Home Rule for 16 W.Va. Cities Positive: Moody's

BRADENTON, Fla. - A West Virginia pilot program expanding the number of municipalities receiving home rule powers is credit positive for those participants, Moody's Investors Service said Oct. 16.

An additional 16 cities joined four original participants in the pilot program earlier this month. They were chosen by the West Virginia Municipal Home Rule Board.

"Through expanded local powers, participating municipalities will have greater operating latitude to set new rules and regulations, and to impose new fees and fines, said Moody's analyst David Strungis.

Cities with home rule power can levy a 1% sales tax, which affords them greater financial flexibility and diversification of revenues, Strungis said. They can also adopt ordinances and other regulations without the state's permission.

The new revenue allows municipalities to rely less on a business and occupation tax, which is currently a primary revenue source for West Virginia municipalities.

Without home rule, the operating flexibility of municipalities is constrained because they do not have the power to enact new laws or ordinances, unless explicitly prescribed by state law.

The 16 cities entering the pilot program expect to experience net revenue gains for fiscal 2015 as a result of obtaining home rule status, Moody's said.

"Several municipalities plan to use sales tax revenues to help pay down unfunded pension liabilities, improve infrastructure, and engage in economic development projects," said Strungis.

In applications to join the pilot program, Moody's said many municipalities requested additional freedoms such as the ability to dispose of city property without a public auction, enforce and collect property and other tax liens, and reduce speed limits.

"Continued satisfaction with the pilot program may open the door to statewide home rule," according to Moody's.

The first phase of the program began in 2007, and granted self-governing powers to Charleston, Bridgeport, Huntington, and Wheeling for five years.

Some proposals enacted by the program's first participants became state law, including measures allowing municipalities across the state to file liens for delinquent fire protection and garbage fees, Moody's said.

The Municipal Home Rule Board announced earlier this month that the cities of Bluefield, Buckhannon, Charles Town, Clarksburg, Dunbar, Fairmont, Martinsburg, Milton, Morgantown, Nitro, Parkersburg, Ranson, Shinnston, South Charleston, Vienna, and Weirton had been chosen for the expanded program.

According to the board's website, the Legislature expanded the program after finding that it allowed original participants to benefit from innovative rules and novel ideas that also provided them "greater flexibility to operate in a more cost-effective, efficient and timely manner."

Some states still do not allow local governments to operate in a self-governing manner. In Alabama, as an example, cities have most home rule powers, but counties have none.

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