TOP OF 2013: Adding a Sales Tax

WHEELING – As communities around West Virginia grapple with sinking gambling revenue and rising employee pension costs, Wheeling this year became one of the first cities in the state to enact its own municipal sales tax as a method of dealing with those issues.

Retailers began charging the tax Oct. 1. When City Council approved the tax earlier this summer, they said the additional 0.5 percent tax – combined with the state’s 6 percent for an effective tax of 6.5 percent – would provide money to upgrade WesBanco Arena and keep up with the demands of the city’s aging infrastructure.

Critics of the plan said a sales tax increase would harm the city’s poor and ultimately would drive more shoppers out of town in a city that’s already seen a number of businesses leave city limits for The Highlands, or close altogether. However, with minimal opposition demonstrated at public hearings on the matter, council unanimously voted to enact the sales tax and a corresponding reduction in the city’s Business and Occupation Tax that will go into effect April 1.

When he announced the proposal, Mayor Andy McKenzie said the B&O tax – Wheeling’s largest single source of revenue – is unfair because it is levied on gross receipts, regardless of a business’s profit margin. Meanwhile, the total sales tax of 6.5 percent would allow the city to remain competitive with businesses in the Pittsburgh area and East Ohio where the sales tax is 7 percent, he said.

It remains to be seen how much budget flexibility the extra half-penny on the dollar charged on purchases of everything except vehicles, groceries and gasoline will provide the Friendly City, which won’t receive its first quarterly payment of revenue from the State Tax Department until January.

For the current fiscal year ending June 30, the city expects to receive $1.1 million in sales tax revenue. That takes into account the quarter-long lag in getting the money from the state as well as the fact catalog retailers won’t have to begin charging the tax until Jan. 1.

Full-year projections show the city receiving $2.4 million from the sales tax each year – which combined with an anticipated $1 million reduction in B&O revenue would mean an additional $1.4 million pouring into city coffers each year.

Proposals already have been received to design upgrades to WesBanco Arena, but City Manager Robert Herron said he needs to see at least six months’ worth of revenue before deciding on the project’s scope.

A long wish list of items for the 36-year-old downtown venue includes high-priority items such as seating and facade repair, but also includes other items such as an outdoor marquee, brand new video boards and spectator suites. If all goes well, brand new hotel and convention space may also be constructed near the arena using proceeds from the sales tax.

In terms of infrastructure, repair of the Baker Street Bridge across Big Wheeling Creek to the Peninsula area of the city is high on the city’s priority list of needs, but is expected to cost $2 million, officials have said.

Other goals for the sales tax money include street paving, slip repair, improving signage and crosswalks around the city, stair replacement in the Glenhite area, upgrading playground equipment, rebuilding infields at city ballfields and new garages at the Stone Church and Peninsula cemeteries.

Wheeling enacted its sales tax through powers granted under the West Virginia Municipal Home Rule pilot program, which gives participating cities more control over their own affairs. Non-home rule cities may enact a sales tax only if they do not charge B&O tax on retailers.

Williamstown was the first Mountain State community to do so, enacting a 1 percent sales tax in 2011. Taxes of the same amount went into effect in Huntington on Jan. 1, 2012, and in Rupert – a community of less than 1,000 in Greenbrier County – on April 1.

Three other cities – including the state’s largest, Charleston – enacted municipal sales taxes that went into effect the same day as Wheeling’s. The others were Quinwood, also in Greenbrier County, and Harrisville, in Ritchie County.