City Council Work Session and Regular Meeting

Zach Burrowspublic commentThe debt service on that is extremely high. In addition to that, we have some increases on just general cost centers that are magnitudes ahead of inflation. Why are we spending that amount of money? Are we seeing the same increase in population coming into the community that justifies that spend? And then third, there's just some areas where we need to look at do we need these expenditures? Zero-based budgeting. Go back and look and say, is this something we actually need? Or do we just need to keep tacking on 6% to 7% increase every single year? It's not sustainable. And frankly, the members of the community can't sustain a 15% increase. other tax rates that are on the agenda tonight, the meals tax, again, is another tax on top

JC Martinezstaffthank you mayor council once more once section 90-262 of the city code currently provides a 4 percent meals tax the proposed ordinance would increase the amount of the meals tax to six percent as set forth in the city manager's recommended fy 2026 budget the effective date of this change would be July 1, 2025. The previous meals tax change was from 2% to 4% in 2004 or 21 years ago. An increase to the meals tax reduces the financial burden on residents as the meals tax can offset the need for higher real estate tax, real estate taxes due to visitors and non-residents paying this tax. Deletions to the current language are shown as strike throughs and additions are double underlined as text in the staff report. The 2% proposed increase

generate about an additional 4.4 million dollars in meals tax revenues each 1% generates about 2.2 million dollars this change would result in a tax increase of approximately one dollar to a $50 meal happy to answer any questions are

Sabrina Hendersonpublic commentGood evening Mayor, City Council, and fellow community members. My name is Sabrina Henderson. My family has owned PJ Skidoo's restaurant here in Fairfax City. My father, Cosmos Bells, has been a business owner in Fairfax City since 1970. He originally owned the Black Baron restaurant and converted it to PJ Skidoo's in 1978. This restaurant is other child. He loves this business more than me at times. He is 86 years old and still comes in six days a week. He's an immigrant from Greece traveling alone to the US at the age of 11 to escape poverty and find a better life. Over the years he has owned grocery stores and restaurants. He's seen it all. I'm here today to express my strong opposition to the opposed 2% meals tax increase. PJ

on being an affordable meal option for our community, but that isn't the case anymore. We've been forced to raise our prices in order to cover our growing expenses. When customers see checks, whether it's from increased cost or higher tax, it does affect their behavior. They dine out less, they order less, they tip less, and they choose cheaper options. Sometimes they may even go somewhere else entirely, maybe even a neighboring town where the meals tax is lower or non-existent. That drop in spending directly impacts our sales, our staff's earnings, and our ability to stay afloat. We're not asking for special treatment. We're simply asking that you truly consider the effects of this decision. A 2%

Bill Hamrockpublic commentfor that it is much appreciated Chris Brent Chris Bruno and his staff are great he was a huge addition with the staff and everything they are doing police, fire, city offices treasurer's office I found to be helpful I can call them, I can approach them when I go I can talk to someone I get answers, they listen I'm wrong, they tell me I'm wrong and they let me know how it can be fixed I found it to be very helpful okay, meals tax, please don't do this with this increase, tax is going to be viewed as 12%. It's not a 2% increase. Customer gets the check, they see an additional 12%. Okay, they don't notice the 2%, they see 12%. Customers don't give us a break on that. We become more expensive. As of now, Fairfax County does not have a meal tax. With Fairfax County not having a meal

tax. We shouldn't be here talking about it. This is a drastic increase on us. 6% more than our competitors a mile and a half away. 75% of our business comes from outside the business. You guys already said that. What if they stop coming? We will be known as most expensive. This will hurt. Some will not come. That will definitely happen. 12% onto the total check, 6% more than Fairfax County it's drastic it's not fared we're not competitive that shouldn't be considered however part two it sounds like Fairfax City the Fairfax County will have the mails meals tax you know it's not done yet but they are working on it it may happen chances are it's going to happen even with Fairfax County getting the meal stacks their meal stacks will be three or four percent

Randy Barnettpublic commentdon't make them 6% cheaper if they want to go to Mosaic they're cheaper it's already a challenge to get people to come to the city traffic, traffic lights parking, even though the parking is so much better than everybody believes all those reasons in the city. We need incentives to bring them here. Over the last few years, inflation, inflation, inflation, all our prices have gone up. What my burger used to be is not what my burger is now. So the meals tax revenue has to already be going up significantly. I don't envy the position you all are in. But there seems to be an ability to look harder at expenditures instead of taking the easy route out to higher taxes, please. I looked up some of the other regions, other towns, because that's where the pinch is,

right, on the towns, what their other meals tax are. Vienna, go down the street to Vienna, 3%. Go to Herndon, 3.75%. Manassas, 4%. Haymarket, 4%. Prince William County, one of the ones with the county tax, 4%. We will be the highest meals tax in northern Virginia, and I believe, by statute the highest it can be at 6%. I would just say that where the meals tax can be voted on it gets roundly rejected by the county. The county got the legislature to change the rules and they will probably roll it out. It will result in reduced dining out. It will result in hitting middle-income and lower-income families more than others. It targets an industry that is already just being pinched more than any other industry out there.

Cyrus Colemanpublic commenthi mayor and council members i'm the owner of doce vita italian kitchen and wine bar in elise restaurant here in fairfax i appreciate the opportunity to speak with you today um yeah i mean just what most people are saying this is going to put us at a competitive disadvantage there's no other local municipality with a six percent meals tax we are constantly competing with Fairfax corner mosaic to you know bring people to our restaurants I also sit on the restaurant committee restaurant we committee with fairfax city and we've worked extremely hard to make fairfax city a restaurant destination and there's no this is gonna impact that all that work seems the common trend with some of the restaurants is that we are

we're down we are already losing traffic to our restaurants in the city and this will tremendously impact that just to reiterate Brianna three percent Alexandria five percent Manassas four percent Arlington four percent I got here a little early because of the time I didn't realize it started at seven and committee there and listening to the Sherwood project I I'm not a city resident I'm sure that project is would be amazing for city residents but if I ran my business like that project I would be out of business and so to increase meals tax to help support a project like that if that's the case it just doesn't make sense and to also read I knew the restaurants are challenged right now we we are getting the burden of inflation we are already raising our

Josh Alexanderpublic commentGood evening, Mayor and City Council. Thank you all for being here and dealing with all of this. I know how I'm doing, but I also know how a lot of my friends are doing in this business and they're some struggling folks. and a closed business, a closed restaurant generates 0% meals tax. And they might hack it out for another couple years, but when the lease is up, I can tell you they are leaving. They're packing it up and they're going. Everyone's very tired. A lot of my friends are still living off of COVID money, and it finished up last year. It's coming. Zero percent doesn't help anybody. Let's just keep it at four. Thank you.

Jennifer Rosepublic commentBut I wanted to publicly reiterate a couple of points. Your budget's resilience on reliance, excuse me, on increasing the real estate tax rate, meals tax, utility fees are going to have a direct and negative impact on small businesses and economic development in Fairfax City. These measures risk undermining years of progress in making our city a regional destination for entrepreneurship, innovation, and, of course, dining. We urge the council to reconsider the current approach and instead focus on reducing tax and fee rates to alleviate the financial burden on those small businesses. Rather than seeking new revenue through higher taxes and fees, you have been, and we are appreciative that you have been reviewing city spending and really look towards those meaningful cuts.

Melissa Shinaberryclerkby voiceIs there anybody else in the room that would like to speak on this agenda item? On the meals tax? Yeah. Okay.

Speaker 29yes so the the parallel the corollary that I would give you is it's the same as the meals tax it's the same these are all advertised maximums in this case these are the numbers that are reflected in the city managers budget and then just so you can act on them night of the budget they need to be introduced and then you'll The hearing in action on budget night

JC MartinezstaffSure, and as the manager spoke and said, so the five original scenarios are still in here in addition to what Council Member Hall and Council Member Bates had done. So very quickly, scenario one is just the city manager's proposed budget, which was presented to council at the end of February. That's sort of the starting point for all the scenarios and where we're working off as a reduction or an addition to. SCENARIO TWO WOULD BE A REDUCTION IN THE REAL ESTATE TAX RATE OF TWO CENTS AND A HALF A PERCENT ON THE MEALS TAX, UTILIZING SOME OF THE EDA REAL ESTATE RESOURCE FUND TO BASICALLY BALANCE IT. AGAIN, SCENARIO THREE IS ANOTHER DECREASE OF TWO CENTS AND ANOTHER

A PERCENT ON THE MEALS TAX, NOW REQUIRING ADDITIONAL POTENTIAL EXPENDITURE REDUCTIONS TO SORT OF BALANCE THE BUDGET AGAIN. SCENARIO 4, ORIGINAL SCENARIO 4 IS A 3.5 CENT POTENTIAL PROPOSED INCREASE TO THE CURRENT REAL ESTATE TAX RATE AND A HALF A PERCENT MEALS TAX INCREASE. AGAIN UTILIZING MORE POTENTIAL EXPENDITURE REDUCTIONS THAT ARE LISTED THERE IN RED. WE HAD THE COUNCIL MEMBER BATES SUGGESTED SCENARIO OF THREE AND A HALF CENTS WITH NO CHANGE TO THE MEALS TAX AND ASSOCIATED USE OF THOSE POTENTIAL EXPENDIATURE REDUCTIONS ON THE LEFT THERE OR ON THE RED. I'M GOING TO SKIP OVER COUNCIL MEMBER AMOS REALLY QUICK. SCENARIO 5, THIS WAS THE LAST ORIGINAL SCENARIO 5 ONE, WHICH WAS A 2.5 CENT INCREASE TO THE CURRENT REAL ESTATE TAX RATE, NO CHANGE TO THE MEALS TAX, AND INCORPORATION OF THE FOLLOWING OR THE LISTED IN RED POTENTIAL EXPENDITURE REDUCTIONS.

COUNCIL MEMBER HALL HAD A RECOMMENDED PROPOSED CHANGE TO SCENARIO FIVE WHICH KEPT THE REAL ESTATE TAX RATE AT AN INCREASE OF TWO AND A HALF CENTS NO CHANGE TO THE MEALS TAX UTILIZING THOSE POTENTIAL EXPENDITURE REDUCTIONS IN RED. GIVEN THOSE REDUCTIONS IT WAS ACTUALLY FOUND THAT WE COULD POTENTIALLY REDUCE THE REAL ESTATE TAX EVEN MORE SO AND have a rate increase of 1.75 cents making the potential FY 26 real estate tax rate a dollar four seven five any questions on what was previously discussed and shown if not I'm gonna go to scenario four point one council member Amos which had proposed a three cent increase to the current real estate AND NO CHANGE TO THE MEALS TAX. THAT WOULD PROVIDE SOME REVENUES.

Anthony AmosAnd I mean, if we quickly also just wanted to pull up 4.2, because there's not much of a difference there at all outside of the 0.5% meals tax consideration for discussion. Of course.

JC MartinezstaffSo as the Council Member stated, the only major change here is a potential increase to the meals tax half a percent that would allow for an additional or maybe the request would be for an additional 550 of that additional funding to be dedicated to the school bond project with a potential sunset if the 1% sales tax option was available this is the option that the general assembly or the governor potentially keeps striking down that if that were to come into fruition at that point council would have the option to potentially retract this half a percent meals tax increase at that time once that was available i think everything else sort of still holds true that does show a larger positive variance of about 617 000.

Anthony Amoswith this it's pretty much preparing us for the chance that we don't get it because if we don't then things get much worse for us and we have a horrible in the year next year no one's gonna walk away from this happy in my opinion so with 4.1 that was excluding the meals tax and we were pretty much just right there and that was to keep that flat because I do agree with the comments that we received earlier that our restaurants have been paying that for a significant amount of time granted we are now also operating the with the knowledge that the county is planning on going to 4% and in addition to that we are having a much different conversation than we were back in March we're no longer looking at nine and a half and two percent. I don't like the meals tax. What I will say in

addition to that is if there were to be any kind of meals tax for me personally I wouldn't feel comfortable unless if it were dedicated in some kind of way and I know that one of the priorities especially with the one percent is if we dedicated specifically for school funding. I also played around with the idea of if we dedicated it specifically back to restaurants through restaurant week and a culinary program as we previously discussed with entities like Josh Alexander for example, but we felt like the schools would be the best avenue if we were to pursue that, but I wanted both on the table just for discussion. But my approach to this is pretty much we need to be prepared for the worst scenario. I don't even know if we're there with this one, but I'm

Billy BatesI also would not support cutting the merit increases. I think that's consistent with what's been done in the past. And I would be extremely wary of any additional cuts to training and travel because that, you know, if we were to just kind of go to the max cut you know that's equivalent to what's in scenario five that may not directly impact services and staffing but it may have an indirect impact in terms of them not having the travel and training that they need to go get training and you know get the skills enhancement of you know certain kinds That's kind of where I am. But one additional potential compromise I'd like to propose is if we were to increase the meals tax by, say, 0.75% or 0.5% or even 0.25%,

Rachel McQuillencosts themselves. And so it's not right that we're sending people when they can get that same knowledge potentially through the internet or something, or virtually. I prefer to keep the real estate rate under three cents increase right now. That's kind of what I'm looking at and leaning towards. Anything above that, I'm just not even, that's tough for me, and you guys know where I stand on the meals tax, so thank you. That's what I'm thinking right now.

Stacy HallMcQuillan for suggesting it and for councilmember Amos for suggesting it in his plan I'd like to have a little bit more feedback I think on the sprout grant position and whether or not that position would actually be able to do any of the items that are included in the budget for those items to be completed with the CIP I got the impression not at 5% police reduction okay, that that was manageable. That's a million dollars. So I would like to reconsider that. I do not support any meals tax increase regardless of where it's going. Reducing travel and training, I think no to travel. I think mandatory required training is where we need to be. Again, this is a year. This is one year. It gives us the opportunity to

Anthony Amosreferenced today there were still people who thought it was going to be the full nine and a half now we're looking at three I would testify on nine and a half I probably wouldn't be too too upset if it were a three cent increase to be honest with you and the same for the meals tax that conversation today was was 2%, not a .5. Now I understand that if there's no support for that, that is perfectly fine. But with the approval of the school bond, with us trying to use one-time money to afford recurring expenses, I thought these were mistakes that happened in the past that we did not want to replicate. And so I understand wanting to get to two, but I think building in buffer space and getting that 1% sales tax next year

Council Member Amos? I also just want to acknowledge that a lot of what we're looking at potentially cutting or suggestions that have come up during this process, we didn't ask people if they want those cut. And I still don't think we've even come close to hearing from the majority of citizens. And so I do want to make sure that's on the table because we're about to get that information. We're about to do a community survey where we can fund an efficiency audit. We can have those in conjunction for next year. And if we allow ourselves some buffer room, get the 1%. Because if it passes the state, I don't know if we can assume that it's going to pass on a referendum, considering what's happened to the meals tax in the past.

Brian FosterstaffThank you, Mayor, if I may. So I appreciate this has been very good discussion. If I may, if I just can sort of reflect back for just a moment what I've been hearing. I was trying to take notes when everybody was speaking, so I it sounds like a majority of you do not want to increase the meals tax. That's what I'm hearing at least half of you are not interested or would not support those are my words that's what I'm hearing but would not support the 5% PD reduction that was has been mentioned as a as an as an alternative what I have heard is somewhere between two and three cents as far as what you might be willing to consider for real estate so we're I say we're making progress we're getting a little closer we can't I mean we can certainly we want one suggestion

I'm looking at them, but I have done this before in other places. And what I think we can do, and I'm looking at them, and they might kill me when I suggest this, however, is what we need to know is the tax rate. which tells us the revenue, and then we can plug all the things that we need to put in place. What we can do is we can hold the – so I guess what I'm saying is if we need to – if you agree on the – I'm just going to say for sake of discussion. will do three cents no change to the meals tax that's just only I'm reading that because that's what's on the screen at the moment then that's going to then then then what that tells us is that we need to reduce uh 7.8 million dollars we can and we can show you how to get to the 7.8

JC Martinezstaffnow. So given scenario 5, Hall at two and a half cents, no change to the meals tax. If that is sort of the starting point, the items on red there, I guess starting from the bottom up as well, I'm assuming everyone would be okay with the 1819 going away from communications which is .25 FTE that is not being utilized and nor is there expectation of it being utilized right now.

So tentatively, right? Yes. Drum roll. at two and a half cents no meals tax no changes from what is being discussed votes up or down without further clarification from the police chief right now so taking the full million fifty six thousand we're at a negative variance meaning we need to come up with money of about 363. Incorporating potentially $100,000 from EDO, incorporating intentionally $150,000 or so from CDMP, that's a negative variance of about $124,000, which I think collectively we can figure that out. Probably go back to the 10 percent, cherry pick, and hopefully I'm not manager cherry-pick some items from that if that would be amenable to council two percent no no MRA so two percent for it

Brian Fosterstaffyes so recap so we can do all this at two and a half cents no meals tax however the million dollar five percent reduction for release is still included so if all of that if if to your question was have talked to the police chief come back what can we live with and or what's the what you recommend so if the recommendation is that we need all of that million dollars then that's another 1.2 cents now you're to 3.7 well or yeah I'm just saying that that's fine but that's that's that's that's how that's how the math works so or you we you can say 450 400 and you put some of that back and be at three, I mean, we can still ask the question, and if the answer still is the million is fine, then you're at two and a half.

all of the, and with the major placeholder being the PD piece which I will have a conversation tomorrow with the chief and can report back but we can certainly prepare what we need to prepare based on the with a two two and a half set no change the meals tax and have that for consideration and then we can show an alternative based on if she if she comes back with an alternative number what that would look like so we can have that ready for May 6th

Correct. We can, we'll have something for you this is helpful because now we know the two and a half cents, no meals tax we can, I'll talk with PD we'll have that conversation and then if it's a number other than a million, 56, then we'll also have a discussion on the alternative ways to make up that delta and leave the rate at two and a half

scenarios but I think we can keep you at two and a half cents and no meals tax change and if that is with these general parameters if that's acceptable then that's what we'll be able to prepare for you