A new food and beverage tax could be on the menu in Mount Airy, in response to a need for more sources of revenue other than raising property taxes or depleting the city’s savings.
This would involve imposing a tax on prepared foods and beverages such as those sold at restaurants in addition to regular sales taxes.
“It is not a grocery store tax,” Commissioner Jon Cawley said Wednesday of the proposal that surfaced in recent budget discussions among Mount Airy officials.
Cawley mentioned the possible local tax on prepared food and beverages during the commissioners’ last meeting on June 15 as they were putting the finishing touches on the 2017-2018 municipal budget that goes into effect Saturday.
A proposed 5-cent hike in property taxes was averted with the budget approval, but the spending plan calls for using $1.06 million from the city’s reserve funds, or savings, in order to balance the books.
One major budget item is a multi-year plan to raise the pay of city employees, who are said to be earning less than their counterparts in similarly sized municipalities. A 3-percent increase was approved last year toward an overall goal of 11 percent, but for the upcoming fiscal year no personnel are getting raises except for sworn police officers.
“We did make a commitment a year ago to raise salaries over a three-year period,” said Cawley, who voted against the across-the-board hike granted in 2016.
“It was obvious to me that we are going to have to increase our revenues,” he said at the June 15 meeting. Cawley has long been concerned about the fact that once raises are imposed, they become an obligation from then on, creating an unsustainable situation under the present revenue structure.
The total general fund budget for the upcoming fiscal year totals $12.6 million, while revenue from property taxes, sales taxes and other sources has been projected at around $11.2 million.
Pointing out that officials need to find some way to generate additional funding other than increasing property taxes, Cawley said at the last meeting that the city council should start talking about a food and beverage tax.
“It’s something our board should look at, that’s all,” Cawley said Wednesday in elaborating on his position.
He indicated that in speaking with officials from other places in North Carolina which have imposed a food and beverage tax, revenues have been produced rivaling those derived from property taxes.
In Wake County, for example, a 1-percent food and beverage tax has been levied since 1993. For last October alone, Wake is reported to have received record monthly collections from that tax of $2.5 million, according to data from the Greater Raleigh Convention and Visitors Bureau.
That was boosted by several major events, such as a N.C. League of Municipalities conference, Wildlife Society conference and the Atlantic Coast Conference Cross Country Championships.
Wake, the second-most populous county in the state with around 1 million residents, is a much larger area than Mount Airy. But the success of the tax there provides some inkling of what this city might feast on due to its heavy influx of Mayberry and other tourists.
The town of Hillsborough (population 6,100) is among other localities in North Carolina where a tax on prepared food and beverages has been enacted.
State approval required
Imposing the tax could not occur locally through a vote by the city commissioners, but would require special approval by the state Legislature.
After Commissioner Jim Armbrister also expressed support for trying to get the tax enacted as soon as possible, during a budget workshop in early June, fellow board member Steve Yokeley mentioned that this process could take “months.”
Cawley said Wednesday that with the plan now in its infancy, no proposed tax percentages have been suggested for Mount Airy and he doesn’t know at this point how much the city could generate on an annual basis.
While the matter has not been the subject of a vote, Cawley said he would like to see the majority of the commissioners decide to launch the approval process for the tax with the N.C. General Assembly.
“I sure hope so,” he said of that prospect.
The tax typically is applicable to all prepared food and beverages sold at retail for consumption, on or off the premises, by any retailer with transactions that are subject to sales tax imposed by the state.
In Wake County at least, businesses must complete a prepared food and beverage tax application to establish an account number for tax-reporting purposes.
Tom Joyce may be reached at 336-415-4693 or on Twitter @Me_Reporter.