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Wheeling panel suggests sales tax hike

WHEELING, W.Va. — A three-member panel of Wheeling City Council on Tuesday recommended increasing the municipal sales tax from 0.5 percent to 1 percent to stabilize the city’s rapidly expanding police and fire pension costs.

The move would provide additional revenue needed to close the current police and fire pension plans and enroll any future hires in a state-run pension plan, a proposal also recommended by the city’s Finance Committee on Tuesday. Members Eugene Fahey, David Miller and Don Atkinson were unanimous, and the plan now moves to the full City Council for approval.

If that happens, City Manager Robert Herron stressed, current retirees and those already on the police and fire payroll would continue drawing benefits from the existing plans and would see no change in their benefits.

Wheeling has an unfunded liability of about $80.2 million combined in its police and fire pension plans. That’s how much Wheeling’s pension plan assets would fall short of being able to pay all expected obligations if every member of the plan retired today.

This year, Wheeling will pay about $3.8 million into the police and fire funds, an amount that automatically increases by 7 percent each year under state law. Enrolling in the state plan would cost the city about $1.57 million more per year up front – resulting in the sales tax hike – but would stop the automatic yearly increases and eventually make the new plan less expensive than continuing with the current funding method.

“In a couple years we’d be in a world of hurt if this isn’t taken care of,” Atkinson said.

The sales tax increase, if passed, would bring Wheeling’s municipal rate to 1 percent and its overall rate, including state sales tax, to 7 percent. That’s slightly less than the 7.25 percent paid in nearby Ohio counties, including Belmont, Jefferson, Monroe and Harrison counties, but more than the 6 percent charged at Ohio County’s major retail development, The Highlands, which is not in city limits.

Based on Wheeling’s experience with the 0.5-percent municipal sales tax that went into effect last October, Herron projects an additional half-penny on the dollar would bring in about $2.2 million per year. Meanwhile, a user fee – a weekly tax on all who work within city limits – could generate $884,000 for each dollar taken out of workers’ paychecks each week, but that’s only Herron’s best guess.

“We have nine months of data that I feel very comfortable with,” he said.

Although Wheeling had to seek approval from the Municipal Home Rule Board before enacting its sales tax last year, City Solicitor Rosemary Humway-Warmuth said the city will not have to go before the board a second time to increase it. That’s because the city’s original application to the board did not specify an amount for the sales tax, according to Humway-Warmuth.

“We did that purposely,” she said.

Huntington and Moundsville are the two largest cities which have already closed their old police and fire pension plans, since the Legislature made that an option in 2010.

Several smaller communities, including Welch, Oak Hill, Westover, Belle, Dunbar, Grafton and Weston have also made the change, according to Municipal Pensions Oversight Board Executive Director Blair Taylor, even though their plans are relatively well-funded compared to West Virginia’s larger cities.

“The reason they’re doing that is it stops adding further unfunded liability to their plans,” Taylor said.

Members of the state plan will eventually get to vote on whether to join Social Security. Herron originally had told council that could mean an additional $550,000 in Social Security contributions for current employees, but said Tuesday he has since received clarification that only new hires would be affected by that vote.

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