Meals and lodging tax rates could increase in Albemarle County.
During a work session on Wednesday, the county Board of Supervisors supported increasing the county’s meals tax rate and transient occupancy, or lodging, tax rate in the upcoming Fiscal Year 2023 budget. The authority for counties to increase both tax rates was approved by the General Assembly in 2020.
Albemarle County CFO Nelsie Birch said she was concerned that property taxes made up 68% of total revenues for the county in the last fiscal year that ended in June.
“We’re getting more and more reliant on real estate and personal property taxes than maybe we should be,” she said. “This is a unique opportunity that we have, where our real estate assessment has grown higher than we anticipated. Do we have a moment where we can look at doing a little bit of rebalancing with our taxes to push it away from real estate and on to sales and meals taxes?”
Birch said the work session would be used for policy direction from the board to help county staff “frame and shape” the Fiscal Year 2023 budget. The county executive’s recommended budget will be presented to the board in February.
Albemarle’s current meals tax rate is 4% and the transiency occupancy tax, or TOT, rate is 5%. The meals tax rate can be increased up to 6%. Legislators removed the cap on the lodging tax rate for counties, but a portion is still required to be dedicated to tourism marketing.
Charlottesville’s meals tax rate is 6%, while its TOT rate is 8%.
“I think anything that we do to match Charlottesville is appropriate,” Supervisor Diantha McKeel said. “If the sales tax in Charlottesville is something, then it should be the same in Albemarle. And I’ll be honest with you, I don’t think anyone looks at or checks out what the TOT is or the sales tax or anything before they decide where they’re going to go and where they’re going to spend their tourism money.”
Jacob Sumner, the county’s assistant CFO for policy and partnership, said that the county currently estimates that each additional 1% on the TOT could generate about a half million dollars in revenue, while each additional 1% on the meals tax could generate about $2.25 million.
There is the additional local sales tax option for localities to add 1% on the sales tax that is designated for school construction, and Sumner said the board may want to include this as future legislative priority. Currently, the general assembly would have to grant the county the authority to levy the additional tax rate, which would then be subject to a voter referendum.
Depending on what happens in the upcoming General Assembly session, Albemarle and other localities could receive the authority. Securing the ability to increase the sales tax is the top priority for the Charlottesville School Board, and lawmakers expect to see a push to give all localities the authority.
Supervisors also expressed concerns that the Legislature would change state laws and restrict how localities could increase revenues.
“I would anticipate under the new administration, we will see more than just the grocery sales tax eliminated, and that’s probably going to impact the other revenues,” Supervisor Donna Price.
Earlier this year, the county adopted a local cigarette tax and supported considering a tax on disposable plastic bags in the Fiscal Year 2023 budget.
Money generated from the plastic bag tax must go to “support environmental cleanup, litter and pollution mitigation, or environmental education efforts or to provide reusable bags to recipients of Supplemental Nutrition Assistance Program or Women, Infants, and Children Program benefits,” according to the state.
The board also heard county staff’s recommendations for spending the county’s $13.2 million surplus from Fiscal Year 2021.
“Staff has prepared an initial proposal to allocate this $13.2 million and that is intended to be a starting point for the board this evening,” said Andy Bowman, the county’s chief of the budget division. “The board will have opportunities again and again to continue to provide feedback on this plan and modify it all the way through the adoption of the Fiscal Year 2023 budget in May.”
Currently, staff are recommending that $4.1 million be spent on capital projects, $5 million into the county’s economic development fund, $3.1 million into the county’s housing fund and $1 million toward workforce stabilization.
Supervisors were generally supportive of the recommendations but wanted more specifics.