Restaurateurs worry about proposed tax’s impacts on customers, employees

The county held an informational meeting, similar to the two budget workshops it held this past fall, on Thursday to inform constituents about the county’s financial situation and the two ordinances that will be on the May ballot.

The draft ordinance for the levy is fairly straightforward: Up to $0.89 per $1,000 of assessed value for public health and safety services, effective for five years beginning in 2019. The prepared food and beverage tax is a bit more complicated, however, and while it was very popular with those who attended the budget workshops in the fall, it doesn’t sit well with the restaurant owners who will have to administer the tax.

“Yes, I know our county needs money, but I feel like this is tunnel vision and it’s going to hurt food trucks and it’s going to hurt small businesses like me,” said Megan Davis, owner of Pine Street Bakery. “I’m all for social services and I think we need it, but I don’t think this is the way to do it.”

Davis has experience operating retail bakeries on both sides of the river and said that, though collecting and keeping track of sales tax is “always a pain in the neck,” it is doable. However, she questions the fairness of Hood River County’s proposal.

“If I go to Andrew’s and buy popcorn and a soda, I don’t pay tax, but if I go buy a locally grown salad, I do,” Davis said when asked her personal opinion on the tax. “Do I lay off my employees to put up vending machines?”

While the ordinance does include lists specifying what is included in the tax and what is exempt (see sidebar for details), the tax is meant to apply to all prepared food and beverage items intended for immediate consumption and exclude groceries. For example, a single pastry from a bakery would be taxed, but an order of six or more pastries would not.

There are also a few exceptions to the “for immediate consumption” rule: Confections such as candy, popcorn and chips, as well as food sold in vending machines or in schools, and food provided by a hotel or a hospital, are all exempt from the tax.

She added that enforcement is another concern, asking, “Who is going to come and look at my books and ensure that I’m paying tax on my salad but not on my loaf of bread?”

The commissioners attributed the food and beverage tax’s popularity at the fall budget workshops to a public interest in getting tourists to contribute to the services they benefit from — which is why the revenue from that tax will go towards offsetting the cost of services used by visitors (see sidebar for details).

Matt Swihart, owner of Double Mountain Brewery and Taproom, said he understands why the commission aims to tax tourists, but the county’s assumption that tourists are the main group that eats out in Hood River “certainly doesn’t hold true to my business … When I look at my restaurant, I see people whose kids go to the same school as my kids,” he said. “This is a tax on local people who go out to eat.”

Double Mountain recently had to raise its menu prices to accommodate for the minimum wage increase, he said, and he expects that — even though the county will cover the cost of administrating the tax — increasing the customer’s bill further will negatively affect his employees’ take-home pay and tips. “My bartender behind the bar, that (tax) will affect his family.”

He said that he would support broader-based tax reform, or a county-wide sales tax, but he thinks this tax proposal unfairly targets his business. “That’s really what this is, they’re singling out 20 businesses in town that’ll have to support its county services and its unfair,” he said. “We support additional revenue for the county, we just think it should be spread across an even level.”

Hood River County tried to get a 2 percent general sales and tourism tax passed last year, but it met significant opposition by the community and was ultimately abandoned before making it to the ballot. 

A 3 percent tax on retail marijuana sales did make it onto the November 2018 ballot and passed — but that only raised $20,000 annually for the county, which needs a bare minimum of $1.6 million to avoid more cuts, and another $3.2 million to bring county services up to appropriate levels.

Former Commissioner Maui Meyer said that the county has been working on long-term solutions to its budget crisis and making cuts since before his first day on the job in 2003, but most proposed solutions were either deemed too risky or rejected by constituents. 

Since 2006, the county has pulled more than $7 million out of its Reserve Fund to balance each year’s budget, despite significant cuts. Since the county has been operating at a deficit for nearly a decade and has continued to cut capital outlay to support other areas of the budget, county buildings and other infrastructure suffer from a lack of maintenance and multiple departments are in drastic need of new equipment.

“I don’t know what we can cut anymore,” Meyer said. “As frustrated as I am at the decision to choose a food and beverage tax, this is the one that gets most towards the population that gets into our community but, because of Oregon’s tax structure, don’t have to pay anything,” he said.

Meyer, who has over 25 years of experience in the food industry, said that even though the tax is hurtful to tourist-based businesses like his, he can’t think of a better way to access that tourist revenue stream.

The optimal solution to the county’s financial crisis is statewide tax reform, Meyer said — but “until we get that, this will keep Hood River County afloat with the services its accustomed to.”

A public hearing on both the prepared food and beverage tax and the public health and safety levy will be held at 6 p.m. on March 18, location to be determined.