Richmond schools improve from tax increase, restaurants pay the cost

By Alan Rodriguez Espinoza

RICHMOND, VA.—Wearing a surgical mask to work is not something one would expect a school teacher to do, but in Richmond, Virginia, combinations of mold and rodent droppings had made the air quality almost impossible to teach in.

The impacts of the city’s decaying public school buildings were hard to ignore — Richmond City Public Schools had the highest dropout rate in the state in 2018, according to the Virginia Department of Education.

After seemingly endless debate, Richmond Mayor Levar Stoney announced a solution. By raising the meals tax from six percent to 7.5 percent, the city could afford the construction of new public school facilities.

The city council approved the tax increase on Feb. 12 of last year by a 7-2 vote. While some residents saw the new legislation as a sign of relief, many local businesses say they felt “unfairly targeted.” The method of funding reflects a trend in Virginia and nationally, as some cities seek to improve education systems independent of state or federal entities.

Restaurant owners vs. the meals tax increase

“Why do we have to continue to feel the brunt of the city’s inefficiency in raising money and managing their money?” asks James Thrasher, owner of The Local Eatery and Pub in Richmond. “I do not know of any restaurant owner that I have talked to that was in favor of the tax increase.”

With the new tax increase, all prepared meals in Richmond are now accompanied by the new meals tax, as well as a city sales tax of one percent and a state sales tax of 4.3 percent — a total of 12.8 percent in taxes per meal that Thrasher says is hindering the local restaurant business.

“For about six or seven years, I have averaged between five and 15 parties during the holiday season,” Thrasher says. “This year, I had one.”

Thrasher’s The Local Irish Restaurant has been a vocal critic of the sales tax increase.

Thrasher says a lot of the Richmond restaurants owners he has spoken with have seen “a noticeable drop in lunch sales” of around “15 to 30 percent.” Jake Crocker, owner of F.W. Sullivan’s Bar and Grille, Lady N’Awlins, and Uptown Market & Deli, says his food distributors have seen an equal drop in shipments into the city of 30 percent.

“These are thin margin, extremely fragile businesses with everyone just trying to get to next week,” Crocker says. “Yet they are exclusively singled out for tax hikes over all other industries.”

Crocker and Thrasher both say the tax increase has made it harder to compete with chain restaurants that operate on Virginia Commonwealth University’s (VCU) campus as part of the school’s meal plan, such as Taco Bell and Pizza Hut, which are tax exempt because VCU is state owned.

“If you are someone who is trying to watch your money and you are having to eat because you are on campus every day,” Thrasher says. “By the end of the week, 64 cents has now added up to an extra three dollars you spent. By the end of the month, that’s an extra 12 dollars.”

A meals tax increase in the city of Richmond has also made it harder for Thrasher and Crocker to compete with restaurants outside of the city. Henrico county, which surrounds the state’s capital city, has a meals tax of almost half of Richmond’s: four percent. Immediately south of Richmond, Chesterfield County does not have a meals tax.

Unintended consequences?

Crocker says lower meals taxes outside of Richmond have given an unexpected advantage to catering and delivery services who are set up in the counties but feed city residents. Thrasher says food trucks on VCU campus who are registered outside of city limits enjoy similar benefits.

According to a study by the University of Virginia, Richmond’s new meals tax is tied for the second highest in the state with those in the cities of Newport News, Hampton, and Emporia. Covington City holds the highest meals tax in Virginia at eight percent.

Crocker says local Richmond restaurants “account for thousands of jobs and generate millions in tax revenue,” yet he says the restaurant business “has been consistently the lone target for tax hikes.”

“This is why most large chains set up just over the city limit line in the counties,” he says. “This equally blocks county residents from coming into the city as well as pulls city residents into the county.”

In response to criticisms of the meals tax increase, Mayor Stoney said in an email “the increase is minimal: an extra 15 cents on a $10 meal, 75 cents on a $50 meal, $1.50 on a $100 meal.”

Thrasher says “it’s not that simple.” He says “when you start talking about spending a thousand bucks, a couple thousand bucks,” such as in the case of large work parties and holiday parties, “that starts to add up and make a big difference.”

Choosing a source for public school funds

Stoney says a big advantage of increasing the meals tax as a new source of revenue for school funding is that it is “entirely discretionary and only applies to people who dine out or purchase prepared foods in the city.”

By “prepared foods,” the new ordinance refers to meals eaten both in-house or taken to-go from a restaurant, non-factory-sealed alcoholic beverages prepared at food establishments, and hot foods found at supermarkets that are “ready for immediate consumption” such as rotisserie chickens.

“In addition, roughly 50 percent of those who will pay the tax live outside the city limits,” Stoney says. “So its impact on residents is limited.”

According to the Richmond Times-Dispatch, the tax burden was a big selling point for Stoney’s proposal to raise the meals tax, rather than raising the property tax, for instance, which would have been collected in full from Richmond homeowners. A cigarette tax was also considered but it was later decided it would not produce enough tax revenue.

The use of a meals tax for creating revenue for Richmond public schools is not a new idea. An almost identical tax plan that included a 1.5 percent meals tax increase was proposed by former Virginia Governor Dwight Jones in 2016 to fund school and city infrastructure, according to CBS 6. Jones’s meals tax increase was not adopted.

Additionally, In 2013, residents of Henrico county voted in favor of a meals tax of four percent that would fund the county’s school system. According to Richmond Magazine, the meals tax in Henrico county had brought in “nearly $58 million” by 2018.

While Virginia Senators Tim Kaine and Mark Warner have not publicly commented on Richmond’s increased meals tax, they have addressed the state’s “aging schools” in the past. In 2017, the two legislators introduced a joint bill — the School Infrastructure Modernization Act, intended “to spur public and private investment in renovating active historic school buildings.”

Outside of Virginia, a sales tax increase in San Antonio, Texas was also implemented in 2013 to fund prekindergarten education. The tax was raised from 8.125 percent to 8.25 percent, according to the San Antonio Express-News.

Alexxus Harris, a student at Virginia State University in Petersburg, Virginia and a former student of Richmond Public Schools, says she was “shocked” to see the city government take action to improve the schools.

Harris, who graduated from Armstrong High School in 2016, says the students in her class “could have used a new building, new desks, and new resources.” She could tell the old public school buildings “had been there for years,” but she says they were all she knew growing up and she eventually “became accustomed to it.”

“I did not see much of a change,” Harris says. “And they built a brand new jail when all of our high schools could use some remodeling.”

Even the same restaurant owners that opposed the tax increase recognize the financial needs of the public school system. Thrasher recounts a three-month period where a teacher “had to teach in the cafeteria because there was black mold in the walls of her classroom.”

“About a month and a half ago, teachers were having to bring in their own toilet paper to one of the schools.” Thrasher says. “The school ran out of toilet paper and did not have the money in their budget to buy more.”

Carver Elementary School in Richmond, Va. is one of those impacted by the new policy.

Thrasher says Richmond’s restaurants “are not against helping the schools,” but he says local business owners should not be “the only ones bearing the brunt of it.”

Another Richmond resident who asked to remain anonymous due to her connection to Richmond Public Schools says the city should have gone for “some real money” by increasing the property tax, which currently sits at $1.20 per $100.

I can’t even go to Chick-fil-A because I’m paying a dollar plus on taxes for just a ten dollar meal,” she says. “Why would you even increase money for somebody like myself who is on a fixed income? It’s almost as if you’re taxing the poor.

“You are throwing pennies at a bigger problem.”

Improving the schools

The city has collected more than just pennies. According to the mayor’s email, the revenues from the meals tax increase, which were estimated at around $9.1 million a year when passed, “are on track, if not exceeding expectations.”

In addition to the annual $35.6 million the meals tax produced before the increase, the new revenue is expected to allow the city to borrow the $150 million needed to fund the public school system through fiscal year 2023, according to the Richmond Times-Dispatch.

Tiawana Giles, principal at George W. Carver Elementary School, says the funding from the meals tax increase has been “great for Richmond.” She says the conditions of the school  have been on “a quick turnaround” since the tax increase went into effect in July 1 of last year.

“We are looking at being able to make sure that all of our students get the right interventions that they need,” Giles says. “We were able to get new computers and we are very pleased about that.”

Prior to the meals tax increase, Giles says the city’s public schools were in urgent need of “updated buildings with updated technology.” She says the current Carver Elementary school building is “over 100 years old.”

Giles says public schools in the city “learned to manage” while underfunded but ultimately fell short of meeting standards placed by neighboring counties like Chesterfield and Henrico, where classrooms are “technology-wired” and students get more one-on-one time with their teachers.

She says Richmond Public Schools wants to “stay abreast and stay competitive with other states” so that “students are ready and have what they need to compete with others.” Also on the agenda is keeping class sizes small and increasing teachers’ wages.

The issue of fair pay for public school teachers garnered national attention after thousands of teachers throughout the state of West Virginia walked out of schools in February of last year, followed by protests from teachers in Los Angeles and Denver regarding better pay. It has been no different in Richmond, where an estimated 4,000 teachers gathered at the state capitol in late January.

“We want to make sure that we are paying teachers in a competitive way,” she says. “And make sure that they stay here in Richmond. That was a big issue — that our teachers were leaving and going to other districts.”

Giles says it is important for Richmond children to “get to live and play and learn in their own environment.” She says that thanks to the meals tax increase, students “don’t have to worry about moving out of the district” and now have the opportunity to get “a world-class education.”

Moving forward

The revenue from the meals tax increase may be opening a door to the future to nearly 24,000 students, but for restaurant owners like Thrasher and Crocker, the tax increase represents a hopeless setback.

Last year’s announcement that the city was considering raising the meals tax in order to raise money for the schools came with no warning for Richmond business owners. Thrasher says “there was not a lot of time for the public to get involved.”

Stoney first proposed the meals tax increase in Jan. 22 of 2018, less than a month before the city council approved the initiative. Thrasher believes this was a last-ditch effort to use tax revenue to fund the public school system.

“It had to be passed before June because in June 1 there was a new state law that went into effect that says you cannot raise taxes on anybody to fund school improvements,” he says. “That you had to find money in your budget and you cannot levy a new tax on people just for schools.”

Thrasher says the proposed meals tax increase was “bulldozed” through, and therefore, “there was not a lot of time for restaurants and businesses to try and mount an opposition and get hard numbers to fight against it.”

In response to Stoney’s proposal last January to increase the meals tax, Thrasher, Crocker, and two of their fellow restaurant owners formed the Richmond Restaurant Alliance. Crocker says the alliance represented “the first time the independent Richmond restaurant owners stood up in a coordinated effort.”

“We spent our own money and time contacting other owners and businesses until we were able to build a coalition,” Thrasher says. “The alliance now represents 62 restaurants in the Richmond area.”

Moving forward, Thrasher says he does not feel hopeful about conditions regarding his restaurant and the meals tax improving. However, he says through the formation of the Richmond Restaurant Alliance he now feels better prepared for future challenges.

“We are now more mobilized,” he says. “And if they try to do something else to us we are going to argue a lot more effectively and with a louder voice.”

Crocker seconds this sentiment. While he says his businesses are “starting to recover,” he says some of his fellow restaurant owners “could not hang on” following the tax increase.

“We will continue to fight,” Crocker says. “Not for additional profitability, but rather to survive, protect our employee’s livelihood and continue to serve our neighbors.”

In his 2018 State of the City address, Mayor Stoney said he “did not relish the idea of imposing a higher tax on any of our residents, or even our visitors.”

“I respect the concerns of our restaurateurs who are responsible for so much of the positive trends we have seen in our city,” Stoney continued in his address. “I promise to be a committed champion for their success, and pledge that we will work with you to make it easier for you to grow and expand.”

Stoney also declared in his address that the meals tax increase would allow the city to begin building new schools “today — not in five or six years.” A year later, Giles confirms this to be true.

“We know that we have three new buildings going up,” she says. “And so we think that is a positive for our students to be able to learn in buildings that are updated.”

Mayor Stoney says school faculties and city officials are “very satisfied” with the results of the tax increase. Regarding the three buildings Giles mentioned, he says two are elementary schools and one is a middle school. Stoney expects all three of them to be completed by Fall 2020. 

The Richmond experiment has tested the community’s ability to maintain an environment favorable to education and business interests. If the policy becomes successful in the long-term, many other cities and municipalities may consider new mechanisms such as a sales tax to improve public schools.

Alan Rodriguez Espinoza is a senior from Virginia Commonwealth University majoring in Mass Communications. Alan made the photographs in this story.

The views expressed in this article are those of the writer. The Contemporary takes no position on matters of policy or opinion.

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