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Tax increment financing, levies

February 25, 2011
Delegate John Doyle

Two ideas that will increase the ability of local governments to deal with their problems have shown some movement in the House of Delegates in the last couple of weeks.

Tax Increment Financing is a concept fairly new to West Virginia, but it has been in use for quite some time in most other states. The idea is to use the additional revenue resulting from development of property (and the resulting increase in value) as debt service for bonds that enable the development to occur in the first place. You don't touch any of the revenue already coming in from the property in its undeveloped state, so no revenue is lost. TIF should only be allowed when a proposed development would not be done without it.

A few years ago West Virginia allowed counties and larger cities (Classes I and II) to do TIF. The House of Delegates Political Subdivisions Committee (upon which I sit) recently approved a bill that would expand that permission to smaller cities and towns (Classes III and IV). That bill has been given a second reference to the Finance Committee (upon which I also sit). I strongly support this bill.

Since its emergence from "Political Subs" the bill has encountered the strong opposition of the West Virginia County Commissioners' Association. I find this opposition curious in more ways than one.

Why would the County Commissioners' Association, which represents all 169 county commissioners and county council people (Berkeley County's governing authority is called a "county council"), oppose allowing small cities a tool that they themselves and the larger cities enjoy? Several commissioners have told me that we shouldn't allow the smaller cities this tool because it could "hurt county revenue." If that were the case why would counties have wanted this tool and why would the Legislature have allowed them to have it?

I concede that in some other states local governments have been a bit careless with TIF and some projects were no doubt approved for TIF that would have happened anyway. In those cases tax revenue was indeed lost.

That's why West Virginia's rules about the use of TIF are quite strict, and the West Virginia Development Office must approve any use of TIF. We don't want to give away a penny that would have been collected anyway. I don't think we have yet and I don't think we will if we expand the permission to use TIF to all cities.

Another curiosity is why the County Commissioners' Association waited until after the bill had been approved by "Political Subs" to oppose the bill. The association knew full well that the bill was going to be on the committee's agenda. Not a peep was heard from that group until after the committee acted.

Meanwhile the Constitutional Revision Committee (I sit on this committee too) has approved a proposed constitutional amendment that would lower the portion of the vote needed to pass a bond or an excess levy from 60 percent to a simple majority. I also strongly support this proposal.

An "excess" levy is a tax increase that "exceeds" the limit on property taxes imposed by the West Virginia Constitution. The voters must approve any such increase at a referendum.

The term "landslide" in politics means an overwhelming election victory.

Political scientists and practicing politicians generally agree in defining a "landslide" as a victory by a margin of greater than 10 percent. If my opponent defeats me by a margin of 55 to 44 percent, I have lost in a "landslide." Such a margin is difficult to achieve.

Requiring an even greater (20 percent) margin for a vote of the people to raise property taxes to fund parks, police, libraries or some other public endeavor seems therefore wildly unreasonable to me. If the increase in taxes being proposed in a given situation is not worth the benefit gained from the expenditure of the funds I think a majority of the voters will recognize it.

This logic led West Virginia to make this very change 30 years ago to referenda on excess levies and bonds for schools. Since then the success rate of school bond and excess levy referenda has increased significantly.

Meanwhile many proposed levies for public services have lost despite getting a majority of the votes in the referendum. I think city and county governments should be permitted to play by the same rules that govern local school boards.

One of my fellow Eastern Panhandle delegates proposed earlier in the current legislative session that Jefferson, Berkeley and Morgan counties be allowed to leave West Virginia and join Virginia.

That idea is nonsensical in part because it is impossible to achieve. We would need the permission of a majority of West Virginia to leave and we aren't going to get it.

However I think we can achieve greater autonomy for the Eastern Panhandle.

The only way to get that is by allowing greater authority for local governments. The two proposals discussed above are both important steps in that direction.



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