City sales tax collection will take time
Although Charleston Council passed a measure creating a half-cent sales tax on Monday, the city will likely not see any revenue until the first quarter of 2014.
That is because the mechanism for collecting the tax is created by the West Virginia Tax Commissioner, City Manager David Molgaard said.
It will take the state agency several weeks to create the mechanism for collection, and notify the vendors in Charleston and around the state, City Attorney Paul Ellis said.
Therefore, vendors will likely not begin collecting the tax until October, Molgaard said. And then the state tax office will not immediately begin distributing the funds to the city, he said.
"If the vendors start collecting on Oct. 1, we'll probably see some revenue by February or March," Ellis said.
Mayor Danny Jones pushed for the measure to generate money to pay for $35 million to $60 million in renovations to the aging Charleston Civic Center. He hopes to make the Civic Center a state-of-the-art convention center to attract more and bigger events to the city.
However, the issue did not come without some fighting among the council.
Councilman Robert Sheets cast the lone vote against the measure. Sheets, an East End Democrat, has opposed the sales tax, which is expected to gross about $6 million annually, since it was first proposed.
"A sales tax is the most regressive tax that is put upon people," Sheets said.
Jones said opponents have failed to put forth a viable plan to fund Civic Center renovations.
Sheets has suggested bake sales and bingo and raffle events to fund the measure. He has also proposed an increase in the hotel/motel sales tax.
Jones questioned Council Member Edward Talkington, a West Side Democrat, about Sheets' proposals. Talkington spoke out in support of the measure during the meeting.
"Would you believe me if I said bake sales won't pay for this Civic Center?" Jones emphatically asked Talkington.
Talkington said the needed funds greatly exceed the amount of money the city could raise through bakes sales and bingo.
Talkington added that the city could not increase the hotel/motel tax without legislative approval, which was not guaranteed.
"We have very limited choices on how to raise money," he said.
Talkington voted for the measure, as well as the elimination of the business and occupation tax on manufacturing, which was also passed Monday.
The ordinance eliminating the B&O tax on manufacturing passed unanimously.
That measure will end up costing the city about $350,000. However, the revenue generated by the sales tax will make up for the lost funds, Jones said.
Talkington did oppose a plan to roll back the B&O on retail in the city. That measure would have reduced the city's budget by about $2.25 million annually.
But, the push to reduce the B&O on retail was dropped when city leaders discovered that the state's new home rule bill prohibited cities from raising municipal business and occupation taxes once they were reduced if they had already established a sales tax.
Jones, who made the initial proposal, was loath to tie future council members to a reduced retail B&O, he said.
Charleston is creating the city sales tax under its home rule powers.
The funds generated by the sales tax, as well as the retail B&O, could be used to pay off millions of dollars in unfunded liabilities in the police and firefighter pension plans, Jones said.
The city's unfunded liability in the plans is about $259 million, Talkington said.
The city could also use the funds to pay for other projects in the future, he said.
The B&O elimination will take effect until Jan. 1.
Council members also approved a measure establishing a $20 uniform business license fee.
Council members had previously passed a measure setting the fee at $25 but officials soon learned that was in conflict with a state law capping the fee at $20, Molgaard said.
The measure passed unanimously.
Charleston officials also approved a $1.1 million paving contract with West Virginia Paving during Monday's meeting.