Thursday, October 09, 2008


Many restaurants not only support the prepared meals tax, they helped shape it, rolling up their sleeves to give constructive input on the uses. Chefs like Scott Howell and Wilma Dillard are even honorary co-chairs. The majority of Durham restaurateurs realize it is a tax on consumption, added after the bill, not a tax on restaurants. They believe Durham voters should make up their minds without interference.

The objections; however, of a the Raleigh-based state restaurant association is a reminder of those raised by a hotel chain or two when room occupancies taxes were introduced in the ’60’s and ‘70’s as a more fair and effective way to self-fund visitor promotion (vs. memberships paid only by a few cobbled together with grants). “This isn’t fair. Why are we being singled out, etc?” But the occupancy tax, where modest and used as intended, has been the biggest boon to attracting visitor commerce of any development in the last 50 years.

But the downside is the burden is born entirely by the 1 in 4 of all visitors who stay overnight in commercial lodging. The inherent inequity in the occupancy tax-only formula is that in Durham, for example, restaurants harvest 26 cents out of every dollar of visitor commerce, compared to 21% by lodging properties. I hear the restaurant associations, both national and state herald how important visitor commerce is now to restaurants (40% of fine dining, 20-25% of family or casual dining, and 15-20% of quickservice), but object to permitting their customers to help self-fund the costs of destination marketing and development. I don’t see that logic.

They herald what comes their way as the fruits of a special tax on lodging customers, but then strenuously object to being “singled out” as they put it, when asked to pitch in?

It seems that rather than playing the victim, many Durham restaurants are taking a better route, believing it is now time for restaurants to permit their customers (both day-trip and overnight) to help in the process of, not only drawing visitors, but developing and maintaining Durham as a destination. After all, this isn’t a tax on the businesses, though these businesses stand to greatly benefit. One particular vocal opponent is handing customers a flyer complaining about fuel costs and that the penny on the dollar meals levy will be a burden.

But he isn’t going to pay it. It doesn’t come off his bottom line. The proposed prepared meals tax is on consumption, and added after the bill. So the “Woe is me,” sentiment raised by the state association just doesn’t resonate. Restaurants complain when customers don’t tip…why are they objecting to their customers freedom to vote yes on a tip to improve Durham.

The reason occupancy taxes have worked so well (where used appropriately) is they took the old membership model, where a very few paid but everyone benefited, and made it much more democratic and effective. All the penny on the dollar prepared meals tax does is ask another group of direct beneficiaries to do the same in a very manageable, democratic way.

What’s even more puzzling about all of this is the state restaurant association itself helped pioneer the prepared meals tax in North Carolina during the last recession, delivering it on a silver platter to the state’s largest two cities and counties and scores of towns, including their home base Raleigh…and without any kind of referendum.

Then, as a 1999 email I have from the association tells it, some members got in a snit because the legislature repealed the tax on groceries. You see, those in the snit seriously confuse grocery stores and restaurants as competition. Huh? I may have missed a class or two during economics 101, but groceries fall under necessities and dining out falls under leisure activities. Restaurants don’t compete with grocery stores, they compete with other leisure choices.

To make things appear very hypocritical, while the association vehemently objects to Durham residents getting a clear and unfettered choice at the polls, it has turned a blind eye when convenient to requests of a powerful legislator or two when Fayetteville and the Outer Banks received the tax with no referendum required.

So if it works where the association pioneered it and it works when convenient, why be so adamant and hostile when a community like Durham wants to let voters decide, unfettered by outside interference on a proposal that is far more well thought out and to the industry’s benefit than any it has approved in the past? The state restaurant folks are good people, but this sure seems like a big double standards.

It is time for restaurants, as many Durham restaurant owners already believe, to be at the table…not just to harvest visitor commerce, but to let their customers, 40% of whom in Durham are visitors and non-resident commuters, shoulder some of the burden of developing and maintaining Durham as a visitor destination.

Usually the private industry points to elected officials as unreasonable. But in Durham’s proposed meals tax, elected officials have worked hand in hand with the Tourism Development Authority and other stakeholders including restaurateurs on a proposal that makes more sense than any prepared meals tax I’ve read about…dedicated uses that benefit restaurants and diners…, e.g., cleanup and beautification (food wrappers make up 20% of the litter stream), workforce training, visitor promotion, and building and upkeep of cultural, civic, and recreational projects like theaters, museums, etc.

Judging from news reports, the restaurant association dismisses these as “pet” projects. But this is the same group that supported this same tax in the state’s two largest communities and counties to pay for convention centers, a narrow type of visitor business that is proportionately far less beneficial to restaurants, than the types promoted by Durham’s uses.

After 50 years of seeing how well the special tax on overnight hotel guests works, you’d think the restaurant industry would more easily grasp how permitting their customers to play a part in visitor commerce would be a snap.

For now though, the association is taking the same “no and hell no” approach taken by early occupancy tax opponents, but it is only a matter of time. When the day comes though, and it will come, hopefully they get a deal with a fraction of the benefits in the Durham referendum.

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