2 million in fiscal year 2011 and $3.5 million in subsequent years, according to administration projections.

Much of that revenue would offset reductions in the municipal fee and B&O tax, Insco said, but any money left over should be used for infrastructure projects such as paving or storm sewer improvements.

"I don't know who thinks we can just put this occupation tax money into the general fund or use it to eliminate furloughs, but I kind of enjoy living," Insco said. "We would be hung for doing that, and we should be.

"Folks from across the state are watching us very closely with how we handle this. It's an opportunity to take a lead in the state and show what can happen if municipalities have power to control their own destiny."

The first reading of the occupation tax ordinance is on the agenda for City Council's Monday, April 26, meeting. Wolfe's administration had requested that a final vote on the tax come at a May 3 special call meeting. But Insco, who sets special call meetings, said he likely will take more time.

Earlier in the meeting, Delegate Kelli Sobonya, R-Cabell, suggested that Wolfe and council members meet with the Cabell delegation and business leaders to hammer out any concerns before moving forward with the proposal.

More than 60 people, most of whom live outside but work inside the city, attended the committee meeting. Twenty-five people spoke during the public comment portion of the meeting. All but one -- former Mayor Jean Dean -- voiced their opposition to the tax.

Most called the proposal taxation without representation and voiced their displeasure that nonresidents were being asked to shoulder more of the tax burden. Others vowed to boycott businesses in Huntington if the occupation tax is approved.

Hurricane, W.Va., resident Carla Murphy said she has worked in Huntington for some time and that her husband just got a job in the city as well. The couple enjoys eating lunch together at downtown restaurants, but that ritual would stop if the occupation tax is approved, she said.

"You would be getting into my purse and taking my lunch money," Murphy said. "This body can do what it wants, but there will be repercussions to your actions, and it will come in the form of lost revenue for businesses. I'm not being vindictive. It's just what I can afford."

Maurice Lockridge, a financial accounting professor at Marshall University who lives outside the city, told council members that the university's Faculty Senate has joined the Huntington Regional Chamber of Commerce in its opposition to the occupation tax. The Faculty Senate took a stance on the proposal during its Thursday afternoon meeting.

Marshall President Stephen Kopp also voiced his opposition to the tax at the Faculty Senate meeting.

"In the research of cities with these taxes, businesses that can move out do and new businesses always develop outside the city limits," Kopp said. "I believe it's bad for business, bad for the university and bad for faculty retention."

Lori Wolfe/The Herald-Dispatch

Sabrina Irons of Kenova voices her opinion to city council members about the proposed occupation tax during a city council meeting Thursday, April 22, 2010, at Huntington City Hall.

Purchase this photo