NEWPORT — Two tax measures intended to raise money for city of Newport infrastructure repairs, public safety services and facility maintenance will appear before voters in November, including a proposal for a new prepared food and beverage tax that already faces strong opposition from local restaurateurs.
The Newport City Council on Monday night voted to run the new food tax and a gas tax increase during the Nov. 2 election.
The food tax would set a new, 5 percent tax rate on prepared food and drinks purchased from restaurants in Newport and raise roughly $2.5 million in its first year to fund 8.5 city staff positions, including three firefighters and three police officers lost to budget cuts last year; maintenance and repairs on 48 city-owned buildings and parks; equipment replacements; and one-time grants to help restaurants prepare to implement the new tax.
The gas tax increase would boost local gas tax to 5 cents per gallon year-round, up from a variable rate of 1 cent per gallon seven months of the year and 3 cents per gallon during the peak tourist season. It would raise $400,000 for street construction projects.
Several local restaurant owners urged city councilors to abandon the food tax during a public hearing ahead of the vote. Nearly 25 citizens attended the hearing, and half a dozen more submitted written comments for the council.
Almost all of the comments touched on themes of inequitable treatment of the restaurant industry, poor timing and ideas for alternative ways to raise money.
“Our industry has been hit the hardest out of any industry in this area because of the pandemic. … Singling out our industry with this tax is horrible,” said Mike Franklin, owner of Newport Chowder Bowl.
“This thing is never going to pass. We put out a preliminary poll asking locals, ‘Are you going to vote for this?’ … I think 87 percent or 90 percent said absolutely not,” said Janell Goplen, owner of Clearwater Restaurant and Barge Inn Tavern.
Terry Hopkins, a representative with the Oregon Restaurant and Lodging Association, also attended the meeting to speak out against the tax. He noted that his organization has never supported a city’s food and beverage tax.
“We’ve worked with cities who have been in this exact same seat and came up with decisions that didn’t require a direct tax on food and beverage,” Hopkins said. Without giving specific examples, he said those cities looked to other options, such as parking fees or tourism improvement districts.
Councilor Dietmar Goebel initially suggested waiting until May 2022 to run the prepared food tax, so the city could invite restaurant owners to a work session to further discuss the tax and potential alternatives. However, most of the other council members disagreed that waiting would change the community’s sentiment toward the tax.
“I’d kind of like to find some middle ground, but from what I’ve heard tonight, the restaurateurs are not going to support this, whether it’s in November or May,” said Councilor Ryan Parker.
City Manager Spencer Nebel cautioned that waiting to run the measure would leave less time for restaurants to transition into the change should the measure pass or less time for the city to prepare a new plan and budget should the measure fail.
He confirmed to the council that the measure has a sunset clause that ends the tax after five years, unless the council acts otherwise. The measure also functions to set a 5 percent tax rate capacity but does not require the city to set the rate at that maximum amount every year, meaning the council could vote to decrease the tax rate if it found a better way to fund the needed facilities improvements.
Councilor Cynthia Jacobi said those two aspects of the tax mean there is “nothing to stop us from rescinding it totally … if we got some other hybrid ideas on board.” The council expressed interest in meeting with Hopkins and the local restaurant owners to discuss their ideas, though it did not set a formal work session.
After nearly 90 minutes of discussion, the council voted 4-2 to add the prepared food tax to the November ballot. Councilors CM Hall and Aaron Collett cast the dissenting votes; councilor Beatriz Botello was absent.
Two-thirds of the crowd left after the vote on the food tax, and no one commented on the gas tax during the meeting. The measure did receive three written comments, but all three comments included remarks on the food tax, too.
The council unanimously approved sending that measure to the November ballot.
Both tax measures are among others recommended by the city’s Finance Work Group in its five-year financial sustainability plan approved by the city council in March. Without adding the revenue increases and spending decreases suggested in that plan, the city anticipates annual budget shortfalls that will deplete the reserve funds by 2023, according to city documents.
The initiatives focus specifically on spreading the tax burden to not only local residents but also tourists, Nebel said. If approved by voters, both tax rates would take effect July 1, 2022. If one or both of the taxes do not pass, the city will need to consider alternative ways to balance the budget.
The city has already downsized expenditures by cutting 22 full-time staff positions and increased the transient room tax to raise additional money for general operating expenses.