Heated Over Proposed Meal Tax Hike, Restaurateurs Form Lobbying Group

by | Jan 25, 2018 | EAT DRINK

Richmond restaurateurs are heated once again, as the city has served up a proposal for yet another hike to meal taxes. And this time, restaurant owners have united to form a lobbyist group to fight back.

In his State of the City speech this week, Mayor Levar Stoney proposed raising Richmond’s meal tax to 7.5 percent to help renovate and repair Richmond City Public Schools, which would produce approximately $9.1 million a year and allow the city to borrow $150 million in new capital funding over the next five years.

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Mayor Stoney with students at Chimborazo Elementary School

“I do not relish the idea of imposing a higher tax on any of our residents or even our visitors. And I respect the concerns of our restaurateurs who are responsible for so much of the positive trends we’ve seen in our city,” Stoney said in his address. “I promise to be a committed champion for their success, and pledge that we will work with you to make it easier for you to grow and expand.”

But that burn of a meals tax increase is an all too familiar feeling for local restaurant owners. In 2003, the city tacked on an extra 1 percent, raising the meals tax from 5 to 6 percent to help pay for the construction of Centerstage. Once the performing arts center was built, the tax was supposed to be tossed, but it remained on after a 2006 City Council vote to be poured into Richmond’s general fund for “operational costs”.

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Now, the new proposed 1.5 percent increase may not seem like much, but combined with the 5.3 percent state tax, the total tax would increase to 12.8 percent. To compare, Henrico collects a 4 percent tax, but surrounding counties, like Chesterfield, and Hanover, do not have a meals tax.

Restaurant owners, fed up with forking over hefty payments and shifting the costs to customers and in turn, hearing complaints, losing money, and some even losing business to the surrounding counties, are fighting back with a newly formed group, the Richmond Restaurant Alliance.

Jake Crocker, owner of F.W. Sullivan’s, Lady N’awlins, and Uptown Market & Deli rallied more than 30 people in the restaurant community this week to form the organization and talk about next steps to take on the proposed heighten tax.

“Every few years they target one specific industry, our politicians make promises to reduce the tax, and now they’ve reversed it,” Crocker said. “The current mayor has publicly and privately made those promises to a number of the restaurant owners, so we’re very disappointed that this was the ultimate solution.”

Owners from Richmond Restaurant Group, to Rueger Restaurant Group to Johnny Giavos, were in attendance, with the group representing over 100 restaurants in the area combined according to Crocker. Since the meeting, the newly-formed RRA organization has partnered with the Virginia Restaurant, Travel and Lodging Association (VRTLA), who will help push efforts forward.

“They’re committed, and they have fought this successfully in other localities including Fairfax County, so they’re going to be working with us,” he said. “They have expertise in the area from other initiatives in other parts of the states so we’re excited.”

Matt Simmons, owner of Capital Ae House and secretary of VRTLA, said his restaurant has been a member of the association for years and like most in the community, wants the schools to be improved, but doesn’t agree with the way the city is suggesting to get the money for the much-needed repairs.

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“No one is arguing that our schools need to be fixed, but it’s absurd to target one industry to solve this or any issue,” he said. “Richmond has a vibrant restaurant scene and this would throw cold water on the good things that are now happening. We are meeting to discuss this issue and get the word out to city council members that taking the easy way out could hurt an industry that helps Richmond shine.”

The VRTLA, a political action committee for the aforementioned industries, organized a grassroots campaign in 2016 with the National Restaurant Association to help successfully defeat a proposed 4 percent meals tax increase in Fairfax County.

Crocker, who threw his political hat in the ring this year as a Libertarian candidate for the 69th District, headed up a “Repeal the Meal Tax” campaign back in 2011 to urge the city to get rid of the Centerstage tax hike that was intended to be temporary.

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And up until a few days ago, he, like many restaurant owners, was under the impression there was going to be a reduction in the taxes.

“The fact that all the restaurants are mobilizing to prevent an increase is unfathomable,” he said. “No one even had a taste of this. A few of the restaurant owners did meet with the mayor and expressed their concerns, and he still went ahead with it anyway. It’s frustrating because I’m a supporter…but a lot of the restaurant folks who rallied behind him are feeling hurt…it’s our livelihoods.”

Patrons are the ones that bear the brunt of the taxes getting collected, which Crocker said is an issue that regularly comes up at his Fan restaurants.

“Everyday you have a customer who points at that tax and confronts the server about it and demands to see a server or manager,” he said. “They think we’re gouging them and I’m like, ‘look I’m on your side, I don’t want to charge this tax.’ Especially at Lady N’awlins, I get a lot of people from around the region and the counties and they’re like, ‘what is this?’”

Often the customers that complain, then, in turn, take their frustration with the taxes out on the restaurants, which was one of the many common themes brought up at the RRA meeting according to Crocker.

“Many times, they will tip extremely low, or, this is the fun one, they’ll write ‘taxes’ on the tip line so they stiff the server,” he said. “Everybody (restaurant owners) had the same story.”

Simmons has Capital Ale House locations both inside the city, as well as Midlothian and Innsbrook, and he said customers from the counties are also steamed when they see those added taxes to their bill.

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“Right now my customers pay 6 percent more for everything in Richmond than they do at our Midlothian location,” Simmons said. “When quoting prices for banquets and other events, people are shocked to find out taxes are 11.3 percent currently and will be even more shocked if that increases to 12.8 percent.”

Jimi Foster, Manager of The Daily Kitchen & Bar, part of the Richmond Restaurant Group which own several spots in town, said he’s constantly explaining the extra costs to out-of-towners and is not happy about the proposed tax hike.

“During the busy season, I have to explain the taxes to tourists multiple times a week. Think about that, I’m running a restaurant and hours of my life are spent explaining tax code to people from New York, that’s insane,” Foster said. “People that travel into the city from any other state are appalled at the tax rate. Last year, our restaurant alone paid well over a million in taxes, in addition to supporting local causes like the Feedmore food bank and Real Local RVA. What do we get in return? Bike races that hurt our business’ by almost 50 percent and a training camp filled with national restaurant chains. Now the city that has spent years mismanaging funds is asking restaurants and working-class Americans to pay 12 cents out of every dollar claiming that it’s for schools.”

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The Daily Kitchen & Bar

But, despite customers protesting the taxes, Crocker did address the heightened taxes on a meal will be a huge burden on low-income families and single parents working multiple jobs that need to eat out while they’re on the go with their children.

“There are families I heard from in the previous campaign, both working two jobs, single mom or dad, they’re shuffling between different shifts and they’ve got kids,” he said. “These lower-income families don’t have a stay at home member of the family and the kids have to eat and they’re often grabbing food on the fly, some are mom and pop owners themselves. Eating out is a necessity when you’re working two jobs and raising kids so it affects them.”

Foster chimed in on this as well, agreeing that it’s going to hurt the mom and pop restaurants and working-class residents of Richmond.

“The mayor is claiming that it’s ‘just a couple pennies’, but my two cents is that this will hurt him in the next election. The margin he won by is less than the profit margin of most restaurants,” he said. “I’m also almost always in support of taxing the wealthy to support our society, but this is a tax this will hit the working class consumer the hardest and restaurateurs that struggle with 15 percent profit margins so they can keep the doors open to employee thousands of people second.”

But it’s not just restaurant patrons that are left with a stomach ache when the bill arrives, Richmond restaurant owners are having to pay extra fees, and some have to hire employees to keep track of the taxes collected.

Crocker sends between $10,000 to $15,000 a month to the city for the meals tax, and beyond that, Richmond restaurants combined are paying about $25 million a year to the city for the meals tax alone.

“Everybody says it’s just a pass through, but you find me a restaurant that’s not struggling to keep up with it, and you’d be hard-pressed to find one that isn’t.”

Carter Snipes, who runs The Hofheimer Building and The HofGarden, is fairly new to the issue, but that’s been his biggest gripe.

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“We’ve got to have separate bank accounts, we get charged fees on all those dollars coming in, we’re paying $1,000 a month to collect the city’s taxes, and we have to hire a bookkeeper and not only does it cost us money from the credit card processing to collect the money for the city, we also have to then, pay someone from our company to administer that whole process, and a lot of these restaurant owners are small business owners, they don’t have a bookkeeper. And that’s a huge deal, that’s a huge burden on these operators.”

And Foster said between all the Richmond Restaurant Group’s restaurants combined, the group is paying hundreds of thousands each month to the city for meals taxes, which has forced the group to make sacrifices at their establishments.

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Pearl Raw Bar, part of Richmond Restaurant Group

“In order to deal with the increase in taxes, restaurants have to either raise prices or cut labor. So for a lot of places, in order to keep the lights on and still be competitive in the market you have to cut peoples hours back,” he said. “That means that people then have less disposable income to put back into the local economy, so less people go out to restaurants, so you cut back on labor even more, then quality goes down and business’ close. I’m just not sure what this city and state seem to have against local business’ and why they always seem to push and promote outside business over the welfare of its residents and voters.”

Snipes brought up the referendum on the ballot this past November, which stated that the mayor had to come up with a plan within six months of the election to repair and fund the schools without tax increases, and 85 percent of voters approved it.

“In my opinion, they haven’t done the first step, which is to offer the plan or say it can’t be done, and they came out with this tax increase,” Snipes said. “But the referendum specifically said a plan without tax increases.”

A recent Richmond Times-Dispatch article broke down some of the city’s spending courtesy of reports from Virginia’s Auditor of Public Accounts. According to those reports, Richmond is spending more per capita on administrative costs ($381.80), public safety ($822) and health ($823) than the state averages for each. However, when it came to education, the city spends $1,511 per capita, which is less than the state average.

But Snipes, who has two children in grade school, along with Crocker, and the majority of the restaurant community stressed that they are in favor of supporting and rehabilitating the schools, but that the city needs to come up with a better way to reduce expenses and overhead.

“I’m fully 100 percent in support of the schools, but I think this particular proposal is not the best or most efficient proposal to solve the problem,” Snipes said. “I think most people would be fine with tax increases if the city showed some goodwill and find some savings in the budget.”

He suggested breaking up taxes to a few industries equally across the board.

“There a should be a quarter percent tax on real estate, a quarter percent tax on meals, a quarter percent tax on hotels, and everyone shares that burden because it’s something we need to do for the community at large. It’s totally unfair to single out this one industry that has nothing to do with schools.”

Crocker had a similar suggestion for the city to implement retail taxes to help spread out some of the burdens.

“You put a 1 percent tax across the city on retail, grocery stores, bookstores, shoe stores, and restaurants, you’re going to get a hell of a lot more money than just restaurants,” he said.

The money that was given to Stone Brewing ($31 million) and the construction of the Redskins Training Center ($10 million) were also factors that Crocker pointed to as money that could have been diverted to the schools.

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Simmons, on the other hand, said taxing an untapped resource like local vacation and apartment rentals would be a good source to generate revenue.

“The city is not taking advantage of new legislation that allows them to collect taxes on the many Airbnb properties in the city,” he said. “That’s a start that would bring in funds and level the playing field with the area hotels who do collect and pay taxes. An across the board sales tax increase on every purchase in the city would be much fairer than targeting restaurants.”

Richmond Restaurant Alliance will hold their next meeting on Tuesday, and no matter where you land on the issue, Crocker said the restaurant owners are going to take action very soon.

“We’ve got some initiatives in the works, we’re going to be heard and it’s not just going to be Jake Crocker speaking up, its everybody,” he said. “We will not be cannon fodder for the ambitions of politicians, we’re not going to be put on the frontlines, so they can achieve their goal.”

Amy David

Amy David

Amy David was the Web Editor for RVAMag.com from May 2015 until September 2018. She covered craft beer, food, music, art and more. She's been a journalist since 2010 and attended Radford University. She enjoys dogs, beer, tacos, and Bob's Burgers references.

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