By Michael Birnbaum
Monday, October 13, 2008
In what is probably the region's most significant test this fall of public sentiment on taxes and school funding in the worsening economy, Loudoun voters will decide Nov. 4 whether to endorse a meals tax to raise money for school construction.
Will residents of one of the area's wealthiest counties be willing to support new taxes for schools as property values dwindle and retirement funds shrink? The question comes as schools across the region are feeling pinched by dwindling local and state revenue.
The measure would grant county supervisors the power to tax meals in restaurants and prepared meals at grocery stores up to 4 percent. If passed, it would raise up to $13 million annually and shrink the $176 million budget gap county officials expect next year.
"We have an awful lot of folks who do not live in this county" who eat in Loudoun restaurants, said Board of Supervisors Chairman Scott K. York (I). "They would be leaving that tax behind to help pay for school construction."
For instance, officials said, meals purchased at Dulles International Airport would be subject to the tax.
Supervisors voted in July to put the measure on the ballot.
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This isn't the first time Loudoun residents have voted on a meals tax. Similar measures were defeated in 1992 and 1998, but the tax was never explicitly tied to school funding. A change in Virginia law after the last vote allowed the supervisors this time to tie the two issues.
In the Washington region, the District, Alexandria and Arlington County have meals taxes. So do Falls Church, Fairfax City, Leesburg, Purcellville and Middleburg. Towns in Loudoun that have a meals tax would be exempt from the new county levy.
Revenue would be used to pay down debt from past school construction or pay for new construction. Because school construction is largely financed by bonds - essentially, taking out a loan - paying some cash up front could lead to later savings. Ben Mays, Loudoun's deputy chief financial officer, estimated that using revenue from the tax exclusively to replace bonds would save the county $1.2 million a year on debt service. Those costs add up over the course of the 20-year bond, he said.
Put another way, Mays said, "Every other year, we'd get a free elementary school."
Some customers of Loudoun restaurants said the tax is a good idea.
"We need to do something to build the schools," said Karen Sears, a Loudoun resident who was eating at the South Street Under restaurant in Leesburg last week.
Even some tourists agreed. Mike McCall was passing through Leesburg last week on a visit from Johnstown, Pa.
"It's good for the residents because they'll have tourists pay for it," McCall said. "The tourists will have to bite the bullet a bit."
Loudoun officials said they are uncertain about the measure's chances. New taxes are a tough subject any year, and this isn't just any year.
The Loudoun County Republican Committee last month announced its opposition to the measure. "People in Loudoun are hurting economically," said Republican county committee chairman Glen Caroline. "I think the last thing we want to do is hurt people as consumers."
School construction is a perennial problem for Loudoun schools, the region's fastest-growing system. The schools added 3,000 students this year - enough to fill a high school, a middle school and an elementary school - for a preliminary fall enrollment of 57,000. An additional 2,500 are projected next year.
Loudoun voters will face two other school construction measures, which propose to raise more than $100 million through bonds to build an elementary school and a high school in the Dulles area.
The School Board endorsed the meals tax 8-1 early last month, with Joseph M. Guzman (Sugarland Run) dissenting, although some board members expressed skepticism about how much the measure would benefit schools.
"The idea of diversifying the tax revenue is a good one," said board Vice Chairman John Stevens (Potomac). "But it doesn't change the basic dollars that are spent on schools." He said he was glad that the supervisors had taken action on school funding, but he noted that last year the supervisors drastically cut the school system's proposed building maintenance budget.
York said he looks forward to seeing what the voters decide next month. He said he is cautious about property tax increases, which might be debated next year.
"Education is very important," he said. "But we also want our families to survive and be living here."
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