RVA 5×5 | Substantial Doubt of Competency, More Meals Tax Issues


While the Mayor and friends were busy celebrating the AAA bond rating upgrade atop City Hall, inside the lower levels the city continues to fall apart. Most notably, the meals tax fiasco that we were told was being handled and improved is showing more and different signs of being more dysfunctional than we thought.

The latest is an astonishing piece from Eric Kolenich in the Times-Dispatch who reported that more letters are showing up to restaurants that show a credit one week and an outstanding balance the next — with no explanation for the changes. 

Virginia Restaurant Association Director Mike Byrne said all the industry is fighting for is fair treatment and says it’s not getting better nor is the transparency since the media was flooded with stories early in 2024 with restaurants getting with massive bills that had accumulated because the city was changing penalties and interest on outstanding balances they never informed the restaurants owners about.

But even today, the city is offering more confusion and dismay instead of offering businesses helpful or detailed assistance in resolving the perplexing issues and charges. According to Kolenich, city officials say that restaurants have multiple opportunities to ask questions throughout the process.

“The city is here to provide comprehensive support throughout this process, ensuring that business owners feel reassured and less anxious about the review of their accounts,” the city’s communications director Petula Burks, said. “We are committed to addressing their concerns and providing them with the necessary information and assistance.”

Except, they’re not.

For example, some restaurants that were hit with huge bills were reimbursed earlier this year if they had paid the bill just to stop the penalties and interest from accumulating. Other establishments that were still fighting the insane bills had them wiped clean or settled for much smaller amounts. Some were asked to sign Non-Disclosure Agreements (NDA) by the city and others who had their issues resolved have remained silent now that their cases have been settled (even thought they spent serious money on lawyers and accountants). After resolving the issues of those restaurants who were vocal and in the media, the city moved quickly to lower the bad media exposure of one of the city’s favorite and most popular industries: eating out. 

But rather than find a path to being helpful, it seems as though the “leadership” at the City has decided instead to return to try and bully restaurants to settle within a short period of time or face the original astronomical bill. Noelle Forest co-owns Lamplighter Coffee Roasters and said she worked for years to finally get her balance straight and correct. Like the others, she had incurred penalties and interest on bills she was never notified about; but in recent weeks, the real hammer fell.

Kolencih writes: In May, she received a phone call from the finance department saying that she was owed money from the city and would be getting a reimbursement of $13,000.

She asked for that in writing but never got a response. Then, a few weeks later, Forest got a new Offer-In-Compromise (OIC) from the city that said she owed the city $7,000. Then, two days after appearing in the Times-Dispatch article last week, Forest got a call from the Finance Department that said she now owed $20,000. 

“The way these policies are set up are so convoluted and predatory, they’re essentially like a bad payday loan,” Forest said.

The RTD also cited another unnamed venue that got an OIC which would have given $9,000 in tax relief but asked them to pay $11,000 the venue says it doesn’t owe. David Bender, who owns Sheppard Street Tavern in the Museum District said he was offered $16,000 in relief, but to get it he first had to pay within seven days about $1,200 that they city claims he still owed “as a full and final settlement of the dispute.”

Bender asked the city for a detailed breakdown of all payments from January 2021 to March 2024 to prove he owed the $1,200, but the city did not respond other than CAO Saunders saying the city stands by its findings.

On a serious note, what good does it do to brag about a AAA bond rating when we can’t properly track, bill, or inform small businesses why the city is charging them thousands or tens of thousands of dollars? 

In the case of Elizabeth Sexton, who owns Smohk BBQ in Scott’s Addition, she was told after several years of not being notified that she owed the city $5,528 in penalties and interest and threatened her with a property lien if she did not pay. Her story was in the media earlier this year and she recently told the RTD she finally got a letter last month. 

“It said, ‘We decided there is some doubt whether you owed that. We’re not going to say we did anything wrong. We’re going to refund the money.’”

Her refund for nearly $5,000 finally arrived — in the form of 42 separate checks. 

Beam me up, Scotty. 

“There was no explanation for what any of the checks applied to. No dates or corresponding months. I don’t understand their accounting. But at the end of the day, I did get my money,” Sexton said.

Lindsey Barr is a CPA with dozens of restaurant clients in the city and told the RTD that the letters from the city that she has reviewed don’t provide any details of the amounts owed.

“There is no detailed information on how the city arrived at these numbers. There is no explanation or documentation. It’s very frustrating,” she said.

What’s even more absurd is that the letters from the city ADMIT that there might be some doubt about the amount they are requiring to settle with the city. The letter says that “both parties agree there is substantial doubt as to the liability of the Taxpayer for the assessed amount” [emphasis added]. 

See if you can follow this — the city is telling you that you owe a large amount of money but they won’t tell you what it is for, how it was determined to be that amount, provides no documentation, and admits that they will agree there is “substantial doubt” as to the accuracy of the amount — but pay up so it can be legally settled.

CAO Saunders claimed the the city has been actively communicating with Barr and her clients for several months about these letters, but if you don’t provide information or documentation that shows how and where the outstanding balance came from, it is actually the opposite of communication. Most people would find it easy to understand why some restaurants might be reluctant to entire into a “final” agreement that is legally binding on the restaurant without the city providing and details (or proof). But CAO Saunders says the city is actually being fair and accurate.

“We started this analysis to ensure we were billing fairly and accurately for all of our meals tax accounts. For those who have received an OIC (offer in compromise), we have reviewed the payment history of each account,” Saunders said. “The OIC reflects the total amount due after crediting the business for the penalty and interest they have paid against any taxes that are due. So, while businesses may be offered relief from penalties and interest, there may still be a balance due for the months that the city did not receive their payment,” Saunders added.

But sending a letter with a total amount owed is not the same as providing an amount owed with details and documentation as to how that total was reached. Sheppard Street’s Bender asked for documentation over a three year period and got zero in response. How’s that for fair and accurate?

And how can the owner of a coffee shop go from having a $13,000 credit to a $20,000 outstanding balance in a matter of weeks — a $33,000 swing — without any documentation or evidence? Would anyone in their right mind not ask for and demand an explanation and documentation before signing a check for thousands for tens of thousands of dollars?

You might also recall the CAO sent a memo to City Council in late January with a laundry list of policy promises that could be done administratively and “quickly” because they did not require legislation of approval of City Council. He claimed by then the city had already revised “standard operating procedures” without listing them in the memo. Clearly they didn’t take. You can’t have Standards of Procedure if no one knows what the standards are or the procedures entail.

At least someone if finding a little humor in this latest fiasco. Richbrau Brewing, which fought the city for four years over a $50,000 bill that was based on inaccurate information/advice provided by the city, finally got their bill cleared and has now introduced a new brew called “Penalties and Interest” to highlight the issue has not yet been resolved for many businesses.

The city has promised to have all of the 600+ meals tax cases reviewed by July 1 and is claiming they are moving through the accounts faster than they thought. But Burks told the RTD they have only resolved 234 cases with 25 currently in discussion and 479 active accounts left to review and resolve. Perhaps when your definition of case review is to make up numbers, not worry about documentation, and offer a compromise with only a few days to pay it or be faced with the threat of a much larger bill, meeting that deadline might actually be feasible. 

But don’t forget, the city now has a AAA bond rating! Apparently, you can still get one of those even if your official policy towards small business is to act like a bully in a gangster movie and shake people down for money they may or may not owe, and for which they receive no explanation or proof. In one famous scene, it’s just called good acting in the movies. Around here, it’s just called incompetent leadership.

Read more from Jon Baliles and his RVA 5×5 Substack HERE

Main image by Taber Andrew Bain

Jon Baliles

Jon Baliles

Jon Baliles is the founder and editor of the Substack RVA 5x5 newsletter (https://rva5x5.substack.com). He spent a decade in City Hall as a member of City Council and also served as an advisor to Mayors Wilder and Stoney and also served as the Executive Assistant to the Director of the Planning Department.

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