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“Financing Your City’s Path to Excellence ‐ ”Business and Occupation Taxes and Public Finance

Government Finance Officers Association Of WVWest Virginia Municipal Human Resources Association

Charleston, WV Mark W. MatkovichOctober 5, 2017 Ryan White

Municipal Finance Essentials

232

$567,008,129

B&O, Excise Tax on Utilities, Sales Tax, Property Tax, Licenses and Fees

OVERVIEWWest Virginia Municipalities

WHITE LAW OFFICES PLLCwww.whitepllc.com

Nothing stays the same:

232 231 $567,008,129


Municipal Finance Essentials:West Virginia Municipalities


The Town of Rhodell, Raleigh County, Pop. 173.

On June 13, voted 33-13 to dissolve the town.

Look where we started:

231

$567,008,129 B&O, Excise Tax on Utilities, Sales Tax, Property

Tax, Licenses and Fees



In 2003, total municipal revenue was ~450M

Something New ‐ Finally!

231

$567,008,129




Early adopters Huntington &Williamstown combined for <$900K in FY2012

A Growing Trend in WV Tax Policy

36 Cities effective July 1, 2017

Rate 1% (except Moorefield 0.5%)

FY 2017 $60,244,032.08 (predict >$80 million next year)

Sales Tax:West Virginia Municipalities


A workhorse:

$204,684,195

36% of Total Municipal Revenue

Key Classifications: Retail (.5%), Wholesale (.15%), Contracting (2%), Service (1%), Rents/Royalties (1%)

Often subject to criticism*

www.whitepllc.com Blog

B&O Tax:West Virginia Municipalities


B&O TaxStill A Revenue Mainstay


B&O 36%

Excise Tax on Utilities 4.5%

Property Tax 18%

Other Tax (i.e. Sales) 11%

Total Charges, Licenses and Fees 31%

Composition of Budgeted General Revenue FY2018

Notable Cities


BO 2018 BO 2007 Total Gen Rev % of TotalCharleston 45,437,310 33,400,000 96,237,991 16.97Huntington 13,961,759 15,076,554 50,786,466 8.96Beckley 9,690,000 7,955,000 21,404,869 3.78Bluefield 2,937,900 2,300,000 10,459,981 1.84Clarksburg 9,102,000 6,117,000 18,566,634 3.27Fairmont 5,305,268 3,923,196 15,856,082 2.80Martinsburg 6,850,000 6,000,000 16,700,000 2.95Morganton 14,700,000 10,120,000 33,202,474 5.86Parkersburg 8,350,000 9,850,000 28,775,473 5.07St Albans 3,100,000 2,800,000 11,280,620 1.99So Charleston 11,500,000 8,500,000 27,650,089 4.88Vienna 2,600,000 2,415,000 9,085,363 1.60Weirton 4,700,000 2,300,000 20,037,323 3.53Wheeling 11,325,000 8,970,000 34,014,256 6.00

Totals 149,559,237 110,756,750 394,057,621 69.50

Current Items of Interest

AirBnB and the sharing economy

Spec Building

Nexus for sales tax, business license, and B&O are not necessarily the same – know the distinctions

Information Exchange with State Tax Department*

Publishing tax information about non‐payors

Closing Businesses for failure to pay taxes or licenses

Tax Notes TodayCity Administration


Public FinanceWest Virginia Municipalities


West Virginia municipalities can finance public projects including police stations, fire stations, city halls, convention centers, sewer upgrades, and water upgrades using a variety of different methods including:

General Obligation Bonds Special Revenue Bonds Lease Revenue Bonds Tax Increment Financing and Sales Tax Increment

Financing

Public Finance:General Obligation Bonds


Backed by Full Faith and Credit of the Municipality

What can be financed? Any public project

What Revenue is pledged? The taxing power of the municipality

Are there special requirements for Issuing the Bonds?Yes. An election must be held and the municipality must receive 60% of the votes to proceed with the Bond. Also, a municipality may not issue bonds in an amount that exceeds 2.5% of the value of taxable property within the subdivision.

Public Finance:Special Revenue Bonds


Backed by Specific Revenue of the Municipality

What can be financed? A project that will produce enterprise revenue. Also certain public projects can be financed by pledging lottery revenue, sales tax revenue and hotel/motel tax revenue

What Revenue is pledged? The enterprise revenue and/or lottery revenue, sales tax revenue and hotel/motel tax revenue

Are there special requirements for Issuing the Bonds?Yes. Bonds issued will require certain debt service covenants for the revenue sources that secure the bonds. Accordingly, covenants to raise rates will be required in order to pay the bonds if the revenue does not cover the debt service payment

Public Finance: Lease Revenue Bonds


Backed by the Lease Revenue from a Lease

What can be financed? Essential public buildings that will be leased by the city from a local building commission

What Revenue is pledged? Lease revenues derived from the leasing of the building from the local building commission

Are there special requirements for Issuing the Bonds?Yes. The local building commission must own the property and issue the bonds and then lease the property to the municipality. The lease will often be for the entire term of the bonds and then the property will be purchased by the municipality at the end for $1. There must be a provision that states the municipality may cancel the lease in any year by giving 30 days notice.

Public Finance: TIF and STIF Bonds


Backed by tax increment revenues and sales tax increment revenues

What can be financed? Public buildings and infrastructure. Usually used in conjunction with a particular development.

What Revenue is pledged? This is a type of special revenue bond which is paid by the excess revenue generated in a certain district from property taxes or sales taxes which is over a certain baseline that is established at the time the district is created.

Are there special requirements for Issuing the Bonds?Yes. A TIF or STIF district must be created. Only class I and II municipalities may create districts. TIF and STIF districts must be approved by the WV Development Office and STIF districts must be approved by the WV legislature.

Public Finance


Many different Purchasers of Bonds:

The Public - An underwriter will initially purchase the bonds and then sell bonds to the public who can buy the bonds and receive tax exempt income from most bonds

Banks and Financial Institutions - Banks will often buy bonds directly from governmental issuers. This is called a private placement. Banks receive the tax exempt rate and also can receive Bank Qualified incentives if the issue is under $10 million.

Governmental Entities - State and Federal governmental entities such as the USDA, the Water Development Authority, the Clean Water SRF Program, the Infrastructure and Jobs Development Council, the Drinking Water Treatment Revolving Fund will buy bonds at extremely low interest rates.

Mark W. Matkovich Ryan WhiteSteve White

White Law Offices PLLC600 Kanawha Blvd. EastCharleston, West Virginia

304‐720‐1400www.whitepllc.com

We will be glad to help you with determining how to finance your next project. For more information, contact us.

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