A D.C. Council committee on Wednesday defeated Mayor Vincent C. Gray’s proposal to extend bar hours by one hour, leaving a $3.2 million hole in the next fiscal year’s budget that some members hope to plug by raising taxes on beer, wine and liquor sales.
In a 3 to 2 vote, the Human Services Committee stripped from the budget the proposal to extend alcohol sales to 3 a.m. on weekdays and 4 a.m. on weekends. That set the stage for an intense debate over whether the full council should adopt the second tax increase on alcohol in the past year.
“This committee is under an obligation to vote its principles,” said committee Chairman Jim Graham (D-Ward 1), whose panel has oversight over alcohol issues. “We wanted to protect the neighborhoods that are in entertainment areas.”
But there could be multiple rounds in this bar fight.
By rejecting Gray’s proposal, the committee was left with a $347 million budget for human services that a majority of its members could neither fully fund nor support.
Moments after they voted down the extension of hours, members fretted that Gray’s fiscal 2012 budget cut $5 million in assistance for needy families and $7 million for homeless services.
Unable to stomach the cuts but short of revenue, the committee then voted 4 to 1 against Gray’s social services budget, punting the tough decisions about how to fund those priorities to the full council. The move left a window for reconsideration of extending bar hours later this month.
But Graham and council members Michael A. Brown (I-At Large) and Tommy Wells (D-Ward 6), both of whom also opposed an extension of bar hours, are hoping that the council instead approves an increase on the wholesale alcohol tax that would amount to about 6 cents per drink. Last year, the council raised the retail sales tax on alcohol from 9 percent to 10 percent.
The proposed excise tax increase, which the hospitality industry is rallying to derail, would raise an estimated $20 million.
Pedro Ribeiro, a Gray spokesman, said the mayor continues to support his proposal to extend bar hours, casting it as a choice between his plan and higher taxes.
“The mayor fully supports his approach,” Ribeiro said. “No new taxes. No new fees. A lot can still happen. . . . We think it’s the right approach.”
Jay Hibbard, vice president of the Distilled Spirits Council of the United States, called the council proposal “a tax on D.C.’s entire hospitality industry” that would cost hundreds of jobs.
“Coming out of the recession, this is the worst time to hit . . . businesses and consumers with another tax increase,” Hibbard said.
Council member Jack Evans (D-Ward 2), chairman of the Finance and Revenue Committee, has also stated that he is unlikely to support an alcohol tax hike this year.
If the alcohol tax increase is defeated, several council members said Wednesday, the proposed extension of bar hours could resurface as members try to balance the budget.
“Certainly, we could do it on a temporary basis and see what the ramifications are,” said council member David A. Catania (I-At Large). “If some of the negative consequences come to fruition, we could revisit."
On Tuesday, Graham met with Gray to see whether they could find a compromise in the coming weeks.
“We’re working on it,” Graham said.
In recent weeks, many neighborhood groups organized against extending bar hours, citing the potential for late-night noise and violence. But tourism and business groups embraced the proposal, saying the District needed to evolve into more of a 24-hour city.
The issue has created a geographic split on the council. Council members Marion Barry (D-Ward 8) and Yvette M. Alexander (D-Ward 7), who both represent areas east of the Anacostia River, were the only committee members to vote in favor of the proposal Wednesday.
The committee, however, unanimously approved two of Gray’s alcohol proposals, including allowing bars to serve until 4 a.m. during the week of the presidential inauguration. The committee also agreed to allow Class A and Class B carryout liquor stores to open at 7 a.m. instead of 9 a.m., except on Sundays.
The committee did not vote on a proposal that would allow liquor stores to open on Sundays, which would raise about $710,000 in annual revenue. Although he voted against extending hours, Brown said he is hoping to see a compromise that includes the rollback of that blue law.
Graham, Gray and Council Chairman Kwame R. Brown (D) are skeptical of Sunday liquor sales.