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Mayor scraps plan to cut B&O taxes for retailers

CHARLESTON, W.Va. -- As another result of the heavily amended bill to extend the state home rule pilot program, Mayor Danny Jones said he plans to scrap his plan to cut the business and occupation tax for retailers.

Jones first announced his proposal to roll back the B&O tax, and eliminate B&O taxes for manufacturers, two months ago as part of his plan to impose a half-cent sales tax to raise money for Civic Center improvements.

The state's Municipal Home Rule Board recently approved the sales tax as an amendment to Charleston's home plan. City Manager David Molgaard said he expects a bill to implement the tax will be introduced to City Council on Monday.

But in the two weeks since the Legislature passed the controversial bill that extends and expands the home rule program for another five years, city leaders have been trying to make sense of the 16-page document.

In addition to the much-publicized provision that forces cities like Charleston to repeal local laws that regulate the sale or carrying of handguns, they found language that seemed to be targeted specifically at Jones' tax plan.

A section of SB 435, which is still awaiting Gov. Tomblin's signature, says home rule cities can enact a municipal sales tax of up to 1 percent if they reduce or eliminate their B&O tax.

But it adds: "... if a municipality subsequently reinstates or raises the municipal business and occupation tax ... it shall eliminate the municipal sales tax enacted under the Municipal Home Rule Pilot Program."

The bill seems to be aimed at cities that join the home rule program after July 1, City Attorney Paul Ellis said, not the four cities such as Charleston in the original pilot program. City leaders hope to get the sales tax in place before July 1, under the original program.

"I think the language they put in here is unclear," Ellis said. "Does it reach back? The answer is 'I don't know.'"

While Charleston can impose a sales tax only through home rule, it can adjust B&O tax rates outside of the home rule program, Ellis and Molgaard said. "It appears the language tries to tie the two together, even if we pass it before July 1."

Molgaard said the B&O tax rollback, which would have saved retailers an estimated $2.25 million a year, is doubtful.

"That line seemed to have been inserted [into the home rule bill] based on our current plan," he said. "I think we need to be cautious on how we proceed.

"I know the mayor planned to roll back the B&O tax. I'm not sure that's a prudent course of action, in that we'd be binding future councils based on that.

"The problem is we lose flexibility under the new bill," Molgaard said. "As I read it, you can't increase your B&O tax once you've decreased it. That's not the flexibility we're seeking."

City leaders may still try to eliminate the B&O tax on manufacturers, however, Jones and Molgaard said.

The home rule bill appears to give Charleston a year or more to repeal its gun laws, unless the city decides to withdraw from the program. Once again, the language is unclear, Ellis said.

"A plain reading of the bill seems to show cities like Charleston have until June 1 [2014] to elect whether to continue under home rule and, if they do, 90 days to repeal their gun laws."

At risk are laws Charleston passed 20 years ago that impose a three-day waiting period and other restrictions on handgun sales, and forbid carrying guns and other weapons in city buildings and recreational areas.

"We've got until June [2014], which means nothing happens until then," Jones said.

"But what you have to understand is the Legislature will act before then. I fully expect the Legislature will pass something in January 2014."

Opting out of home rule won't help, Jones said.

"Just because we don't choose to go into home rule by June 2014 doesn't mean we won't lose our gun laws. We'll lose them anyway. [But] we're going to proceed on assuming nothing's going to happen."

Meanwhile, council President Tom Lane hasn't given up hope of trying to challenge the constitutionality of the home rule bill. He's been studying the bill and plans to present his findings to council Monday.

"I'm distressed with the bill passed by the Legislature," he said, "that a bill aimed at giving more freedom to cities takes away existing laws and existing rights. The two seem irreconcilable."

State Sen. Brooks McCabe, an original sponsor of the home rule extension bill, said he would not favor another extension beyond the 2019 end of the second pilot program.

"At some point we have to sit down and have a serious discussion on letting cities govern themselves," McCabe said.

The Legislature traditionally has kept a tight rein on local government, he said.

"I think legislatively we have to have a different view going forward. I would hope three or four years from now they would see the economic vitality of cities is crucial to the success of the state."Reach Jim Balow at balow@wvgazette.com or 304-348-5102.


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