SH considering cigarette tax, rate increase

The town of South Hill funds multiple improvement projects in its preliminary draft budget for the coming fiscal year and is considering implementing a cigarette tax and a water and sewer rate increase to cover the increased expenses.
Town Manager Kim Callis presented the preliminary draft budget at Monday’s town council meeting, noting general fund expenditures increase from $11.9 million to $14.2 million to cover increases for a new law enforcement officer retirement benefit as well as a new ladder truck for the fire department ($1.3 million), the Highway 1/138 intersection improvement project ($2.4 million) and the construction of a new public works building at the site of the former Exchange Warehouse ($1.6 million).
Callis said staff recommends the cigarette tax to help cover the cost of implementing enhanced LEO Benefits (Law Enforcement Officer Benefits). He said the town needs to offer these benefits in order to compete with other localities for recruiting and retaining police officers. The proposed police department budget increases from $1.9 million to $$2.5 million in the coming fiscal year.
“It is very important to recruiting and retaining police officers,” Callis said of the benefit. “Several surrounding law enforcement agencies already provide LEO Benefits, and we have lost some officers to our neighbors.”
The proposed cigarette tax would be levied at $30 cents per pack or $1.5 cents per cigarette and includes cigars and individually wrapped snuff and chew but not loose tobacco or e-cigarettes.
Finance Director Katherine Ward said there are 25 retailers in town who sell cigarettes, and they would be responsible for buying stamps from the town and applying them or having their distributors apply them.
Callis said the town would have the stamps produced and printed and proposed the town incur the cost of giving retailers a one-time supply of stamps at the beginning.
“So that people will not be out of any out-of-pocket money up front, we are proposing to give them a supply of stamps at no cost to them, which we will incur that cost, so they can apply them to the cigarettes or cigars or whatever it may be, and when they begin selling them and collecting the tax they will then have money in hand to come in and purchase additional stamps,” he said.
South Hill Police Department would be responsible for enforcing the cigarette tax, which Callis said is already being levied by 91 jurisdictions throughout Virginia.
Under questioning from council members, Callis said if the town does not implement the cigarette taxes it will have to raises revenues from elsewhere.
“If we didn’t get it from here, we’d have to look at some other taxes, and we really don’t want to touch that,” he said.
In the proposed budget, the real estate tax remains $0.34 per $100 property valuation, and the personal property tax remains $1.05 per $100 valuation. The machinery and tools tax is listed as $0.38 per $100 valuation (nominal) and $0.30 per $100 valuation (effective).
Meanwhile, the Water and Sewer Fund budget increases from $6.3 million to $9.3 million to cover sewer infrastructure upgrades as well as water on the north side of town.
The minimum bill for residential water and sewer is proposed to increase from $5.25 to $5.50, and the minimum bill for commercial water and sewer is proposed to increase from $40.22 to $42.75. Cemetery plots are proposed to increase from $350 to $800.
In-town water rates are proposed to increase by $45 cents per 1,000 gallons of consumption.
“That will help cover the cost of major infrastructure additions and improvements that we have to do to meet regulatory requirements and greater demands for service,” Callis said.
Callis said the town is waiting on final health insurance information and expects an increase which could cause adjustments to the proposed budget.
The council scheduled a pair of public hearings at the May 8 town council meeting to hear from the public on the proposed budget and proposed cigarette tax.