Democracy in Action: Henrico County Style

Henrico hotels bring in visitors whose dining out can be taxed, county officials say.
Henrico hotels bring in visitors whose dining out can be taxed, county officials say.

by James A. Bacon

Henrico County officials doubled down last night on their claim that a 4% meals tax would be paid largely by out-of-state residents. Previously, they had contended that 40% of the tax would be paid by non-resident workers and visitors to the county. Now, in light of new data provided by Richmond Region Tourism, they estimate that 50% of the tax would be paid by outsiders.

Speaking at a public forum hosted by Tuckahoe Supervisor Patricia O’Bannon, county administrators also insisted that, despite surging prices in home sales this year, the assessed value of county real estate will not increase more than 2% this year or for the foreseeable future. The home sales, they said, are concentrated in neighborhoods that do not reflect what is happening across the county, where foreclosures are still a problem. The county still forecasts a $100 million revenue gap over the next five years.

Despite a state law clearly stating that information on referenda provided by local government must be “neutral,” County Manager John Vithoulkas and Budget Director Brandon Hinton made a severely one-sided presentation in support of the proposed meals tax, which citizens will vote on in November. No pros and cons — just pros.

In opening remarks, Hinton said, “We are bound by the law to state the facts. It’s your decision.” But, when pressed by your humble correspondent on the use of cherry picked data to support the county’s position, Vithoulkas justified the administration’s aggressive promotion of the tax on the grounds that Virginia courts had interpreted the law to allow government officials broad latitude to explain how they had reached their decision.

Give the pro-meals tax officials credit for this: After dozens of public hearings, they have refined their pitch. While they still say they will dedicate the estimated $18 million in revenue from the meals tax to schools, they no longer liken the arrangement to a “lockbox.” They also have strengthened their claim that much of the tax would be paid by non-residents.

Sidney Gunst and Mike Mickel, both outspoken critics of the tax, challenged the use of the “lockbox” term last night. While the Board of Supervisors can guarantee that the $18 million in meals-tax revenue will flow into the school budget, they argued, there is no provision to guide the rest of the money the county spends on schools. There is no legal mechanism to stop the Board from adjusting the other half billion dollars it allocates to schools downward, if it pleases.

But Vithoulkas and Hinton had dropped the “lockbox” term from their remarks last night. And Supervisor O’Bannon, who supports the meals tax, made little effort to defend the use of the term. Instead, she vowed that she personally would vote to uphold the promise to the schools. In essence, they beat a tactical retreat from an untenable position.

The county unquestionably scored points with a presentation by Jack Berry, president of Richmond Region Tourism. Henrico does not have a reputation as a major travel destination but it does, in fact, generate the fifth largest number of visitors of any jurisdiction in Virginia — 2.5 million yearly, just behind Virginia Beach and ahead of Williamsburg. Travelers on two Interstates drive through the county, the Richmond regional airport is located in the county and the region’s biggest sports event, NASCAR at the Richmond Raceway, takes place in the county. Henrico also has 9,000 hotel rooms, more than the City of Richmond and Chesterfield County combined.

When 10,000 visitors attended an Amway convention at the downtown Greater Richmond Convention Center last weekend, Berry said, more than half stayed in Henrico hotels. Also, Henrico generates a disproportionate share of the region’s business travel and it brings in thousands of visitors for amateur athletic events. Visitors spent an an average of $45 per day on meals. Right now, he said, those visitors are not paying a tax when they dine in Henrico restaurants.

While county officials gave lip service to wanting a dialogue about the meals tax — “the time is right to have the conversation and decide,” Vithoulkas said — little actual dialogue was permitted. The handful of skeptics were politely cut off after two or three minutes of repartee, while a teacher pleading for more money for schools was allowed to discourse at length. As soon as everyone in attendance who wanted to ask a question had a chance to ask one, the “forum” (dictionary definition, a meeting place for the discussion of questions of public interest) was adjourned a few minutes after 8:00 p.m., having lasted little more than an hour.

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6 responses to “Democracy in Action: Henrico County Style”

  1. Henrico County officials doubled down last night on their claim that a 4% meals tax would be paid largely by out-of-state residents. Previously, they had contended that 40% of the tax would be paid by non-resident workers and visitors to the county. Now, in light of new data provided by Richmond Region Tourism, they estimate that 50% of the tax would be paid by outsiders.

    50% of the total meal tax revenue may come from outsiders, but 100% of meals purchased by Henrico residents in their own neighborhoods will be taxed.

    The 50% percentage is a sleight-of-hand trick to get Henrico residents to mentally associate the meals tax with the 50% figure: officials want Henrico residents to think “only 50% of the tax will be paid by us” therefore it’s not that bad. But the truth is that Henrico residents will always pay the tax when they go out to eat in their own county. Outsiders don’t live here. Henrico residents do. And how many Henrico residents, when they go out to eat, eat within the county? I don’t have the data but I will bet the answer is most residents.

    It doesn’t matter how much tax is paid by outsiders, the day-to-day impact of the tax is going to be felt more keenly by Henrico residents.

  2. does Henrico collect taxes on motel stays? how much?

    how much additional tax will the average Henrico resident pay in meals tax?

    looking at a per capita expenditure… it sorta looks like the “average” 3 person household in the county would have to spend about $38 a week to generate about 9 million taxes (the 50%). That would be about 1.50 in tax (for the 4% meals tax).

    so all this fru fru is about – about 1.50 per household per week ?

  3. County officials estimate that the meals tax will average $68 per household. No, that’s not a huge deal. Overall, Henrico has low taxes and still will have low taxes.

    To me, personally, it’s the principle of the thing. This tax will allow county officials to kick the can down the road without instigating any of the long-term reforms — land-use, smart cities, MOOCs — that will allow the county to prosper in the 21st century.

  4. isn’t the $68 the amount if Henrico citizens paid it all? $68 * 315000 = 21520000.

    so it’s $34 per household per year?

    not that much – but on the flip side as you have made the point – if it’s not that much then it looks to be a modest amount that could be found in savings.

    On their side – they’re looking for diversity in the taxes – and a bit of a shift from property to consumption.

    so… if they could find a way to make it revenue neutral – would you STILL oppose the adding of yet another kind of tax?

  5. Yeah, 4 percent ain’t much to have someone cook you a burger. But you forgot to add in the sales tax. What you end up with is a service tax, a sales tax, and then the cook wants a tip.

    There was an article here in Tidewater that listed Va. Beach as third highest meals tax in the nation. They didn’t count the higher taxed local cities because they weren’t large enough. And if you think a ‘tourist’ tax is no big deal, just wait until the economy turns south and locals make up the difference.

  6. consumption taxes are though more discretionary than property taxes and Darrell’s comment illustrates a difference between a discretionary/consumption tax and property tax in terms of reliability although a meals tax by itself is probably not going to vary that much in places whose economies are not tourism-based.

    For instance, any locality that sits on a major interstate like I-95 and has exits with fast food/motels/ etc is going to benefit even when tourism is down because other traffic continues…

    I’m still wondering if tying a particular kind of tax to a particular function is a good or bad thing. We do it with the tax on gasoline. I think we do it with the Lottery and perhaps taxes on alcohol. That could argue for more diversified taxes – each one tied to something… and in theory that “something’ would ‘float” according to the tax revenues. On the “con” side, you cannot “float” permanent employees… and/or just cut staff – that may be needed – because the tax revenues fell.

    I’d bet most govt folks would not like that kind of system but on the other end of the spectrum – which is the basic complaint of the folks against the Henrico meals tax – there is a concern that each new tax just adds more fodder to slush funds… with little or no accountability for how that specific tax is getting used.

    the theory has always been that the govt that is closest to the people is the one that has the best opportunity to be held accountable to the people but the very way that even county’s do budget businesses, how they actually account for spending, and that includes schools – makes it difficult for the average person. The data is there but it basically takes someone who is a budget analyst to decipher parts of it.

    and I can give a couple of examples:

    1. – for years, I’ve tried to figure out just how much gas tax revenue a local county generates – and how much is expended in that county on transportation operations, maintenance, and improvements and it’s damn near impossible – even worse now that we’ve got to a multi-tax with percentages.

    2. – I’ve tried for years to figure out how much money is spent in schools on core-academic courses – what gets spent on SOL-required functions and it’s almost impossible.

    I’ve tried to figure out how much gets spent on elementary schools verses high schools – and that’s nearly impossible.

    Jim thinks the schools can save money on online courses – and I totally agree – for the non-core-curriculum or even for some electives if they can be a wide range of choices.. like foreign languages. Why not? But try to find out how much money is actually expended on courses like these in most school budgets.. it’s just not there. You could get it with a FOIA but
    then that begs the question as to why you have to do that to start with instead of it being in the budget to start with – OR it gets put there because citizens want to see that level of spending.

    So…. when Jim advocates more online courses, there is no dollar amount associated with it.. and cannot be if he cannot easily identify how many courses are taught that would be candidates for online.

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