Fredericksburg City Council members are going to take another two weeks to look at changing the way they fund next year's budget, after several city residents chastised them last night for a proposal they said would hurt businesses disproportionately.
Last night, four council members said they would support a proposal Councilman Matt Kelly has been talking about for weeks, to raise the real estate tax to 68 cents per $100 of value instead of 70.5 cents, and to raise the meals tax by 1 percent.
Kelly has been saying this would spread the increased tax burden more evenly, especially since recent reassessments would put more of the burden of a real estate tax increase on commercial property owners than homeowners. He also said the meals tax is on disposable income, and is paid partly by visitors to the city.
Last month, Councilman Brad Ellis supported Kelly's proposal, and no one else. But last night, councilmen George Solley and Hashmel Turner both said they'd be willing to consider it.
But the proposal would leave the city $100,000 short of a balanced budget.
While Solley said he'd be willing to consider changing the way the city gets its money, he said he wouldn't be willing to go back into the spending side of the budget, where Kelly and Ellis have both proposed cutting some of what the city gives to outside agencies.
That means the city could hold taxes steady overall--but not necessarily for individual property owners--by raising the tax to 65 cents.
The council considered raising it to 70.5 cents to bring in around $1.6 million in new revenue from this source. This, combined with a proposed personal property tax increase and consumer utility tax hike, is necessary, council members had said, to fund a budget that is 5.2 percent smaller than this year's budget as sales tax revenues continue to slide.
Up until last night a majority of the council members had opted to tap the real estate tax even more than was originally recommended by city budget officials instead of raising the meals tax by a half percent to find extra money to avoid across-the-board city salary cuts.
But the five residents who spoke at last night's hearing on the tax rate all said the move would end up hurting businesses the most, and might chase them out of town. "Every time you raise taxes, businesses recognize that, they leave and they take jobs with them and your tax base shrinks," said local architect Raymond Herlong. "We really can't afford to chase businesses away.
City resident Bryan Metts said he thinks restaurants might have made out better with a meals tax increase. He said the total of city tax increases adds up to a few hundred dollars a year in his household. "That money is coming out of my going out to eat and my meals. Imagine my surprise when the restaurants were here arguing that a half percent meals tax is a big deal to them. What they don't realize is that for my family, we're giving up entire meals [out], so they're going to lose out bigger than they would have."
Franklin Powell, a former councilman who owns several rental properties in town, criticized council members for not cutting spending more aggressively, and said he'll pass the increase directly onto his tenants. "There's nothing you can do to me except take property, because every time you raise the tax, I raise the rent."
Council members will vote on the tax rate at their June 23rd meeting. They'll also hold a public hearing that night on a proposal to raise the personal property tax rate from $2.99 to $3.40 per $100 of value.
Emily Battle: 540/374-5413
Email: ebattle@freelancestar.com