Richmond Mayor Levar Stoney is proposing raising the city’s meals tax to fund improvements to decrepit school facilities.
The mayor on Monday announced a proposal to fund a facilities modernization plan. Included in the proposal is a 1.5 percentage point increase to Richmond’s meals tax, which would increase from 6 percent to 7.5 percent if the proposal is approved by the City Council.
The additional meals tax would generate $9.1 million in revenue per year, according to the mayor’s office, and would expand the city’s limited debt capacity. In Stoney’s proposal, the money would be put in a special reserve that would be used only to fund Richmond Public Schools facilities.
“For the last year, I’ve said that when it comes to meeting the critical needs of school facilities, the only option that’s off the table is doing nothing,” Stoney said in a statement Monday. “It’s time for us to invest boldly in our most important resources — our children. We owe it to the children of our city to act.”
In Virginia, 108 localities have a meals tax higher than 4 percent, according to a study done by the University of Virginia. The highest meals tax is in Covington, a small city in the western part of the state, where diners are charged 8 percent.
If the ordinance is approved, Richmond’s meals tax would equal that of Hampton and Newport News. The current combined sales and city meals tax rate is 11.3 percent. If the mayor’s proposal passes, it would increase to 12.8 percent.
Currently, a $10 meal is taxed at 11.3 percent for a total bill of $11.13. If the meals tax increases as the mayor has proposed, that bill would be $11.28.
Jake Crocker, a restaurant owner and Stoney supporter, said the proposal came as a surprise. Crocker started the “Repeal The Meal Tax” movement during the Dwight C. Jones administration.
The former Virginia House of Delegates candidate added that Chesterfield and Hanover counties not having a meals tax “already puts us at a competitive disadvantage.”
“They’re putting more burden on small businesses,” he said. “There are other ways (to fund school improvements).”
Richmond raised its meals tax by 1 percentage point in 2003 to raise money for a proposed performing arts complex that eventually became Richmond CenterStage, now the Dominion Energy Center.
James Baldwin, co-owner of the Social 52 restaurant in the Fan District, said he called his city councilman to share his opposition as soon as he heard the news.
“As an owner, all we see is money going out the door,” Baldwin said. “The market is already skewed with all the brewery tasting rooms opening, diluting even further the finite population pool which will come down into the city. ... Additional taxing just makes it that much harder to succeed.”
Kendra Feather, who owns five Richmond restaurants, said: “I support anything that helps our schools; they’re in dire need.”
The proposal falls short of completely funding the Richmond School Board’s $224.8 million facilities plan it passed in early December. That plan would modernize some — not all — of 44 schools within the school system, a decision some have criticized because most RPS schools have suffered from deferred maintenance.
Instead, school and city officials would have $150 million in the short term to fix school facilities that have for years been put on the back burner as funding went to other areas. This School Board’s facilities plan is the latest iteration of a plan, with recent blueprints stalling because of the city’s limited debt capacity.
At a joint meeting of the mayor’s office, City Council and School Board in December, the bodies were briefed on the city’s debt capacity over the next five years: $66 million.
The School Board said in a statement Monday that it’s “appreciative of the mayor’s expeditious efforts to begin to explore all funding options.”
“We remain eager to collaborate to ensure we have a sustainable, funded plan in place that addresses our facilities needs now and in the future for all students,” the statement read.
The mayor’s office highlighted in a statement Monday that the city’s credit ratings — in the second tier of ratings at AA+ from both Fitch and S&P — and the low interest rate environment, along with the city’s economic development and a growing population, “make this an ideal time to invest in a core function of government, replacing aging school infrastructure with modern, state-of-the art learning environments.”
Stoney’s meals tax proposal also comes as the General Assembly is considering legislation related to the mayor’s ability to raise taxes to fund facilities upgrades. Two versions of the ballot measure Richmond voters approved in November are being weighed by state legislators.
House of Delegates Bill 1409 from Del. Jeff Bourne, D-Richmond, would allow a fully funded facilities plan from Stoney to include a tax increase, while Senate Bill 750 from Sen. Glen Sturtevant, R-Richmond, would keep the November measure’s requirement not to raise taxes.
If passed, though, the Senate bill would not take effect until July 1, allowing the proposed meals tax increase to not be subject to the law if the council adopted the increase before then.
Virginia counties can levy meals tax rates of up to 4 percent, but they must be approved by voters through a referendum. Cities, however, aren’t subject to the 4 percent cap and can levy the taxes through ordinance rather than referendum.
In 2013, Henrico County voters approved a measure that enacted a 4 percent meals tax. That same night, Chesterfield County voters turned down a 2 percent meals tax by a vote of 56 percent to 44 percent. The Chesterfield vote came as voters also approved $353 million worth of bond measures for schools and public safety, with the proposed meals tax revenue helping pay for them. The meals tax was expected to generate about $8 million in revenue.
Like Chesterfield, Hanover County does not have a meals tax.
The ordinance was set to be introduced at Monday night’s City Council meeting, but sound issues caused its introduction to be delayed. Stoney is set to highlight proposals like this and others at his first State of the City address, which is Tuesday at 6 p.m. at Martin Luther King Jr. Middle School in the city’s East End. Elected officials will then begin discussions at a quarterly Education Compact meeting on Monday.