BOS wants to hear more before taking a position on meal taxes

by beth on November 6, 2019

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Above: Advisory’s Chair presented to selectmen the committee’s recommendation to adopt a local meal tax. (image cropped from SAM video)

Last night, the Advisory Committee made its case for asking Town Meeting to add a local tax to meals at Southborough restaurants. The Chair argued that the additional revenue would ease residents’ tax burden without hurting local businesses. Selectmen opted to wait until they hear more from restaurants in town.

As I previously posted, Advisory unanimously voted to support the option. If adopted, eateries would round sales tax up to 7%. The state would pass on the additional revenue to the Town.

Advisory Chair Kathy Cook reported that Hopkinton is the only surrounding town without the tax. Rebutting concerns that it would add to residents’ taxes, Cook said that most of us are subsidizing taxes in neighboring towns when we eat there. Adding revenue from customers passing through would means neighbors would now also subsidize our taxes.

Cook stressed that Advisory doesn’t want more revenue to allow increasing the Town budget. (Vice Chair Chelsea Marie Malinowski later emphasized that they are working to reduce Town spending.) The committee is looking for a way to shift more of the budget burden from property taxes to other revenue streams. Members liked the meals tax because it would bring in $120,000, with part of it paid for by non-residents. Upon questioning, she responded there is no way to quantify how much of would be from out-of-towners.

The Advisory chair urged that the pass through tax increase was unlikely to hurt local restaurants. She didn’t believe that the small increase would impact whether people eat in town or elsewhere. Cook referred to a 4 cent charge added to a $5 Starbucks coffee and 38 cents added to a $50 dollar dinner bill at ¡Hola!. She doubted that people looking to avoid the tax would foot the extra gas to drive to Hopkinton.

Selectman Dan Kolenda was openly skeptical of the tax. He was concerned that residents would see it as one more way the town was increasing their taxes and that money taken would be wasted. He wondered about a slippery slope where the Town would just keep adding other small tax revenues (e.g., landscaping services tax, millionaires tax, trash pickup tax). He also worried about the perception of businesses, when the Town is struggling to fill vacancies.

Other selectmen showed caution. They asked for Advisory to reach out for feedback from restaurants in town. Selectwoman Lisa Braccio said she especially wanted to hear from restaurants downtown, already impacted by the Main Street project. If they opposed, she would like to hear their reasons.

Cook acknowledged that that they would likely oppose it. Comments that night appeared to bear that out. 

Anecdotally, Kolenda shared that four restaurants he spoke with didn’t support it. Economic Development Committee member Chris Robbins said he spoke with a restaurant association and five restaurants, all adamantly opposed. That included the owner of a new pizzeria in town – Zumi. Robbins said that it would cut into businesses’ small margins dealing with “the tightest labor market in history.” He also raised concerns about a softening market and competition with supermarkets and meal home delivery services.

Owen O’Leary’s owner Kevin Gill spoke out against the tax in 2009. He was back last night to oppose it again. Gill said that, ten years ago, when sales tax went up 25% across the state (and even higher in Westborough), it did hurt business. He told selectmen that he has seen a recent decrease in dine-in customers in favor of ordering takeout from the restaurant. He posited that people were avoiding the extra cost of paying tips, which hurts his workers.

Selectmen told them that his feedback was helpful. Advisory was absent for Robbins’ and Gill’s comments. (They were regrouping elsewhere for their regular meeting.) Before leaving, Cook said that the committee would view the video later to see the public response.

In the earlier discussion, Cook also addressed the possibility of earmarking the tax funds. The EDC had discussed the possibility of pursuing a meals tax designated to specific projects – with all or half dedicated to their work. Cook told selectmen that Advisory was against that. She opined that earmarking funds leads to spending more money while not necessarily paying for the things you want the operating budget to cover.

Reacting to Cook’s and Selectman Sam Stivers’ statements that the EDC members seemed in favor of a meals tax if it was earmarked for their work, Robbins reiterated that no vote had been taken. He asserted that he didn’t recall members saying that the tax would be acceptable for Southborough businesses.*

BOS Vice Chair Marty Healey reminded that ultimately if they supported it, it would still have to be passed by Town Meeting. The decision as to whether residents want to pay a meal tax would be decided by them.

*As I posted on Monday, in January the EDC tabled the issue until they could do more homework. Part of that homework was getting more public feedback.

{ 6 comments… read them below or add one }

1 Uber Eater November 6, 2019 at 3:12 PM

“He told selectmen that he has seen a recent decrease in dine-in customers in favor of ordering takeout from the restaurant. He posited that people were avoiding the extra cost of paying tips, which hurts his workers.”

I was interested in this as it didn’t seem to fit with my assumptions on the take out and off-premise dining trends. On limited research I did the tips / cost were not driving factors in this trend. In fact it often costs more to use delivery services. Not sure where I fall on tax just yet but this argument feels off to me.

“The National Restaurant Association predicts that 70 percent of meals will be takeout by 2020” – https://www.usfoods.com/great-food/food-trends/off-premise-dining-is-here-to-stay-are-you-ready-for-it-.html

“Fazoli’s has spent the past two years investing in its drive-thru, carryout, catering and delivery businesses. In addition to online ordering for catering, Fazoli’s has also integrated an individual online ordering system and third-party delivery and has launched a new loyalty app aimed at making carryout orders easier. According to Jennifer Crawford, director of off-premise sales at Fazoli’s, these initiatives have paid off so far – off-premise sales are up 18.5% over last year for the company. ”

https://www.forbes.com/sites/aliciakelso/2018/10/31/restaurants-turning-to-off-premise-channels-to-gain-share/#11fa1d2a3fd5

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2 beth November 6, 2019 at 3:24 PM

To clarify, my impression was that people were getting takeout personally. There was no mention by him of a delivery service.

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3 Uber Eater November 6, 2019 at 3:46 PM

You might be right. But not sure how much that matters. Based on articles it has as much to do with abundance of in home entertainment and desire for unique in-dining experiences as it does convenience. And that certainly resonates with me.

Look at a place like Wellys. They offer online ordering now and have fostered relationship with nearby breweries who do not offer food (2 in area). I think most places are having to adapt to same trend.

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4 Tom November 7, 2019 at 8:56 AM

Restaurant owners are where the rubber hits the road. They know the trends. Mr. Gill, the owner of Owen O’Leary gave good and valuable feedback to BOS on the challenges facing the industry. While other towns may have this tax, the net effect here is a pretty small gain on a big town annual budget and negative impact on small local businesses.

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5 Mike November 9, 2019 at 9:23 AM

As a business owner we know firsthand the results of overtaxation and it is putting small businesses left and right out of business. Our costs as a town , as a nation, as families have to be reduced drastically. We are on a precipice of disaster.

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6 Townie November 9, 2019 at 10:23 AM

This is a bigger than just a tax. Most residents are subsidizing taxes in other towns because they have better and more options for food/drink. Southborough has been a nightmare for new business to come in. There’s little no spaces for restaurants to pop up in, and zoning and planning usually squash any new projects or the few “loud” residents win their “not in my back yard argument” preventing any new commercial properties from happening. Instead of adding more taxes, how about easing up on approving new projects along the rt 9 corridor? Maybe making it easier for down town property owners to open up new businesses?

The big picture is every town around us is growing, residentially and commercially while the boards in Southborough continue to fight it while trying to tax their own residents… It’s getting ridiculous.

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