After a nearly two-month-long process, the Charlottesville City Council has adopted a $156 million budget for the next fiscal year that includes a 25 percent increase in the meals tax.
“We had to raise the meals tax so we can do more for education and for public safety,” said Mayor Satyendra Huja, who will leave the council at the end of the year.
“This is the toughest budget I have ever had to deal with,” Huja said.
The council took action on the budget at a work session Tuesday that lasted less than five minutes.
The meals tax increase, from four cents on the dollar to five cents, is expected to generate an additional $2.4 million in revenue and close an anticipated deficit. Councilors opted to not consider raising the real estate or any other tax rates this year.
The budget generates an additional $1.73 million in new funding for the school system. It also will allow for eight more police officers to be hired.
Huja joined Councilors Kathy Galvin and Kristin Szakos to support the meals tax increase. Councilors Bob Fenwick and Councilor Dede Smith voted no.
“I didn’t feel I saw enough evidence that we could not accommodate these new expenses within our current resources,” Smith said. “We are anticipating new revenues from lodging with the new Marriott opening soon and with more short-term rental facilities.”
The overall budget was passed on a 4-1 margin with Fenwick voting no.
The meals tax increase was one of several recommendations of the Blue Ribbon Commission on Sustainable School Funding, a panel that was convened to develop ways to expand city revenues for education.
The resolution that authorized the increase requires the meals tax rate to be returned to 4 percent if the total amount collected by the tax declines by 10 percent or more. That requirement was the only way that Galvin said she would vote for the increase.
The city brought in $6.1 million from the meals tax in fiscal year 2013 and expects about the same in the current year, which ends on June 30. Budget staffers estimate that the increase will bring in a total of $8.6 million, or nearly a 40 percent increase.
The adopted budget includes two items that the council agreed to fund at its last work session. They are $35,000 to hire a half-time historic-resources planner and nearly $4,000 to fully fund a request from the African-American Teaching Fellows Program.
The tax increase was fought by several Charlottesville restaurant owners who created an association to fight the raise. They waged a campaign to convince the council to cut spending instead and also objected to having the meals tax be the only revenue enhancement to be considered.
“What we witnessed in the last eight weeks was more like a circus show than a true democratic process,” said Peter Castiglione, co-owner of Maya on West Main Street. “We now look to the elections with high hopes and tremendous focus.”
Both Galvin and Smith are running for re-election this year. The two incumbents are on the June 9 Democratic ballot with challengers Wes Bellamy, Lena Seville and Mike Signer. The top three candidates will go on to the Nov. 3 general election ballot.
As part of her support, Galvin also called for an efficiency study to try to prevent any future tax increases.
In 2008, the council hired the Weldon Cooper Center at the University of Virginia and the Virginia Institute of Government to study Charlottesville’s policies and practices to determine how efficient they were.
Galvin said she wants the next study to determine whether the structure of city government should be changed in order to support the strategic plan. It also would look to see if the city’s property assessment process is accurately reflecting the market.
City Manager Maurice Jones will come back to the council for its approval of the scope of any possible study. Fenwick has said he wants the city manager to do the work rather than hire a consultant.
At least one recommendation in that study was not implemented. Authors recommended the city raise the personal property tax rate to $4.28 per $100 of assessed value to match Albemarle County’s rate. The city’s rate is $4.20 per $100 of assessed value.
The meals tax increase goes into effect July 1.
