City Council Meeting

Jennifer Rosepublic commentMany businesses operate on paper-thin margins. These increases limit their ability to reinvest, hire employees, or even remain in the Fairfax City long term. Because many of them are not residents and have no vote, they could easily vote with their feet by leaving the city or not coming to the city at all. percent meals tax increase disproportionately burdens local restaurants and food service businesses still recovering from pandemic-related challenges and our current economic challenges. This tax affects not just dining out, but also prepared foods purchased by busy families, making it a significant financial burden compared to neighboring areas that do not impose such a tax yet. The six percent increase for wastewater treatment and stormwater

JC MartinezstaffThank you. Mayor, Council, as stated, Section 90- 262 of the city code currently provides for a 4% meals tax. The proposed ordinance would increase the amount of the meals tax to 6% as set forth in the city manager's recommended FY2026 budget. The effective date of this change would be July 1, 2025. The previous meals tax was changed 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 taxes due to visitors and non-residents paying this tax. In the handout in the staff report there are deletions to the current language as shown through strikethroughs and then additions would be double underlying tax.

The 2% proposed increase would generate approximately an additional $4.4 million in meals tax revenue 1% generates about 2.2 million the change would result in a tax increase of approximately $1 on a $50 meal happy to answer questions

Billy Batesjust want to reemphasize a point from the staff report that all else all equal other rates held equal and all other given a certain set of expenditures for the budget if we do not raise the meals tax that means that given the same amount of expenditures that amount of money has to be made up by another tax rate such as further increase in the real estate tax rate

Anthony AmosWould it be possible since we all kind of hate the meals tax to a degree and I think we're all recognizing that two percent is probably a little too high within context can we reduce it to one for the advertisement for the public hearing for the max to be considered you

since its advertisement I'm willing to let it go although I likely won't support the full 2% when it comes out also want to reiterate I've been pretty clear for about a month month and a half now that I want to know what we're trying to get to and I'm glad that we have the scenarios on board now but I haven't heard anything about what the ideal real estate tax rate is and right now that's kind of operating in tandem with this meals tax until I find out how we can reduce it so I just wanted to reiterate that

Billy BatesWell, I think it's safe to say that nobody supports raising taxes within itself. but I think that residents do support the services that they get from the city and I for later on during the work session I'd like to propose a compromise that involves a 3.5 cent increase the real estate tax rate and then a 2 percent increase the meals tax rate sort of a somewhat modified version of scenario four but I'd like to have a chance to discuss that and see if my colleagues are amenable to that.

Rachel McQuillenI am not amenable to that because I don't believe in the meals tax. I don't want to increase the meals tax. I've been pretty clear and honest with you guys about that so just so that there's no confusion where I stand on that I will not be voting for meals tax to increase the meals tax.

Catherine ReadSo, Council Member Amos, I promised you 15 minutes to circle back around to your question. So, you started out by saying that you have questions about the meals tax and getting to the tax rate. So, where would you like to start?

Anthony AmosI'm just trying to figure out where we're headed now. I'm glad we got scenarios on the table And I'm glad that we're looking at our overall debt considering that we also need to readjust with the school bond on the way but I Am not completely clear on where we're heading with the real estate tax and that's Somewhat that's directly connected with the meals tax in my opinion currently so I would just like to know what direction written Do you think this scenarios are helpful with that? Is that a place to start?

just to touch on that a bit more because I know that while Jennifer was here earlier with the chamber I do wonder if if the meals tax were to be increased can a percentage or portion of it be dedicated specifically those programs?

JC MartinezstaffIf I could add as well with the meals tax. So there is, and I think Vienna does it as well, so you can actually, in addition to a carve-out, also do a sunset as well. That's something that can be potentially utilized as a signal to businesses that it's not a permanent tax. You can identify a time frame associated with that if need be. Council Member Amos?

Anthony AmosCan you also set a sunset for, and this is odd, but let's say you wanted to sunset the meals tax once the 1% sales tax for school construction was received. Could you do that as well? That way we're not just double taxing restaurants and businesses if we were to go down this path?

Billy Batesthis is kind of tax rate related. So, well, for knowing that there is not sufficient support on the diets, it sounds like to increase the meals tax at all, that kind of simplifies my tweaks to scenario four.

I would have grave concerns about but my idea would be to take scenario four and just take that 1.2 million from the school's projects and use that in place of, as Mr. Martinez suggested, in place of the school bond project, but just do the $1.2 million instead of the $3 million, and then just zero out the meals tax increase, and then take whatever that delta is there between that $1.2 million and then the, 0.5% meals tax revenue plus the further reduction to the CIP transfer that would be possible and put that toward, you know, while still keeping the in compliance with the 5% policy and then put that toward the nonprofit grant program and then maybe raise either the real estate tax rate or the property tax rate whatever additional little amount is

Anthony Amosto say that regarding the meals tax in comparison with like the wastewater and stormwater tax it goes directly for example from stormwater to stormwater related projects and i know a lot of our meals tax money is used by eda but if if we do consider any increase in the meals tax i would be more supportive of being willing to do that if it goes directly into at least a portion of it goes to the lift and fig programs. That way there's direct tangible benefits directly to the businesses.

Stacy HallSorry, mine's just a direct response to you, to Anthony. Sorry, Councilmember Amos. I know. I'm just a little confused by your conception of putting the sunset on the meals tax then to go when the school 1% comes in. One, you're suggesting goes to the EDA, and then when that ends, then you're suggesting that 1% that would be used for the school. So you're not suggesting the meals tax goes to the schools until the 1% kicks in. You're saying whatever portion of MilaSax goes to EDA?

Rachel McQuillenTo answer your question, for me it's both. I like the options that Council Member Bates presented for cuts and actually after going to the open house and really exploring more stuff as to what the cuts entail as well. But yes, the real estate rate is very attractive, as is no meals tax increase, as I've stated previously. So for me, it was a combination of both. Okay.