Parkersburg Finance Committee backs tax
Sales tax could raise $5 million a year for pension help
PARKERSBURG — Members of City Council’s Finance Committee Wednesday recommended enacting a dedicated 1 percent sales tax to address the city’s police and fire pension liability.
It was one of four options presented by Parkersburg Mayor Tom Joyce and Finance Director Eric Jiles to raise a minimum of $2.5 million a year to pay down the funds if and when the existing plans are closed to new members.
The committee also voted 3-0, with Councilwoman Sharon Kuhl and Councilman Mike Reynolds absent, to recommend closing the plan to new hires, which would allow the city to change the manner in which it pays for the pension obligations.
“The committee tonight forwarded the best option that we could provide them at this point,” Joyce said Wednesday. “The fact is that this is a problem that has been growing for 26 ¢ years.”
In 1991, the city opted into a pension program that required it to increase its annual payments by 7 percent each year. For the current fiscal year, the city owes $4.5 million combined for each plan, a number projected to rise to $7.9 million in a decade, according to figures presented in July by Jiles.
By the time the firefighters pension is estimated to be fully funded in 2034, the contribution for that plan alone would be more than $8 million. The police obligations wouldn’t be fully funded until 20 years after that, requiring a contribution in the final year of more than $14 million.
The rising rates would take up so much of the budget for personnel costs that the city “will become an organization that simply pays people,” Joyce said.
Closing the plan would not alter benefits for current police officers and firefighters or existing retirees and beneficiaries. New hires would join a statewide plan that Jiles said is based on sound actuarial practices.
While the benefits would be less than the current plan, the cost for employees would also be lower, he said.
The new payment method would require an initial jump in contributions to $7 million a year, but over time, that amount would be expected to decrease, Jiles said.
In the meantime, the city would need to find $2.5 million on top of the $4.5 million coming from the general fund.
The first option presented was raising police and fire fees, which have been unchanged since the 1980s, and increasing the user fee from $2.50 a week to $4. Police fees would double from $4 a month for residential and $8 a month for commercial properties. The fire fee rate of 4.5 cents per square foot plus $100 for the third floor and each additional floor would increase 17 percent.
The second is the dedicated sales tax, which is allowed under West Virginia state code, even though the city imposed a 1 percent sales tax under the state’s home rule program in 2016. A 0.5 percent tax is projected to generate approximately $2.5 million.
“It cannot, under any circumstances, be used for anything else,” Jiles said. “When the plans become fully funded, the tax would have to go away.”
The full 1 percent allowed would generate $5 million, which Jiles said would fund the plans more quickly.
“But at the 1 percent level, you would free up $2.5 million” in general fund money, Finance Committee Chairman John Reed said.
The third option was an excess property tax levy from the voters. Reed said he was wary of that approach because it would have to be renewed every two years and if it was voted down, the city would be in a difficult position with the original plan closed.
The fourth option would be to cut $2.5 million from city expenditures. Under the plan presented, nearly $1.5 million of that would come from reduced public works projects, including street paving and foregoing a plan to build new fire stations. The remainder would come from personnel cuts, including seven positions each from the Police and Fire Departments and 12 from public works.
“It is the administration’s position that expenditure reductions such as the ones that we just illustrated would severely impact the city’s ability to provide basic public works and public safety services to residents and taxpayers,” Jiles said.
Councilman Bob Mercer said the sales tax would spread the expense out among anyone who shops in Parkersburg not just residents and people who work in the city.
“I honestly believe that option No. 2, in the long run, will be the better bet to fund this,” he said.
Councilman Zach Stanley said he liked that the money could only be used for pension relief.
“It gets straight to the point,” he said.
Councilmen Eric Barber and Jeff Fox, who are not on the committee, agreed.
“That has more of a consistent impact across the economic spectrum,” Barber said.
“Option 2 gives people a choice on whether they want to pay it or not pay it,” Fox said.
The first readings of ordinances to close the current pension plans to new hires and enact the dedicated 1 percent sales tax will be on the agenda for council’s Sept. 26 meeting, City Clerk Connie Shaffer said.
The earliest the tax could go into effect, Jiles said, is July 1, 2018.