Hope you had a great holiday and the New Year is off to a great start! This week’s news has been dominated by one major topic and it’s so important we are breaking it down in a free-to-all-readers, five-part story sadly worthy of a tragic opera.
More from Jon Baliles and his 5×5 Substack HERE
STORY #1 — Act I: Prologue
Starting about 25 years ago, Richmond’s restaurant scene began its ascent into the local consciousness as our region’s favorite (and only) professional sport. Offerings expanded and ventured into new directions and opened peoples eyes and expanded our tastes; it drove creative chefs to new heights, and we appeared in list after list of publications that officially put Richmond on the foodie map.
It was also, ironically, not long after that when restaurants became the “Sherpa” of sorts to help fill the city coffers. In 2003, City Council approved a one cent meals tax increase from five cents to six cents to help fund the renovation of Centerstage downtown. Many restauranteurs opposed the funding of an arts center on the backs of their customers by raising the pass through tax to fund one specific project. That deal later was overhauled and refinanced in 2006, but the one cent increase was not repealed as had been promised and it remained on the books as a permanent source of revenue to fund other city needs.
Then fast forward to early 2018 when Mayor Stoney pushed for a 25% increase in the city’s meals tax from six cents to 7.5 cents. It was a highly contentious debate that rightly riled up many restauranteurs who once again saw it as an unfair burden on their businesses alone that made their patrons’ bills higher with each bite and drink. They argued for another funding solution that was fair and spread across the city and not just on their industry.
The increase made it the second highest meals tax in the state but the increase would be specifically directed to new school construction. On that point, the Mayor has kept his promise and three new schools were built (vastly over budget, but that’s another story) and more schools are in the pipeline because of the funding.
But it should be remembered the mayor made some claims back in 2018 that if the tax was increased, he would help the industry. Those claims seem long forgotten now that the tax is in place and the money is flowing. If he was asked about them now, it is doubtful that he would recollect ever saying them. Thankfully, there is the internet.
Stoney told City Council before the vote that was approved 7-2, Stoney said, “To the restauranteurs who supported this proposal and those who had reservations about it, you are part of what makes Richmond a great place to live, work and play. I will continue to be a champion for you, and I look forward to finding ways that we can make it easier for you to do business and continue to thrive.”
At his state of the city speech in early 2018, Stoney bragged, “After years of unmet expectations, neglect and breakdowns in the basics, we restored faith and confidence in city government by improving its efficiency and concentrating our focus on delivering the service our residents deserve. We did the little things that can make a difference in the everyday lives of our residents.”
When an ally of Stoney’s advocated for a boycott of restaurants that didn’t support the 2018 tax hike, he disavowed that idea and said, “As this debate moves forward, I plan to visit restaurants on all sides of this issue, to thank them for what they do for our city, and to learn how, I, as Mayor, can do more to help them grow and thrive in Richmond.
And in a meeting with some restaurant owners in January 2018, Stoney “told the group there would be some concessions to make operating restaurants in the city more appealing.”
So it was considered more or less across the board that money for building schools was a good thing, but it was unfair to target one industry and their customers to fund it. The Mayor and his allies even started a RVA Kids Can’t Wait group to guilt/shame people into supporting the increase (kind of like the Casino for Child Care scam the mayor ran last fall before the casino referendum – “Vote for slots, Help the tots!”). And even advocates of the mayor’s 2018 plan pledged and promised to push the Mayor for accountability and transparency and things would improve for restaurants.
Except, they haven’t. And those concessions from the Mayor to help restaurants? Not so much.
In fact things for restaurant owners have gotten much worse, and that was never more evident than the flood of stories that came rolling forward this week about the city levying massive fines and late fees on restaurants that pole vault into the realm of absurdity. What’s worse is that after all those promises in 2018, no one at the top seems to have done anything about it or want to fix the problem even six years later.
STORY #2 — Act II: Dysfunctional Dysfunction
In case you missed the news this week, this summary of the problems that restaurants that have faced with the Finance Department is a downright, paper bag over the head embarrassing.
Kevin Grubbs owns Latitude Seafood Company in Stony Point Fashion Park and was hit with a bill last month for $68,000 because of one missed bill in March 2020 (i.e., when the pandemic shut down his restaurant and the country). But according to Dave Cantor at VPM, Grubbs said the city never notified him that his account was in a deficit while interest and penalties kept building and compounding each month. He received a letter in October 2022 that revealed his $800 late fee had grown to $41,000. Grubbs immediately appealed to Finance Director Sheila White.
Grubbs told CBS6, “If we had known, then we would have just settled the $800 right then. We’re not going to let this get out of hand.”
But he didn’t know. So, Grubbs said he sent his meals tax payments as usual, not knowing that the city was tacking on a 10% penalty every single month for the March 2020 payment.
White rejected the appeal more than a year later in December 2023 while acknowledging that the bill sent in October 2022 was incorrect — and yet the city kept compounding fees and interest while under review and the bill rose by more than $20,000.
The Finance Director also cited that Latitude was told there was a balance on their meals tax in September 2020 when the business license renewal was due, but also admitted the balance was incorrect and much lower than the actual owed amount.
VPM reports that: In the decision, White wrote that Grubbs was notified in September 2020 of the penalty. But the department head said that the initial bill was inaccurate.
In the denial of appeal, she wrote that the incorrect “amount on the statement to the Taxpayer would have directly contributed to the taxpayer not understanding the amount of interest due since less interest would have accrued on a lower balance amount. While this does not excuse the Taxpayer’s failure to pay the delinquent tax amounts, the City’s failure to provide an accurate balance may have caused the Taxpayer to not understand how much interest was due.
So the city’s “failure to provide an accurate balance” clearly caused confusion, but they wouldn’t budge on helping or adjusting the restaurant’s balance. Grubbs owns several other locations in the region and has said when his lease is up, he is moving the city location elsewhere.
“I’ll move two minutes up the street, and I will retain all of my people,” said Grubbs, who added that his Stony Point Fashion Park location pays about $22,000 each month to the city for the meals tax. “So, you’re not going to get anything, and I will lose nothing.”
Meanwhile over in Manchester, the owner of Philly Vegan take out shop Samuel Veney was sent a bill for almost $40,000 for back taxes even though he was told he was exempt because his shop was take-out only. The city even admitted to the mistake, according to documents obtained by WRIC (see picture below).
“She said, ‘Stop collecting meals tax. Do not collect this, because you’re take-out only,’ and she filled out our paperwork,” Veney told WRIC. “She did not check out the ALM [meals tax] box, and wrote ‘take-out only.’”
Nine months later (March 2023) he was told it was a mistake and he needed to collect and pay the tax, which he began doing immediately. Veney hired an attorney to help him talk with the city to negotiate but was ignored by the city. Finance Director White declined to meet with him. Last week, after Veney put a video on social media to bring attention to his dilemma and these stories blew up, Chief Administrative Officer (CAO) Lincoln Saunders said he would meet with Veney and others.
Veney told NBC12 that the city offered to waive late fees, but he still owes the amount of money he should have been collecting for nine months — even though a city official told him he was not liable to collect it and for which he has proof. He says he would rather take that money and expand and hire more people.
Veney told NBC12 something that should seem pretty basic about local government:
“I should be able to walk into the Department of Finance by myself, not with a lawyer, to make sure that employees are doing the correct thing by myself and be able to open up my business properly and get everything taken care of without worrying about the city messing it up and then me being penalized,” Veney said.
And over in Shockoe Bottom, Richbrau Brewery showed Tyler Layne at CBS 6 dozens of pages of documents concerning their three year battle with the city.
“It’s been a nightmare to the point where I would not open up another business in Richmond, because of how their tax department runs, their finance department runs,” said manager Matthew Mullett.
He provided a document with a notation from the Finance Department in 2019 that says: “Meals tax 7.5% due on prepared food, not draft.” But a year later they received a notice that they should be collecting the tax on draft beers and the brewery began collection the tax and payment immediately. The city told Richbrau to pay up for the time it was not collecting the tax (and had been told it didn’t have to) along with penalties and interest – more than $50,000 in total.
Richbrau appealed and some of the penalties were waived but were told they still owed $14,000 in taxes even though Finance Director White cited in her rejection that a former employee “erroneously instructed” the taxpayer not to collect the meals tax. However; she added that finance representatives are “not the taxpayer’s personal accountants or lawyers and the taxpayer has a duty to know its own legal obligations.”
When Richbrau appealed to the state Tax Commissioner upon Director White’s suggestion, the Tax Commissioner Craig Burns said his department was not authorized to consider such appeals and added the city should’ve known this and that White’s advice to the taxpayer was “made in error.”
At least someone is willing to admit something was done “in error.”
Mullet at Richbrau said bluntly, “It doesn’t register to me that there’s anybody in that finance department that really cares about small business and what they can do for the community,” Mullett said. “It’s more like, ‘You owe this. It’s your fault. Pay up.’ And it’s the invoicing, the accounting, the billing. It’s a mess over there. It’s dysfunctional.”
And then there is the dilemma endurance of Patrick Stamper, owner of Beauvine Burger Concept in the Fan. He has been dealing with the city’s dysfunction for almost four years. He was late on a meals tax payment in February 2020 and then struggled to keep the doors open during the pandemic.
The city offered a Covid amnesty program that waived late fees on meals tax payments between February through June 2020 and Stamper thought he was covered. But for some reason, the amnesty did not apply automatically to restaurants — owners had to enroll (even though Covid affected literally every business under the sun).
So, Stamper’s payment was considered late. The city began accruing penalties and interest on the late payment, but Stamper said no one ever told him that. It wasn’t until the summer of 2021 until he got the first notice from Richmond’s Finance Department that he had an outstanding balance.
And Stamper’s balances were all over the map. Stamper showed CBS 6 all his documentation and communications with the finance department. Each notice he received contained vastly different balances, and some notices didn’t contain a balance at all. At one point, Stamper said the city stated he owed $424,000.
He believes his latest balance is $86,000 but is unsure because he can’t get an answer from anyone in the Finance Department.
“We generate a lot of revenue for the city, and there’s no urgency to fix this,” Stamper said. “It’s endlessly stressful, and the fact that, almost four years in, I still don’t know who to call, who to email, how this ends, how this gets resolved, and no one does.”
These are but four examples of how City Hall is treating small businesses in the city. These owners and the reporters have talked with other owners who have shared similar horror stories but are too worried about retaliation to come forward in public.
Veney made a pretty appealing appeal to NBC12: “This is a family business. Why don’t you care about the families in the city of Richmond? Why don’t you care about the community in the city of Richmond? Why doesn’t the city of Richmond actually care about the city of Richmond?”
Those are great questions.
Instead, our city “leaders” are deflecting blame (see Story #5), giving small business owners bad (or wrong) advice, compounding their bills without telling them, rejecting their appeals, and then sticking them with six and seven-figure bills that could go toward expanding business and hiring more people and producing even more long-term revenue.
But instead, as the Mayor said, we are The Capital of Compassion. He sure knows how to show it.
STORY #3 —Act III: Manual Technology
So help is on the way and the problems will be resolved, right?! Chief Administrative Officer (CAO) Lincoln Saunders told CBS6 that “One of the challenges today is that this is a largely manual process. The city has known for several years that we needed to automate, we needed to get enhanced technology and we’ve made a clear point of saying that we need to get a more customer friendly, user friendly system in place.”
That’s not breaking news. City Council President Kristen Nye told VPM that councilors have been aware that these issues have been brought to councilors “probably over four years.” Which, of course, was right after the meals tax increase and the promises to help the industry make doing business in the city easier.
“It’s been a stated priority of the mayor, of the finance team, myself to get to a 21st-century technology for our finance department,” Saunders told VPM.
Of course, Stoney and Saunders have been at City Hall since 2017 and here we are seven years later. Just stating and tweeting priorities is not the same as delivering on them. When Stoney took office in 2017, the taxes on prepared food brought in $36 million of revenue every year. In 2019 that rose to $47 million and included the meals tax increase for school construction, but then it bottomed out in 2021 during the pandemic at $34 million. In the city’s most recent financial statement filed last month, the total meals tax revenue increased to $55 million in 2023.
In fact all the major revenue streams for the city are up significantly since 2017. I could bore you with more numbers of increased revenue, but I won’t. It’s simply to make the point that you might think that someone by now would have considered spending and implementing just a few million bucks on a technology platform that was worthy of the 21st Century (hell, I’d settle for a 20th century platform) to help make it easier for all tax filers, not just restaurants.
It was promised back in 2018 and now its 2024. The sad thing is the people that work in the Finance Department are bearing the brunt of the ineptitude of the leadership of the department and the city and they need help. They handle all of the meals taxes, property taxes, real estate taxes, and business taxes and they can’t help business owners and customers avoid these situations with Victorian-era spreadsheets and record books.
Saunders says the city will have an online payment portal called ‘RVA Pay,’ app and running (hopefully) by the end of 2024 for real estate, lodging, and meals tax payments, and it is currently online for personal property payments, according to VPM. It’s long on promise and so far, short on execution. If the system on the back end is antiquated, it won’t matter how shiny a payment portal is; it will implode. Saunders said they have been working on it “for the past few years,” and did not offer a deadline for the launch.
Restaurant-guru Johnny Giavos told CBS6 that it took three and a half years to get a business license because they would not issue it because of a mistake on a meals tax payment from years earlier he was never informed about.
“There’s no transparency for them to show you that you’ve been late,” Giavos said. “Like Henrico County, you can go online and you can check the computers, and you can know when you’re late. And you can pay it online and you can move forward. There’s none of that with the City of Richmond. They need to ask themselves, ‘What would Henrico do?'”
Henrico County has a nice online portal in which to view, file, pay, and monitor a restaurant’s meals tax account and they have only had a meals tax since 2014. Charlottesville has an online portal, as does Alexandria, Hampton, and even Leesburg.
Until then, it will continue to be manually mailed checks and manually entered data, which can lead to manually made mistakes. While many localities in Virginia also use manually filed meals tax forms, they also don’t have the volume of restaurants in business in Richmond. And if you Google any of these other “manual” localities across the state, you also won’t find restaurants that are baffled and complaining about $86,000 and $68,000 and $38,000 bills that come from accumulated interest and fees the owners who never got proper notice.
STORY #4 — Act IV: The Magic Wand
When problems like this come to light, they are usually dismissed by City Hall as one-offs instead of a systemic problem that needs to be fixed. Nothing to see here, move along. It’s just an anomaly they tell us. Saunders told CBS6, “I do not believe there’s a multitude of businesses that are still have outstanding issues. I think we’re dealing here with a handful of cases that have kind of worked their way through the review and appeals process and haven’t been resolved.”
As noted, though, many restaurants are facing similar problems but fear retaliation. Others have smaller balance discrepancies, but they are there and when they occur repeatedly, people have to take time to resolve a problem and can’t run and operate their business.
Speaking of running a business, Saunders offered an odd comment to NBC12, “I don’t think we should be advising a business on what taxes apply to them and what do not. It’s really up to their CPA, essentially their business, to know the law and what applies to them specifically,” Saunders said.
I’m not sure many businesses would accept the offer of business advice from City Hall these days, but restaurants self-report and pay taxes based on earnings. If the owner or the CPA doesn’t know anything about what is in the city’s portal/ledger — if there is an outstanding balance, any overdue fees, or any other discrepancy — then neither could know what applies to them. If they can’t see their account and can’t get anyone on the phone, or they are given documents like the examples above that are later ruled to be in error even though they were provided by the city, no CPA would be able to help.
Beam me up, Scotty.
VPM also notes (emphasis mine) that In 1993, Richmond passed an ordinance that said, “Whenever the Director of Finance determines that any taxes due under this chapter have been erroneously assessed or that payments have been remitted in excess of the taxes due the City, the Director shall refund such erroneous or excess tax payments with interest at the same rate as charged by the City for delinquent or omitted tax payments.”
Which means with one meeting the “leadership” at City Hall could own up to their mistakes — and they are just simple, but large, mistakes. Every government makes mistakes, some leaders just own up to them and fix them. So the Mayor or CAO could waive their magic wand for all or part of these ridiculous fees and charges and the negative press and stories of dysfunction instead become stories of business-friendly assistance.
The mayor’s magic wand has been used before for his friends. As the Free Press pointed out this week, Stoney waived that magic wand in 2018 for ally Ken Johnson, who runs the popular Richmond Jazz Festival at Maymont.
In 2018, as the Free Press reported, then-Finance Director John Wack wiped out a $240,000 admissions tax bill owed by the nonprofit Richmond Jazz Festival that is run by a political associate of Mayor Levar M. Stoney, Kenneth S. Johnson.
This city this week keeps beating the drum of “state code requires we collect the tax” and its a self-reported tax, and both of those things are true. Restaurant owners know they have to pay the tax and if they miss payment they have to pay interest and fees. What they are rightfully upset about is that the city incurs and compounds fees and interest without telling the owners or by making it incredibly difficult to find out if there are outstanding balances or resolve billing conflicts, or they are told one thing one year and another thing the next. If it gets fixed, people won’t need to complain. Pretty simple.
“There’s a good reason everyone’s in this position, and it’s not because everyone is embezzling money. It’s because the city screwed this up,” Stamper said.
More from Jon Baliles and his 5×5 Substack HERE
