Debate over Charlottesville meals tax increase goes down to the wire

The Charlottesville City Council at a meeting held Monday, April 6, 2015. Photo: Rammelkamp Foto The Charlottesville City Council at a meeting held Monday, April 6, 2015. Photo: Rammelkamp Foto

Charlottesville’s proposed city budget is still leaning heavily on a hotly contested one-penny increase in the city’s meals tax, a hike that would generate $2.1 million. That’s money supporters—including an apparent majority of City Councilors—say is necessary to close a school funding gap and pay for additional police. But at a public hearing on the tax hike at Monday night’s City Council meeting, restaurateurs stood up one after another to decry the increase from 4 to 5 percent, repeating the arguments against it they’ve been bringing up at nearly every meeting since the first budget proposal came out in February.

Among their biggest beefs is the assertion by proponents on Council that the meals tax should be palatable because it’s a “luxury tax,” and because the burden of paying it will be shared with tourists. The city estimates 40 percent of revenues will come from visitors eating at Charlottesville restaurants.

The people who run those restaurants aren’t having it.

“As a point of fact, I know that my business relies on our regulars,” said Laura Galgano, who co-owns Blue Moon Diner on West Main Street and was one of several people to speak against the tax increase during the hearing. Asking those locals to pay 25 percent more on the tax portion of their bill when it’s already a competitive market for restaurants “really does put an unsustainable burden on our local businesses,” she said.

She and others slammed Council for not trying harder to fill budget gaps by other means, including raising the real estate tax—something Charlottesville hasn’t done in 20 years—or the lodging tax, which is levied on per-night stays in local hotels.

There was support for both those measures, two people on the dais reminded the crowd, but not enough.

Councilor Kristin Szakos proposed raising the real estate tax as well as the meals tax in early budget talks, only to watch the former plan fall flat.

“We had three councilors vote against it,” she said.

Councilor Kathy Galvin had been the swing vote on the meals tax increase, seeking some kind of compromise between proponents Szakos and Mayor Satyendra Huja on one side and the anti-tax Bob Fenwick and Dede Smith on the other. But she explained Monday that her efforts to spread out the burden of raising more revenue by upping the meals tax by half a penny instead of a full cent and increasing the lodging tax to make up the difference garnered no support from her fellow councilors at a meeting March 26.

“We’ve been talking about this since the first of February,” Galvin said. “This is not something that any of us have been taking lightly. We’ve had arguments and disputes, and now the time has come to make a decision. And we have to make a decision, or else this city will not run.”

One more budget work session is set for April 9, and Council will vote on the budget April 14. Before that happens, Galvin wants to add a measure that would knock the tax rate back down if revenues drop by 10 percent.

But Galgano said if revenues from meals dip by that much, it will be too late to save the restaurants serving those meals. At this point, she’s not hopeful that restaurants’ shouting will make much of a difference.

“They haven’t been willing to listen to us or be creative yet,” she said.