Press "Enter" to skip to content

Albemarle to hold public hearings on proposed hike in meals, hotel taxes

Some Albemarle County restaurant owners and hoteliers worry that an increase in taxes imposed on their patrons will hurt their businesses as they try to climb out of the COVID-19 hole amid increasing operational costs.

On Wednesday evening, the Albemarle County Board of Supervisors is scheduled to hold two public hearings on whether to increase the transient occupancy tax charged to hotel guests by 60% and whether to increase the food and beverage tax, also known as the meals tax, by 50%.

The proposal to increase the hotel tax rate from 5% to 8% and meals tax rate from 4% to 6% is part of the county’s fiscal year 2023 budget process.

Business owners say the tax hikes will burden their customers and could hurt their businesses.

“Something like an increase in the meals tax — although it seems okay because the government’s position is that it’s paid for by the customer — it’s just piling on everything else that we’ve had to deal with, whether it’s increasing labor cost, increase in supply of costs, all of those things,” said PK Kamath, co-owner of Ivy Provisions and The Piedmont.

The board is scheduled to vote on the proposed increases May 4. If approved, the new tax rates would go into effect on July 1.

The county has said the proposed increases are part of an effort to reduce the county’s reliance on real estate property taxes.

“An increase in taxes in those two areas means that we can make some incremental progress to begin to shift revenues from people who live here and spread it out more broadly to those who are also visiting our community,” Andy Bowman, chief of the county’s budget division, said at a budget work session on revenue.

Board members have appeared supportive or expressed support of the higher taxes during work sessions and meetings since the budget was proposed in February.

According to county staff, increasing the meals tax rate would increase revenues next year by approximately $5.1 million, while increasing the hotel tax rate would generate approximately $1.7 million in additional money.

The overall budget projects $565.1 million in revenue and expenditures for capital and operational costs.

Although the real estate tax rate is not proposed to increase, average growth in property values of 8.4% means that some homeowners will see higher tax bills in 2022.

The proposed budget also includes an 86-cent decrease to the personal property tax rate, which covers vehicles as well as business personal property, machinery and tools. The new rate would be $3.42 for each $100 of assessed value.

Even with no increase on the real estate tax rate and a decrease on the personal property tax rate, the county is expecting to see a 14.2% increase in general property tax revenue compared with the current year’s adopted budget, or a $30.3 million increase.

‘Struggling to survive’

Restaurant owners have reason to be concerned. Restaurants across the country are increasing prices to keep up with rising costs, and consumers are seeing that increase hit their wallets.

Consumer Price Index data, a measure of inflation, released last week by the U.S. Bureau of Labor Statistics showed that the index for food away from home rose 6.9% over the last year, the largest 12-month increase since December 1981.

The index for full service meals rose 8% over the last 12 months, and the index for limited service meals rose 7.2%.

Richard Auxier, a senior policy associate in the Tax Policy Center, a joint venture of the Urban Institute and Brookings Institution, said that because the meals tax is a flat tax across the board, it can hit lower-income households harder than higher-income households and can be seen as regressive.

“Especially at a local level, there are not many good options for a policymaker to use that don’t have some sort of regressivity, and the key is trying to find some balance in how you’re [taxing people] and mixing it around,” Auxier said.

In terms of meals taxes and hotel taxes, he said policymakers should consider how high the rates are compared to neighboring jurisdictions and if behavior is likely to change based on the tax rate.

“The people who run the restaurants and run the hotels will tell you that it is death. The people who want to raise the money will say that it’s nothing. I hate this answer, but it really is probably somewhere in between there,” Auxier said.

On Monday night, Charlottesville City Council voted to increase the city’s meals tax rate from 6% to 6.5%. Under state law, counties are capped at a 6% meals tax rate.

Charlottesville’s hotel tax rate is currently at 8%. Nelson County has proposed to increase its hotel tax rate from 5% to 10%.

Earlier this year, Albemarle County Economic Development sought feedback from the hospitality industry on increasing the tax rates. They used focus group discussions, individual interviews and an online survey, according to a report obtained by The Daily Progress through a Freedom of Information Act request.

According to the report, the consensus from lodging stakeholders was that if the hotel tax is to increase, a percentage of the revenue should be utilized to generate additional overnight stays.

“To support these businesses, this would be an intentional long-term strategy to increase visitation and spur greater revenue for both business and local government,” the report said.

“I can say from experience that guests of my bed & breakfast consider the total cost of a stay as well as the total cost of dining or attending an event in the area,” one anonymous respondent said. “If [the] tax goes up on top of the general price increase due to inflation, I can say with certainty that I will [lose] guests as they won’t be able to afford coming for a weekend getaway anymore.”

When asked about increasing the meals tax, the “restaurant industry, as well as the public, had an obvious and more emotional reaction,” the report said.

“We’re still struggling to survive, our sales are HALF of what they were pre-pandemic yet our costs have doubled due to food inflation and higher wages demanded just to get mediocre employees,” another anonymous respondent said.

“We’ve always paid above minimum wage, but now that is not good enough to get quality workers,” the respondent said. “I don’t know how any family owned restaurant is supposed to stay in business.”

Kamath, the co-owner of two county food establishments, said in an interview that federal, state and local grant money received over the last two years allowed his business to “come up for air from time to time.”

“It certainly didn’t guarantee our long-term viability by any stretch,” he said.

In a letter from the Virginia Restaurant, Lodging & Travel Association and its Charlottesville area chapter, sent late last year, the organization questioned the “need and reliability of imposing taxes on a struggling industry” when the county has been granted $21.1 million in American Rescue Plan Act money.

“To ensure hospitality businesses in Albemarle County don’t face additional economic challenges as they attempt to claw their way back to normal operations, and in light of the robust ARPA funds the county has received, we strongly urge you to oppose both efforts to increase the meals and transient occupancy taxes,” it said in the letter.

Albemarle’s proposed budget includes giving $750,000 in APRA money to the Charlottesville Albemarle Convention and Visitors Bureau for marketing.

Wednesday’s public hearings are scheduled to start after 6 p.m. and those who wish to speak can do so in person at the McIntire Road County Office Building or online via Zoom.

Source: www.dailyprogress.com

Be First to Comment

    Leave a Reply

    Your email address will not be published.

    %d bloggers like this: