The Alexandria City Council plans to boost its local meals tax to 5 percent, giving it the highest dining-out tax rate in the metropolitan area, to raise about $4.75 million annually for the city’s affordable housing trust fund.
The proposal was informally adopted Monday night over the strong objections of dozens of restaurant owners, some of whom stood up and walked out of the council meeting once the lawmakers’ stance was clear.
“Nobody cares what we do for a living. . . . Shameful! Shameful!” one woman said as she left.
The increase, which will be part of the budget the council will vote on Thursday, would add 16 cents to a $16 bill, which is the average cost of a restaurant meal in Alexandria, city budget officials said.
Alexandria’s existing meals tax is 4 percent, on top of a 6 percent statewide tax on restaurant meals. Arlington County also has a 4 percent local meals tax, as does Washington. There is a 6 percent statewide sales and use tax on meals in Maryland.
Fairfax County voters in 2016 strongly rejected a proposal to charge a local meals tax on top of the state meals tax.
Alexandria council members debated the meals tax hike for several months, and ultimately decided it was the least painful way they could find to raise money for affordable housing, which is urgently needed in Alexandria and throughout the region.
The city’s budget staff said the 1 percent increase would add only a nominal amount to any individual bill. Officials also said 70 percent of people who use credit cards to dine out in Alexandria are not residents of the city. A total of 195 cities, towns and localities in Virginia charge local meals taxes, officials said, with a median rate of 5 percent.
Council member Willie F. Bailey Sr. (D), who proposed and championed the meals tax proposal, emphasized the inability of middle-class workers, such as teachers, firefighters and city employees, to afford an apartment in Alexandria.
“We talk about inclusiveness and progressiveness, but to me the most basic need is a home. . . . We know you have to make $65,000 to afford a one-bedroom apartment here, a cheap apartment at that,” Bailey said.
But the people who own and operate many of Alexandria’s restaurants flooded the council with objections over the weekend, arguing that they — and their customers — should not be the only ones to foot the bill for affordable housing. Last month, the local Chamber of Commerce said in a letter to the council that 66 percent of its members also opposed the increase.
Six-tenths of one cent of the city’s property taxes are also set aside for affordable housing, but that money is mostly dedicated to covering debt service on housing loans, and has not prevented the loss of more than 12,000 apartments and homes since 2000.
The city has pledged to develop or preserve 2,000 affordable housing units by 2025.
The pushback to the meals tax proposal clearly rattled some council members, almost all of whom are up for reelection and competing in the June 12 Democratic primary, which is six weeks away.
Mayor Allison Silberberg (D), who months ago tried to stop the tax proposal by suggesting a voluntary “round up” option on restaurant bills, sought Monday to delay the vote for a year, and to order the city manager to find $4.75 million for affordable housing by cutting other costs.
That idea did not gain any supporters.
Vice Mayor Justin Wilson (D), who is challenging Silberberg in the primary, and council members Paul Smedberg (D) and Timothy Lovain (D) said they objected to setting revenue aside for particular uses, describing it as a bad budgeting practice.
Wilson last week proposed pairing a meals tax increase with a property tax cut, but that compromise also went nowhere.
“It’s so much money that they just couldn’t look away from it,” said Mike Anderson, proprietor of multiple local restaurants, including Pork Barrel BBQ, the Sushi Bar, Holy Cow and Sweet Fire Donna’s. “There’s no question about affordable housing. Restaurants have huge staffs and we want to support them. But we want that cost-sharing among all the community.”