Durham wants cut of dining bills

The tax would be similar to one in Wake that helped fund RBC and Civic centers and a children's museum

DURHAM -- Restaurant and bar bills of more than $50 could be subject to a 3 percent tax in Durham County if a proposal being floated now gets legislative approval.

But the tax would meet opposition from restaurateurs, and some local leaders don't think it would generate enough money to be worthwhile.

Any revenue raised by the tax would help fund "visitor amenities" such as a proposed Minor League Baseball museum.

The "expensive" prepared foods tax is an alternative to a 1 percent tax on all restaurant bills that has been blocked for years by Rep. Paul Luebke, a Durham Democrat.

"I think a sales tax hurts disproportionately middle class and low-income people," said Luebke, who said he might be able to support the tax on pricier meals.

Local governments must receive permission from the legislature to levy anything other than property taxes. In most cases, a unanimous local delegation is needed for an authorizing bill to be submitted.

The new proposal will be discussed at a meeting of city and county leaders April 8.

Luebke recently found an ally in another Democratic lawmaker from Durham, Rep. Larry Hall, who opposes the tax because he thinks there are more pressing needs than museums and theaters.

"We will need to rely on our local officials to ensure that capital projects such as the performing arts theatre and others that have a limited audience are self-sustaining," Hall wrote in an e-mail message.

"In many other instances we have needs that are felt more broadly across the community."

Durham leaders have had a case of tax envy for years, as they've seen Wake County rake in millions since 1993 with a 1 percent prepared-food and beverage tax.

That money helped pay for the RBC Center, a children's museum and the new convention center.

Many Durham officials fear they're falling behind.

"We have a study that shows quite a bit of money is needed to update our convention center and expand it, and we have no identified revenue source," said Ellen Reckhow, chairwoman of the Durham county commissioners.

"It's hard for us to remain competitive."

Bad time for tax

Restaurant meals already are subject to state and county sales taxes, which total 6.75 percent in Durham. The N.C. Restaurant and Lodging Association opposes additional meals taxes, as do several Durham restaurant owners interviewed.

Elizabeth Woodhouse, co-owner of the upscale Four Square Restaurant on Chapel Hill Road, said during a sagging economy is not the time to increase taxes on the dining industry. She said rising fuel costs have driven up the price of food, which in turn has forced Four Square to raise menu prices.

"The first thing people cut out in this kind of economy is dining out," Woodhouse said.

"I don't think asking restaurants to fund other developments in the area is really the way to go."

An equal slice

That tells local leaders such as City Councilman Eugene Brown that the 1 percent tax would be easier on everyone.

He and other city leaders are worried about a logistical nightmare for restaurants as they try to keep straight who pays the tax and who doesn't.

Besides, many say, the 1 percent tax would bring in more money, an estimated $5 million annually.

No one is sure how much the 3 percent tax on expensive meals would generate, but Reyn Bowman, president of the Durham Convention and Visitors Bureau, thinks it would be much less than that.

A 2003 study found that only about 2 percent of all meals cost more than $40.

The same study, commissioned by the DCVB, found that households making between $40,000 and $50,000 a year would pay about $16 per year if a 1 percent tax were levied. Households bringing in between $20,000 and $30,000 would pay about $13 a year, the study found.

Bowman said he thinks the expensive meals tax also would affect the poor.

"There's a misconception that only poor people eat at McDonald's and only rich people eat at Parizade," Bowman said, referring to a fancy Durham eatery.

"In fact a lot of poor people eat out on special occasions and spend more than $50, so they're going to be hit by that."