When you bite into a Chick-Fil-A sandwich at Short Pump Town Center, you’re helping to replace the doors and hardware at Carver Elementary School.
When you order a salad at the Panera Bread restaurant across from the mall on West Broad Street, you are helping to refinish the gym floor at Varina High School.
When you sit down for a three-course meal at Buckhead’s, you’re helping to replace the boiler at Hermitage High School’s Advanced Education Career Center.
The projects are all being funded through proceeds from Henrico County’s 4-percent meals tax. In 2013, Henrico voters narrowly approved the tax, after rejecting it eight years earlier. The measure carried a proviso that all of the proceeds would be channeled into county school operations and capital projects. Later, the Board of Supervisors passed a special ordinance reinforcing that the meals tax money would always go to the schools.
The concept of using a meals tax to help fund public schools has come into sharper relief since Henrico voters approved its meals tax and the dollars started rolling in. And in Richmond, despite heated opposition from some restaurateurs and residents, the City Council recently approved Mayor Levar Stoney’s proposal to raise the meals tax another 1.5 percent to fund renovation and replacement of older, deteriorating school facilities. Collections are set to begin July 1. Council’s action will change Richmond’s meals tax from 6 percent to 7.5 percent, generating an estimated $9.1 million per year. The new revenue will expand the city’s debt capacity and enable it to borrow up to $150 million over the next several years, city officials have said. Of the remaining 6 percent of the meals tax, 5 percent goes into the city’s general fund and 1 percent supports debt service for cultural and educational facilities.
Henrico is now well into its fourth year of collecting meals taxes for schools — collections began in June 2014 — and county leaders wonder how they ever got along without it.
“The meals taxes are critical to what we do in our school division,” says Patrick Kinlaw, superintendent of Henrico County Public Schools. Kinlaw, who announced that he will retire in June, credited the tax with financing millions of dollars in school projects in rapid-fire order. He says the meals tax has funded 312 projects on 69 campuses at a cost of $57.7 million. Moreover, meals tax collections have far surpassed initial projections of about $18 million a year. Today, it’s generating more than $28 million.
“The meals taxes are critical to what we do in our school division.” —Patrick Kinlaw, superintendent of Henrico County Public Schools
Henrico restaurants receive a 3 percent rebate on every dollar of meals tax collected as a handling fee.
“We’re one of the few localities that allows a rebate back to the restaurants,” says John Vithoulkas, Henrico County manager. Richmond, for example, does not rebate a handling fee.
Vithoulkas is bullish on the importance of having a well-funded school system, as both a quality-of-life issue, but also as a tool for economic development.
“When I first met the company representative with Facebook, when they were seeking to build their largest data center somewhere in the world, they didn’t ask about our tax rate,” Vithoulkas recalls. “Their concern was, ‘Tell me about your schools.’ ” At the time, county officials had no idea that the industrial representative they were meeting with was from Facebook, or that the company was planning to make a $1 billion investment. All they knew, he says, was that a top industrial prospect wanted to know about the schools, and wanted to help in the schools as part of its corporate philosophy and corporate values.
Vithoulkas adds that besides endorsing a meals tax to help the county’s schools, Henrico voters three years later approved a bond referendum that earmarked $272.6 million for school projects.
In the current fiscal year, $9 million of the meals tax makes up 1.9 percent of the $469.9 million schools budget, compared with 43.7 percent from the local government, 54.1 percent from the state and the rest from other sources, according to Chris Sorensen, Henrico’s assistant superintendent for finance and administration. Another $9 million in meals tax revenue went to the capital budget, and $10.4 million went to a fund called the Education Meals Tax Project Reserve.
In Chesterfield County, voters in 2013 rejected a 2 percent meals tax — projected to produce about $8 million in revenue — that would have been used to partially pay for school projects. Chesterfield voters did, however, endorse bond measures to raise $353 million for schools and public safety.
Even without meals tax revenues, Chesterfield has been able to proceed with its school projects by initially stretching out implementation of the referendum, delaying some of the county’s capital projects and bringing other funding sources to bear, such as cash proffers that were still being paid to support schools.
Chesterfield is on schedule to renovate or replace a dozen schools by 2021.
State law allows cities and towns to adopt meals taxes by resolution of the governing body, but county governments are required to win voter approval. The Tax Foundation, an independent nonprofit tax policy institute in Washington, says in a January 2017 report that meals taxes have been rejected 47 of the last 60 times they have gone to voters in Virginia.
The vast majority of the state’s towns and cities have a meals tax. About half of the counties have one; almost all set it at 4 percent. At 7.5 percent, Richmond’s will be among the highest for cities, along with Hampton, Newport News, Emporia and Galax, according to tax charts published by the Weldon Cooper Center for Public Service at the University of Virginia. But the highest rate is found in the towns of Appomattox, Covington, Hillsville and Orange, where 8 percent is added to the customer’s bill.
