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Leaders point to signs of city's recovery

CHARLESTON, W.Va. - Charleston city leaders say a recent surge in business and occupation tax collections is evidence the city's economy is bouncing back.

Mayor Danny Jones said the $400,000 in additional tax collections over the past three months also would help cut the city's burgeoning pension liabilities.

Charleston closed the books on the first quarter of its 2013 fiscal year at the end of September. City finance director Joe Estep said business and occupation tax collections beat expectations by about 4.7 percent during the July to September quarter.

"The amounts collected in the first three months are about $470,000 above what we budgeted for the first three months," Estep said.

Estep said the collections were about $900,000 more than what the city brought in during the same time frame last year - a revenue jump of about 10 percent year-over-year.

Last year, the city collected $39.9 million in B&O revenue, and this year's budget had projected that to grow to $42.2 million.

Estep has been closely monitoring quarterly business tax collections for several years. He said while any fiscal year could register a $1 million to $1.2 million increase in those collections, the $900,000 spike in one quarter was significant.  

"It's just a clear upward trend," he said. "What it says to me is that, within the city of Charleston, we are rebounding."

Charleston has collected around $40 million a year in business and occupation taxes in recent years.

The city's business tax collections began to suffer following the national financial crisis in 2008 and 2009, although the effects were delayed.

While its 2009 fiscal year was OK, the 2010 fiscal year - which ran from July 1, 2009, through June 30, 2010 - reflected a steep decline.  

"Fiscal year 2010 for us was a horrible year," Estep said. "I mean the bottom fell out."

Charleston saw its B&O tax collections drop $1.8 million from the prior year.

"Two years ago, we were basically in a panic and people were afraid of everything financially," Jones said. "They were afraid to spend, afraid they were going to lose their home and afraid of a lot of things."

Revenue rebounded by about $800,000 in fiscal year 2011 and by about $1.2 million last fiscal year. But Estep said the growth in those two years basically got the city back to where it was in 2009.

"We only recovered the losses we incurred," he said.  

Jones said the latest spike shows the city not only has clawed back to its pre-recession levels but also is poised for future growth.

He said the city was fortunate to see that growth, given recent job losses and mine shutdowns in the coal industry in surrounding counties.

"I think the economy's gotten better in the city," Jones said. "However, in other parts of West Virginia, especially in southern West Virginia, things are bleak."

Jones said Charleston has its own economic compass that helps to insulate it from some of the factors that have negatively affected the state's energy industry.

"We have a good nucleus here of retail businesses, banks, hospitals, state government, and we have a huge legal community," he said.

While nonprofit hospitals and state government offices don't pay B&O taxes, Jones said the city's economy benefits by the number of workers who come into town each day.

"Our population swells up in the daytime about 150 percent - I think it's just better in Charleston," he said.

But Jones said he didn't want to get overly optimistic. He said the city still has a lot of future needs to cover, including unfunded liabilities in pension programs.

Because of those liabilities, city leaders decided Monday to apply about $400,000 in surplus B&O revenue from last quarter to those pension accounts.

Jones said it was a prudent move since too much pension debt can be a "catalyst for failure" for a city.

"If this city's going to have a future at all, we need to deal with the pension issue as we can, as soon as we can, and get ahead of it," he said.

The B&O transfer also put Charleston ahead of other cities, including Huntington, that are still grappling with how to reasonably manage their pension liabilities.  

"I don't know of another city that's done what we're doing, trying to pay this off in advance," Jones said. "Usually people are catching up and basically kicking the can."

Contact writer Jared Hunt at jared.hunt@dailymail.com or 304-348-5148. 


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