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City of Martinsburg considers B&O tax increase

May 17, 2007|by MATTHEW UMSTEAD

MARTINSBURG, W.Va. - Martinsburg City Council next month is expected to consider increasing business and occupation tax rates to the maximum allowed by state law and establishing a capital improvement fee to new residential and commercial projects.

Members of the city council's Budget and Finance Committee on Wednesday decided not to recommend property tax increases or the adoption of new municipal service or storm water management fees as a means to help the growing Berkeley County city keep up with the demand for services.

Though particularly unsettled with increasing the B&O tax rate on small, retail businesses, Councilman Roger Lewis ultimately joined fellow committee members Donald Anderson, Max Parkinson, Greg Wachtel and chairman Richard Yauger in support of the two-prong strategy to raise additional money to pay for additional city employees, equipment and capital improvements. Those include a proposed expansion to city hall, a police/fire substation, street department building addition and possibly a parking garage.

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"Psychologically, I would like to see them done at the same time," Lewis said of the proffer fee for new construction and the B&O tax, a levy on business' gross sales.

City Finance Director Mark B. Spickler projected the B&O rate increases applied across eight gross sales categories (value manufactured goods, retailers & others, wholesalers & jobbers, contracting business, loan companies, banking and other financial business, service business or callings and rents, royalties, etc.) would generate about $1.5 million. The city's B&O tax rate on amusement business was increased to the maximum allowed by state law in July 1999, the last time the rates were adjusted.

"This is, in my opinion, the route to go before adding on any more taxes," Spickler said of the proffer fee and B&O tax increase.

But Spickler also cautioned that about half of his projected increase in B&O revenue was expected to come from contract business. That sector is projected to drop below $1.2 million in the current fiscal year, which ends on June 30.

In 2005-2006, B&O tax revenue from contracting business more than doubled from the previous fiscal year when the city collected about $600,000, according to the data Spickler presented.

"I'm uneasy about this little chart right here," Spickler said of the fluctuation, apparently reflective of the area housing market's decline.

The proffer fee, estimated to be applied at a rate of more than $3,000 per new home, also would be dependent upon the housing market and continued overall growth, Spickler said. But Councilman Greg Wachtel said business leaders tend to expect to pay a proffer fee when locating a new store.

"We get laughed at when (businesses) want to know what our fees are," City Manager Mark Baldwin told committee members.

The proposed adjustment to the city's B&O tax rates also would correct current inequities in the structure now applied across nine gross sales categories, according to Spickler.

City officials could not immediately explain why the rates were not uniformly applied in past years, but the correction would ultimately result in a substantial percentage increase for manufacturers and contracting business categories.

The city currently collects 97 cents of every $100 in gross sales of contract business, but that rate would increase to $2 if the hike is approved. Among West Virginia's 10 most populated cities, Martinsburg is the only municipality not to have raised the contracting rate and three other categories to the maximum allowed, according to Spickler.

Manufactured product businesses would see their rate increase to 30 cents, up from 12 cents. The tax on banking institutions would increase by 31 cents to $1. Wholesalers, service, rental businesses and loan companies and retailers would realize the smallest percent increases because they are being taxed at a rate of 80 percent or higher of the maximum allowed by state law, records show.

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