The Charlottesville City Council began a detailed review Thursday of City Manager Maurice Jones’ recommended $156 million operating and capital budget, but made no decision on whether to continue its support for a meals tax increase.

“This is a way to pay for things [the council would] like to do,” said Leslie Beauregard, the city’s budget director. “We can either find new sources of revenue or make $2 million in cuts.”

Representatives of several city restaurants continued to protest the proposed meals tax increase, which would hike the tax from 4 percent to 5 percent of their customers’ bills, which they said would hurt their employees and their bottom line.

“We are at a tipping point and we are going to start trending downwards in terms of collection,” said Peter Castiglione, co-owner of Maya Restaurant on West Main Street.

The meals tax increase was one of several ideas recommended last year by the Blue Ribbon Commission on Sustainable School Funding.

The council directed staff in February to build the budget based on a meals tax increase. The city cannot raise the real estate tax rate now because a higher rate was not advertised in time.

With reassessments up by 2.8 percent, on average, the current rate, which is 95 cents per $100 of assessed value, will mean an effective tax increase for property owners.

The commission also recommended raising the lodging tax, which currently is 6 percent. Beauregard said each percentage point increase in that rate would raise an additional $500,000.

“There has been a lot of concern about raising the meals tax and not nearly the same concern as raising the lodging tax,” said Councilor Kathy Galvin.

The school system would get $1 million from the additional revenue projected to be raised by the increase. In all, the city’s revenue dedicated to the schools is projected at $47.4 million, a $1.74 million increase over the existing year.

“There’s no other increase in our budget that is larger than that,” Beauregard said.

Budget staffers have projected the meals tax increase would bring in about $2.1 million in additional revenue.

“According to the Virginia Tourism Corporation and the United States Travel Association, the Charlottesville area receives between 2 [million] and 3 million visitors, with visitor spending of $523 million annually,” said Beauregard.

Beauregard said a study by the firm Destination Analysts concluded that each visitor to the area spends, on average, $83 a day on meals.

However, the restaurant owners call the increase “regressive” and had asked for staff to justify a claim that 40 percent of the tax is paid for by people who do not live in town.

“I think you will find that locals are paying a lot more than you think they are,” said Castiglione, who also passed out information he said countered a claim that the meals tax is progressive.

Thursday’s budget work session was also the council’s first opportunity to discuss the recommended expenditures in both the operating and capital budgets.

The state of Virginia has eliminated certain budget cuts, freeing up $292,148 in additional revenue that can be used elsewhere. Options suggested by staff include hiring an auditor to ensure businesses are paying all of their taxes, a new historic preservation position or to increase the pool of funds available to nonprofit agencies.

However, councilors said they would prefer not to spend that money, but instead use it to possibly bridge potential revenue gaps.

“We don’t have to spend it,” said Mayor Satyendra Huja.

“We do have a deficit and I do think we have to keep that in mind before we start adding positions,” said Councilor Bob Fenwick.

The proposed budget also includes a $108,520 position to manage contracts. Budget staff said the city has spent an average of $140,000 annually on outside consultants to accomplish that work.

Galvin said she wants to hold off on that position until an efficiency review of city staff can be done.

“I’m not saying we don’t need this position, but I’ve been asking for project management audits in the Department of Neighborhood Development Services,” Galvin said.

Lance Stewart, the city’s facilities manager, said Martin Horn is the current consultant and handles about $3.5 million worth of city construction projects at a rate between $75 and $90 an hour.

A majority of the council supported keeping the new position in the budget.

The budget also contains $99,000 for a new gardener to take care of landscaping installed as part of the John W. Warner Parkway. There is also a $52,000 line item to locally fund a position for the City of Promise now that federal and state grants have expired.

“This would be the first time [the City of Promise’s director] will be in the city’s human services budget,” said Mike Murphy, director of human services.

Eight police officer positions that had been authorized in last year’s budget but not yet hired have been funded in the next year at a cost of $481,000. A request to further expand the police department by eight more positions is not funded.

No new additional money is expected in the City Council’s initiatives fund. That account currently has an unused balance of $224,809. There’s also another $60,000 of unspent money in the city’s Green Cities fund that Szakos said could be used by the parks department to convert to using organic pesticides.

Castiglione recommended using the initiatives fund to help avoid raising the meals tax.

City employees would get a 2 percent increase on July 1 at a cost of $824,000.

Capital requests recommended for funding include $95,000 to buy new parkland, $200,000 to pay for new bike infrastructure, $77,109 to develop new trails and $200,000 for new sidewalks.

There is $500,000 in funding next year to “complete” a study of the West Main Street streetscape project and $250,000 to begin implementing the Strategic Investment Area plan south of downtown Charlottesville. There’s also $50,000 set aside to conduct a small-area plan, though councilors have not yet prioritized where that should be.

The council reduced funding for all three of those projects in February.

The first public hearing on the city’s budget is set for Monday, followed by a community budget forum Wednesday.

A work session to discuss funding for nonprofits is scheduled for March 26.