Merkel: Meals Tax Increase Not An ‘Easy Decision’

by Fatimah Waseem April 30, 2019 at 1:15 pm 0

The Town of Herndon’s 1.25 percent increase in its meal tax has generated some backlash from local residents — prompting Town of Herndon Mayor Lisa Merkel to clarify why the tax was increased from 2.5 to 3.75 percent last week.

In a statement on Saturday (April 27), Merkel said the increase was necessary to cover an unexpected $1 million shortfall in revenue from business professional occupancy license taxes. The estimated price tag for several capital projects also spiked, she said.

The increase could bring around $900,000 in revenue to cover funding for road projects, hiring an assistant town attorney, parks and recreation events, and connecting crosswalks that are unsafe and not ADA-compliant, Merkel said.

“I know raising taxes isn’t popular and it is not a vote that I took lightly,” she said. “If you go back and look at all the discussions, staff reports and PowerPoints, you will that it was not a flippant decision.”

Merkel said her nine years of experience on the council demonstrates that raising taxes is not a go-to approach. Ultimately, the move could generate cost savings, Merkel said. The town currently outsources legal work that the town attorney cannot take on at a high rate, she said.

“With Metro and the growth we are facing in the area the town is dealing with many more complicated legal issues than in decades past when we were a much sleepier little town,” she said.

Merkel’s entire statement is below:

Tuesday night the Council voted to pass our FY2020 budget. For the first time in many years the council raised the meals tax by 1.25%. I understand that many do not favor this decision and I want you to know that I certainly did not make the decision lightly. I think my record on council for the past nine years demonstrates that I am not someone who looks immediately to raising taxes whenever there’s a tough budget before us, so I hope you’ll read along to see my reasoning for my vote supporting this increase.

The additional revenue generated will be funding road projects for the most part. The town suffered a very unexpected $1million shortfall in BPOL (Business Professional Occupancy License taxes) revenue this budget cycle, and several road projects that have been in the CIP (Capital Improvement Plan) for years have had a significant increase in their estimated costs. After a lot of grappling our Town Manager suggested a 1 cent meals tax increase to offset the difference (1 cent meals tax is approximately $900k of revenue.) BPOL is paid mostly by people who do not reside in the town (it is business professional occupancy license fees and is based on gross receipts of the business, the larger the business, the larger the fee. Most of our Herndon businesses are 10 employees or fewer, so you can surmise that a very large company is the reason behind this loss of BPOL revenue) Meals tax is also paid mostly by people who do not live in the town, but use our roads, police, etc. Herndon is an employment center where more than 17,000 people come to work every day, and the biggest portion of our meals tax comes from the M-F lunch crowd.

It was NOT an easy decision for me. The additional .25 that was added was a result of trying to cover some unfunded priorities that were important to the town – some parks and rec events related to the farmers market and family fun days and connecting some sidewalks and completing crosswalks that are currently unsafe and some that are not ADA compliant.

It will also allow us to hire an assistant town attorney which will ultimately save the town money because now we are outsourcing some legal work that the Town Attorney cannot take on, and that is at a MUCH higher hourly rate. With Metro and the growth we are facing in the area the town is dealing with many more complicated legal issues than in decades past when we were a much sleepier little town.

I know raising taxes isn’t popular and it is not a vote that I took lightly. If you go back and look at all the discussions, staff reports and PowerPoints you will see that it was not a flippant decision. Honestly, without the $1million dollar BPOL shortfall I would have likely voted against this increase, because it wouldn’t have been necessary. And I do support the projects these monies will fund. Which is ultimately why I decided to support it.

I understand that not everyone is happy with the meals tax increase; that’s just how these things go. I will still be supporting our local Herndon restaurants because this is home, and I love our local restaurant scene. Did you know that restaurants receive a 6% rebate for remitting the meals taxes they collect on our behalf on time? (This is a fairly typical practice in the commonwealth) and the large majority take advantage of this.

Please remember that since 2010 Herndon’s real estate tax RATE has not increased. In fact we decreased it once in 2011. Every single surrounding jurisdiction has raised their RE rate multiple times during that time frame, even as assessments have increased. I am proud of the fact that Herndon has worked to not put our property owners in that situation.

If you’ve read this entire post, Thank you. If you would like additional information on the discussions and reasons behind this difficult decision I’d be happy to hear from you and share more of my perspective. Thanks again for joining me in caring about our hometown. 

Photo via Town of Herndon

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