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Alexandria raises meals tax to 5 percent to fund affordable housing

Restaurant and business owners unsuccessfully fought an increase in Alexandria’s meal tax Saturday. Mark Tate, left, of the Restaurant Association Metropolitan Washington, and Sue Kovalsky, right, of the Del Ray Business Association, were two of the speakers. (Photo by Patricia Sullivan/The Washington Post)

The Alexandria City Council finalized plans Saturday to boost the local meals tax to raise money for affordable housing, over the objections of small-business owners.

Starting July 1, diners will see their meals tax rise from 4 percent to 5 percent, with the extra percentage point raising an additional $4.75 million that would be dedicated to the city’s affordable housing fund. The rest of the meals tax would continue to go into Alexandria’s general fund.

Restaurant operators told the council that they want to see more funding for affordable housing in an increasingly expensive city where more than 16,000 subsidized units have been lost since 2000.

But restaurateurs said they don’t want to be the only ones to bear the burden.

“We absolutely feel it’s discriminatory and unfair,” said Sue Kovalsky of the Del Ray Business Association. “This tax needs to be spread among the entire community. . . . Restaurants are closing their doors every day, and restaurants wanting to open a second location are going to National Harbor, D.C. and Arlington.”

An increase of the meals tax to 5 percent would boost the cost of the average $16 dining bill by 16 cents. That will make the tax the largest in the metropolitan region, but not in Virginia, where higher meals taxes are levied in Richmond, Charlottesville and elsewhere, city officials said.

Mayor Allison Silberberg (D), who voted with the 4-3 majority on the all-Democratic council, said she supported the proposal if the city manager finds in the next budget year a replacement $4.75 million from cuts within the existing budget. That would allow next year’s council, which is up for reelection this fall, to eliminate the tax increase.

Three council members quickly objected.

“It’s not proper to make staff do the work to find the funding,” said John Taylor Chapman.

“I think it’s inconsistent to say you’re for dedicated funding, then talk about revisiting it next year,” Timothy Lovain added. “To talk about finding $4.7 million without finding offsets is just wrong.”

Justin Wilson, who is running for mayor against Silberberg in the June 12 Democratic primary, said it’s “lip service” to make alternative proposals from the council dais.

“If you want to make a proposal, you put it on paper and shop it around to the community and the council,” Wilson said. “That’s the way things get done.”

Wilson, Lovain and Paul Smedberg voted against the tax because they said they do not think tax revenue should be dedicated by law to specific needs, but should go into the general fund to compete with other priorities each year.

The affordable housing fund has no money at the moment, a result of the city’s decision in January to spend $9 million to help the Church of the Resurrection begin its effort to build 113 units of housing on its property. Housing Director Helen McIlvaine later said that developer contributions, which under state law the city must negotiate with each proposal, usually bring in about $4 million annually.

Six-tenths of one cent of the city’s property taxes is also set aside for the housing trust fund, but that money is mostly committed to covering the debt on housing loans made to the nonprofit developers who build the affordable and workforce housing in the city.

While some business owners objected to the tax hike and several affordable housing supporters spoke in favor Saturday, council members said this was a rare opportunity to act on the long-known crisis in affordable housing.

“This is the first time in I don’t know how many years that we got a majority on this council to approve funding for affordable housing,” Chapman said.