Knives Out: Restaurant Owners, School Advocates Pick Apart Proposed City Budget

The city’s budget back-and-forth entered its go-time phase this week with the school administration announcing that it’s willing to agree to use millions from the division’s “rainy day fund” to manage a tight upcoming year.

And that is happening as the City Council continues to hear from a string of restaurant owners and others associated with the city’s food scene who are opposed to a possible increase in the meals tax.

The school system’s compromise - at a total of about $7 million - would allow the division to accept the city’s plan to level fund the schools in 2025-26. The school administration had proposed a budget of $113 million of city funding. The reduction of $7 million would reduce the budget to the $106 million of local funding approved for the current fiscal year.

However, school officials are worried that the city administration and the council may be moving toward taking all to most of the division’s rainy day fund amount away - which could amount to more than $27 million. That rainy day fund includes $22.85 million in unassigned fund balance, and another $5 million assigned for potential budget use to help the school division transition away from one-time pandemic-relief federal funding availability, according to the school’s finance director, Kathleen Jackson.

By policy, the school system is required to have at least $13.3 million of that in reserve, Jackson said Tuesday night at a school board meeting. Jackson said the school board would need to look at close to 70 instructional position cuts if the council were to take the total school rainy day fund amount.

School board Chair Eli Jamison, who made impassioned remarks at a Monday council hearing on the budget, teared up again during the Tuesday meeting.

“This is not crying - this is fury,” she said, referencing the situation.

It will be the second straight year that the city opts out of an established funding formula that gives the school system 40 percent of new city revenue. If the council does vote to raise the meals tax, for instance, the school system would have received a portion of that new revenue.

Mayor Joe Cobb said Tuesday that the council does plan to meet with the school board to discuss the formula and potential changes sometime after the city budget is approved. When asked if the council is discussing reducing school funding beyond the $106 million, Cobb said: “No.”

Cobb and Councilman Nick Hagen attended Tuesday's school board meeting. When asked about the possibility that the council could vote to take more of the school rainy day fund beyond level funding, Hagen said he would defer to Cobb's remark.

City Manager Valmarie Turner has said the next fiscal year’s budget - proposed at about $404 million - is full of challenges from maintenance needs to a backup in overtime pay to increasing the city’s salary scales so it can attract and keep workers. And that includes the fact that the city’s annual fiscal report, usually done by the end of the calendar year, still is not finished due to turnover in the city Finance Department last year, Turner has said.

During a public hearing Monday night with a packed chamber, numerous speakers urged the council to not reduce the school budget by an amount that would harm its current operations, with potential staffing and program cuts. Numerous speakers asked the council to take a longer-term view.

Amanda Kelly, a parent of two special needs students, said those programs require adequate staffing space and support.

“Our expectation as residents and as parents in Roanoke city is that all schools continue to have access to the same wonderful opportunities and educational experiences without any cuts,” she said.

Former School Board member Mark Cathey said during his tenure there were projections that the city school system would lose enrollment and that schools would have to be closed and funding would drop. However, that hasn’t happened. Roanoke is attracting people due to its amenities, pace of life and its successful school system, he said.

“And that’s a good thing,” said Cathey, concluding his remarks.

The council has also heard from restaurant owners and food vendors who are opposed to the city administration’s plan to raise the city meals tax by as much as 1.5 percent. They have been a consistent part of this year’s budget process.

That revenue - projected at $2 million per 0.5 percentage point increase - would be used for non-school related city needs such as overtime and maintenance needs, based on the city’s plan.

Monday night, those in the city food business urged council to forego a meals tax increase. If the council approves the 1.5 percentage point increase, the tax would go to 7 percent.

Keith Liles, who owns Deb’s Frozen Lemonade along with his wife, said it’s tough enough to keep prices reasonable with the ongoing challenges that exist today. He said if prices go up due to a meals tax increase, consumers will see that as his doing, not the city’s.

Liles is a member of the Vinton Town Council. He said if the council were to take up a meals tax increase, he’d say no.

Hunter Johnson owns two city restaurants, Lucky and Fortunato. He said the industry is just now starting to recover from the pandemic, when he had to lay off employees.

“I stopped in the parking lot … and got sick,” he said.

Johnson said he’s concerned what a meals increase could mean if that causes any type of downturn in business.

“We need nothing that is going to throw a wrench in what we’re doing now,” he said. “We’re starting to almost get back, and I just ask you all to please consider this.”

Former Councilwoman Trish White-Boyd was the only speaker in favor of a full meals tax increase. She also said council should approve the budget as proposed.

“We are all aware of the really challenging times we face, often necessitating difficult decisions,” she said, complimenting the city administration for its work.

She went on to say the city has been “robbing Peter to pay Paul,” and this is a “pivotal moment for us to address some these issues.”

Cobb on Tuesday said he "hears loud and clear" where restaurant owners are coming from. The meals tax issue aside, he said he'd like the council to discuss giving fiscal breaks to restaurant owners who pay their taxes on time and in full - an issue with which the city has had recent problems.

The vote to increase the tax will not be unanimous. Hagen, the lone council Republican, said he will vote against any meals tax increase. He said the tax is regressive and disproportionately affects those with lower incomes.

Also, Hagen, who took office in January, said council's approval last year of a substantial pay increase - to be phased in over a number of years - should be reconsidered. He said it's one of the largest increases in the city budget based on a percentage.

The budget is set to be approved at a meeting on May 12.