Virginia counties again seek to levy meals tax without referendum

About the 18th of every month, Ashland restaurateur Michael Pyle thinks about the meals-tax revenue he has to deliver to the town on the 20th.

"I start cringing," said Pyle, co-owner of The Smokey Pig on U.S. 1. "It's a pretty hefty chunk."

The heft is welcomed by Ashland, which collected more than $1.8 million last year from the 5 percent tax. The Town Council bumped it up a penny on the dollar in 2004 after a public hearing but no voter referendum.

Henrico County Manager Virgil R. Hazelett wishes he had the same option. He had to delay dozens of projects for new schools, libraries, roads, and parks and recreation after Henrico voters rejected a 5 percent meals tax that was to pay for the $349.3 million in bonds they approved at the same time in 2005.

Hazelett is among the chorus of officials from Virginia counties calling again for the same authority as cities and towns to levy taxes on meals without a voter referendum. The House of Delegates already has killed the idea once this year but is about to take up an even broader proposal that cleared the Senate in the first half of the session.

"We're always looking for additional revenue sources, especially for infrastructure," Hazelett said. "With the way the county is growing and developing, we're going to need it."

It's an idea that never goes far in the General Assembly, but the proposal survived the Senate on a wave of concern about local governments' ability to pay for public services with falling real estate values and sharp cuts in state aid.

"I'm not necessarily an advocate of meals taxes, but I'm certainly not an advocate of having to raise real estate taxes, either," said Sen. John C. Watkins, R-Powhatan, who supported the measure that passed the Senate on a 25-15 vote late last month.

"I think the folks in these jurisdictions are going to find themselves between a rock and a hard spot in terms of being able to pay for education and public safety at the local level," Watkins said.

But other legislators and local officials say the last thing small businesses need in this recession is a new tax.

"We're not interested in raising new taxes out here in Hanover," said Ashland District Supervisor G. Ed Via III, who wasn't on the Hanover County board when voters rejected a meals tax in 2004. "There are just too many people hurting and out of work to raise taxes on them at this time."

Hanover County Administrator Cecil R. "Rhu" Harris Jr. said the county should have equal taxing authority with cities and towns, even though it has no plans to impose a meals tax. "We heard what the citizens said on the meals tax," he said. "We do think we ought to be put on an equal footing."

The same day that Hanover voters said no, New Kent voters said yes to a 4 percent meals tax, joining Dinwiddie, Caroline and King William as the only counties in the region to impose such a levy. Richmond had approved a 1 percentage point increase on its tax, to 6 percent, on a City Council vote the previous year to raise money for a new performing-arts center. The city raised more than $24 million with the tax in the last fiscal year.

Counties want the same option, but they face formidable opposition in the House of Delegates.

"These taxes at this point are the death knell of many people in the hospitality and restaurant industry," said Del. Harry R. Purkey, R-Virginia Beach, whose city led the state in meals-tax collections last fiscal year at more than $48.3 million.

Purkey is leading in a different direction as chairman of the House Finance Committee, which already has killed the idea once this session. He and other House Republican leaders are adamantly opposed to tax increases, though Gov. Bob McDonnell hasn't taken a position yet on the issue of local taxing authority.

G. Paul Nardo, chief of staff to House Speaker William J. Howell, R-Stafford, confirmed that his boss doesn't favor the proposal. "He's not real keen on that, no," Nardo said.

Advocates of the proposed change are realistic about its chances in a hostile House.

"We know it's tough sledding ahead in the House of Delegates," said Michael L. Edwards, deputy director of the Virginia Association of Counties, which is pushing for the measure.

Chesterfield County Administrator James J.L. Stegmaier said the county supports the idea on principle, but he added, "Everything I'm hearing is that it's DOA on the House side, so we're really not thinking much about it."

Sen. Frederick M. Quayle, R-Chesapeake, introduced the legislation, known as Senate Bill 280, because Isle of Wight County doesn't have the ability to levy a meals tax without referendum, while the towns of Smithfield and Windsor do, along with the nearby city of Franklin.

"It seems very inequitable," said Quayle, who's also proposing to remove the 4-cent cap on county meals-tax increases.

But the Virginia Hospitality and Travel Association disagrees. "It's a little too easy for them to say, 'Give us the tax authority of cities,' when they don't have all the responsibilities of cities," said lobbyist Thomas A. Lisk, who calls Quayle's legislation "probably the most aggressive local tax bill we've seen this year."

Lisk pointed out that counties routinely put meals-tax proposals to voters. Last year alone, meals-tax proposals were rejected in three localities and approved in two, Southampton and Rockingham.

Sen. Stephen H. Martin, R-Chesterfield, who voted against the bill, warned that the public would not tolerate being bypassed by boards of supervisors in raising taxes.

"If that becomes law, legislators from all over the state are going to hear about it," he said.

Pyle, at the Smokey Pig, agrees, even though he's already subject to the tax.

"I just hope they don't pass something like that without having the people decide," he said.