CLARKSBURG — County officials are urging caution as state legislators again consider a manufacturing machinery, equipment and inventory property tax exemption.
While legislators have promised to replace lost revenue to schools, counties and municipalities, a mechanism to do so has not yet been solidified. That has many county officials nervous.
“I think every county is concerned because they want to be guaranteed that that money is going to be there. … I would basically say our entire membership is concerned about it,” said Jennifer Piercy, executive director of the County Commissioners’ Association of West Virginia.
“Even the counties that don’t have a huge amount of money coming in, for those counties, it’s still money,” she said.
Kanawha County, which took in approximately $11 million in 2017, would see the biggest hit if manufacturing machinery, equipment and inventory were exempted from property taxation.
In North Central West Virginia, Monongalia County took in roughly $6.6 million that year, Harrison County around $1.4 million, and Marion and Upshur counties around $1 million each, according to estimates.
Although about two-thirds of the property tax revenue funds schools, counties take the next biggest cut at around 20% to 23%.
“We are waiting on more information before we can actually have a stance on it. Our main concern is that the counties are safe and that they will be able to backfill, so to speak,” Piercy said.
The changes would first require a constitutional amendment stating that the taxation of tangible inventory, machinery and equipment as personal property used by businesses can only be done by the Legislature.
If passed, the constitutional amendment would be put to the state’s voters to decide during the next election.
Piercy said county officials are trying to stay involved in the ongoing conversations on the proposal to ensure the appropriate questions and concerns are raised, and to ensure legislators have the pertinent information for decision making.
In Harrison County, officials expressed fear the burden will eventually fall on the counties to come up with revenues.
According to Commission President Ron Watson, the county is waiting to hear from the Legislature on how it will provide funding for the tax exemption.
“I agree we’ve got to get rid of it, but somebody’s going to have to sharpen their pencil and decide where it’s going to come from,” Harrison County Commissioner Patsy Trecost said.
Trecost suggested state legislators “are going to have to have the courage” to replace sales tax on groceries, get rid of jail costs for counties or some other solution.
Monongalia County Commissioner Tom Bloom took it a step further.
“This is an ill-conceived, idiotic plan. Do I think the tax is horrible? Yes. However, until you come up with a budgetary line item or funding mechanism, don’t even consider it,” he said. “It sounds great politically, but we need leaders who say, ‘Here’s how it’s going to be done and here’s the funding source.’”
Bloom also cautioned against looking backward to determine funding for counties.
Counties like Monongalia have seen growth in the manufacturing sector, so the true loss of revenue in the county is not accurately represented by looking at intake from previous years, he said.
“You’re basically punished if you’re a county that’s doing economically well,” Bloom said. “I hate the tax. I hate the whole B&O tax system, but you have to look at the bigger picture.”
Without a funding mechanism, Bloom said he will aggressively fight the changes.
“That’s how concerned I am on this issue,” he said.
Bloom also said counties need additional information on how the state came up with the numbers on how much revenue counties would lose if the exemption were to go into effect.
If a funding mechanism is not put into place by the state Legislature, or if the mechanism fails to adequately make up the shortfall, it will fall on the counties to make the hard decisions and replace lost funding, he said.
While municipalities have the Home Rule program to allow the implementation of mechanisms to help generate revenue, counties are more limited in their ability to raise funds, Piercy said.
Many counties are already at the maximum property tax rate allowed under state code.
“We need to look at the bigger picture and get out of the tunnel vision of party influence,” Bloom said. “We need members from both sides of the parties to get together and say, ‘Hey, we have a problem. What is the best way to fix it?’”