Council Passes New Meals Tax

Council Passes New Meals Tax

In a surprising 5 to 2 vote, Husch provides key support for scaled down tax.

With five votes required to pass any new tax, Councilman Dennis Husch held all the power at last Tuesday night's Town Council public hearing.

Like a Las Vegas card shark, Husch sat on the dais, expressionless. It was several hours into a marathon five-hour public hearing and Husch, an anti-tax conservative, sat stone faced. Each councilman, including the mayor, had made their position known on the much-debated meals tax. Six votes had been cast. Four yes. Two no.

"I can count noses," Husch said with a smirk. "Being a realist, I know, we need to compromise."

Rather than voting up or down, Husch, the meals-tax king maker, proposed an alternative to the already scaled-back 2.5 percent that was on the table.

Husch proposed lowering the tax to 1.5 percent, a proposal quickly seconded by Councilman Harlon Reece. "I can count noses, too," Reece said. "This is better than nothing at all."

In the end, the council got the needed five votes for the amended measure. The council's lone female members, Vice Mayor Carol Bruce and Councilwoman Connie Hutchinson, voted against both proposals. The new tax will take effect beginning July 1.

In addition to the meals tax, the Town Council indicated its intention to pass a 2-cents decrease in the real estate tax rate and a 15-cents increase in the town's cigarette tax. These tax rates, along with the final budget resolution, will be debated and voted on during the May 27 public hearing.

But it was the meals tax that sparked the most interest and debate among members of council and it was Husch who provided the swing vote. "We are now talking about 15 cents on a $10 bill," Councilman Mike O'Reilly said Tuesday. "I commend Councilman Husch for counting the votes. I do think a compromise was in order."

O'REILLY, WHO CHAIRED the ad-hoc finance committee that originally proposed a 3.5-cents meals tax a few months ago, outlined the reasons he was supporting the measure. The councilman said he had not favored a meals tax in the past, but he cited two reasons for his change of heart. "Herndon is going to have a meals tax. If not today, we will have one within a year, maybe two," he said, adding that it was only a matter of time before the Virginia General Assembly granted counties, like Fairfax, the ability to issue such a tax.

If the county was to levy a meals tax before Herndon, the town would lose claim to the revenue, O'Reilly and several other council members said.

O'Reilly also directly addressed the criticisms from the biggest opponents of a proposed meals tax — the restaurant owners, many of whom were in attendance last week. In the past two months, many local restaurateurs had lobbied the council to resist adopting a meals tax saying it would unfairly cripple an already fragile industry. While acknowledging the hospitality industry is hurting, O'Reilly said he has not seen "any empirical data" that meals taxes drive away customers and force restaurants out of business. "We have anecdotal evidence that the restaurant industry does not suffer from such a tax," O'Reilly said, referring to similar taxes in Vienna, Fairfax and Alexandria. "I am not convinced the restaurant industry will be hurt by this small tax. It's time to share the pain and this is a responsible way to do it," O'Reilly said.

Council members Hutchinson and Bruce stood firm in their opposition to the tax. "Bottom line is this is still a tax increase," said Hutchinson, who voted "a resounding no" on the proposed tax.

Bruce acknowledged the pending equal taxing authority being debated in Richmond, but she pointed to the recently enacted cell phone tax as proof that the council can act swiftly if need be. "When, and if, surrounding jurisdictions or the county enact a tax at that point we are more than able to act quickly," said Bruce, a vocal and consistent opponent of the tax. "Our restaurants are one of our points of pride in this community and I will not support a meals tax at any level."

While he understood the vice mayor's reservations, Councilman Harlon Reece, like O'Reilly, disagreed that the tax was unfairly targeting one industry. "I have no doubt if I were a restaurant owner, I would have some real reservations," Reece said. "But, as a council, we have a real responsibility to take a larger view. It makes good business sense to diversify the revenue base. We have got to give residential property owners some relief and I don't know how we provide that without passing a meals tax."

After Tuesday's meeting, the Virginia Hospitality and Travel Association blasted the vote. "Although we greatly appreciate the efforts of Vice Mayor Bruce and Council member Hutchinson, who are friends of Herndon restaurants, we are very disappointed to see this new tax imposed on both our restaurant members and Herndon's residents," Danny Mitchell, the group's vice president, said in a statement.

ONE WEEK AGO, Mayor Richard Thoesen predicted that one of the centerpieces of his tax restructuring plan — the controversial meals tax — would be defeated at the May 13 Town Council public hearing. Much to the mayor's relief, he was wrong.

"I wasn't sure if it could be done," the mayor said on Friday. "So I called Dennis [Husch] and said, 'Dennis, what about 2 or 1.5 percent?' He said, 'let me take a look at.' I really respect him for doing that."

When it was his turn to address the issue, Husch took time to outline his argument. He praised the council and staff for tackling the tax restructuring issue. "This was not embarked on as a lark," he said. "This was a very serious endeavor by the ad-hoc committee and staff. Whether we like it or not, the town does require a certain amount of money to run."

Husch blamed the county for failing to enact tax relief and he said he was looking for ways to reduce the financial burden on personal property tax. Ultimately, Husch sided with O'Reilly's claim that the council needs to act "pre-" before the county. "I believe we need to get a meals tax in place to block Fairfax County," Husch said, before proposing a 1.5 percent meals tax alternative.

While supportive of the higher rate, Councilman John DeNoyer agreed with Husch that the town needed to act. "There is a big risk in delaying," he said. "All of us know it is coming."

At the public hearing, Thoesen noted that the roughly 88 local restaurants account for only $78,000 of the revenue generated from the business and occupancy license tax and that "doesn't take care of our police department or our public works projects."

Thoesen also did not agree that a meals tax would drive away business from restaurants in the town. Customers, Thoesen said, will go to a "good restaurant because it's a good place to go."

In the end, the mayor had the last word and in lighthearted, though direct response to Hutchinson, voted "a resounding yes" for the meals tax.