City puts meal tax hike on back burner

The "nickels and dimes" that would be added to Gloucester restaurant bills under the city's meal tax proposal will stay in diners' pockets — for now.

A vote on the potential tax hike, resented by members of the hospitality industry, was delayed this week until next year — and until the new group of city councilors sworn in on Jan. 1.

Described by Mayor Carolyn Kirk as a desperately needed revenue boost for a city government facing potential insolvency, the meal tax would add .75 percent to the current 6.25 percent tax the state tacks on restaurant bills already.

But restaurateurs call it an unfair burden on their industry that will bring a chilling "psychological" effect on customers and drive them to Rockport, Essex, Ipswich and beyond, where the tax does not apply.

On Tuesday night, the size of the tax hike — which would tack an extra 75 cents onto a $100 meal, or around 4 cents onto the price of a sandwich — was at the center of arguments.

Supporters of the tax say that, in the context of living expenses or the cost in gasoline of driving to another town, the additional tax is insignificant.

But meal tax opponents say the small size of the hike is a reason not to approve it.

Describing it as an act of "nickel and diming," several restaurant managers said the revenue generated by the new tax would not make enough to offset the potential harm to their businesses.

The estimated $356,000 in meals tax collected in a full year is not a lot when compared to the massive infrastructure projects facing the city, they argued, although none suggested making the tax hike larger.

"You are not going to get (the necessary revenues) nickel and diming," said Dave Anderson of Middle Street. "You have to go for the big stuff."

"We have had it in Massachusetts with taxes," said Fred Shrigley of the Rhumb Line on Railroad Avenue. "This proposal is taking nickel and diming to another level."

The big losers with a .75 percent meal tax would be function halls, said Sheree DeLorenzo of Cruiseport Gloucester, who said the .75 percent tax added to the cost of a $40,000 wedding at her function hall would be substantial.

But a group of school officials, staring at sizable budgets deficits in the coming years, disagreed.

"I think this is an important thing and a reasonable tax," said School Committee Chairman Greg Verga, who will be the new Ward 5 councilor in January. "This is a small way to keep us toward solvency."

Since state lawmakers this summer allowed cities and towns to adopt local meals taxes — and a 2 percent local hotel room tax increase — 69 communities have done so.

In Gloucester, the hotel room tax hike has been unable to escape opposition in the Ordinance and Administration Committee.

Schools Superintendent Christopher Farmer called for the passage of both local option taxes in Gloucester, saying the effect on consumer behavior was overblown.

"I can't see that people's behavior will change in any perceptible way," Farmer said. "I have never inquired about a room tax when booking a hotel."

School officials have been particularly attuned to the city's coming budget crunch, since a presentation from Kirk and the city's chief financial officer last week described a $3.3 million budget gap for the school system over the next five years.

At the end of the presentation, under the heading "Ideas for Closing the Gap" local option taxes were the first of eight ideas listed.

School Committee members Val Gilman and Melissa Teixeira also issued support for the meal tax proposal.

While opposition to the option taxes in the tourism and hospitality sectors was probably unavoidable, the Kirk administration's awkward rollout of the proposals has not helped their popularity, especially in the City Council.

When both the meal and room taxes were first proposed during the summer, the mayor's office recommended earmarking the revenues toward a series of popular causes that had weeks before been a subject of emotional debate in budget talks.

But as the package languished in the Ordinance and Administration Committee and the passing months reduced the amount the city could realize from the taxes this year, the earmarks changed.

First the Kirk administration recommended that a percentage of the revenues be dedicated to tourism promotion in an effort to placate that industry.

Then last month, with the meals tax returning for debate stripped of the hotel tax, Chief Administrative Officer Jim Duggan told councilors the revenues were needed immediately to close a deficit in the snow and ice removal budget.

When the snow and ice deficit was closed without the meal tax money, Council President Bruce Tobey pointed to the shifting earmarks as a sign that the issue had not been properly considered.

"This should be considered in the context of next year's budget," said Tobey, whose use of a procedural rule pushed the issue off until the next council meeting. "I am saying no tonight — not now — maybe later. This isn't the time."

When the meals tax returns for debate next month, the prospect of gaining the votes necessary appear good based on comments Tuesday.

Of the five councilors returning next year, three said they would have voted yes: Joseph Ciolino, Jackie Hardy and Steve Curcuru. Two of those returning said they would have voted no: Tobey and Sefatia Romeo Theken.

And two of the four incoming councilors — Verga and Paul McGeary — said they would have voted in favor.

Patrick Anderson can be reached at 978-283-7000, x3455, or via e-mail at panderson@gloucestertimes.com

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