A report that compares municipal financing in West Virginia to other Appalachian states shows that the state has the highest share of charges, licenses and fees in total revenue and that municipalities have the lowest share of revenue from state government.

The study, funded by the Appalachian Regional Commission in cooperation with the West Virginia Municipal League, also found that 34 percent of total taxable valuations are within municipalities, but they capture only 7.8 percent of the total property tax levies.

It has often been argued that West Virginias municipalities are under financial restraint due to many factors such as demographic pressures, recent fiscal woes facing the state, and the structural problems in municipal financing,said Dr. Mehmet S. Tosun, director of the West Virginia Public Finance Program of the Bureau of Business and Economic Research.We hope that this study will provide insights and facts useful for policy makers.

Issued by the West Virginia University College of Business and Economics, the study provides an analysis of the West Virginia municipal general revenue sources and shows that the business and occupation taxthe largest single revenue source for municipalitiesperforms poorly in terms of both neutrality and equity criteria.

Neutralityrefers to economic efficiency, andequityis about who ultimately pays for the municipal services.

The report points to low population density and population loss as serious impediments to revenue generation in West Virginia municipalities. It shows that 75 percent of all West Virginia municipalities experienced population losses between 1990 and 2000, with largest losses in municipalities with populations greater than 10,000.

West Virginia municipalities, as a whole, have lower revenue per capita than both the average of all municipalities in Appalachian states and the average of all municipalities in the United States. West Virginia municipalities with larger populations seem to have a greater revenue-generating capability compared to municipalities with smaller population sizes.

Finally, the report lists alternative revenue sources and policy options that can be considered as measures to enhance revenue generation in West Virginia municipalities. These are:

  • p. Local income taxes

  • p. Local sales and use taxes

  • p. Local alcohol taxes

  • p. Local cigarette and tobacco taxes

  • p. Local gasoline tax

  • p. Tax increment financing

  • p. Lottery funds

  • p. Replace the business and occupation tax

  • p. Statewide education levy

For a copy of the report visithttp://www.bber.wvu.edu/.