Amid an especially tight budget season, Roanoke is looking at increasing its meals tax by 1.5% to bring in some extra revenue for the city. It’s one of the most contested changes the city has recommended in the FY26 budget proposal.
In the city’s eyes, it’s a way to bring in more revenue without having to change the real estate or personal property tax rates. But some restaurant owners see it as another hit to their businesses, and others in the city fear that it could disproportionately affect lower-income families.
The increase would bring Roanoke’s meals tax to 7%. The city expects about $6 million in additional revenue from the proposed increase.
The total proposed budget for fiscal year 2026 is $403.7 million, an increase of 6.5% over the current budget of $379.1 million.
The proposed budget also includes $3.5 million in cuts across city departments, and a level budget for Roanoke City Public Schools, rather than an increase that is consistent with the city’s own projected revenue increase.
Roanoke budget discussion
The Roanoke City Council will hold a public hearing on Monday evening where citizens will have a chance to speak on the proposed budget, including a separate hearing specifically on the proposed meals tax increase.
Agendas for both the 2 p.m. regular council session and the 7 p.m. public hearing can be found here. Both meetings will be held in the city council chamber, fourth floor, room 450 of the Noel C. Taylor Municipal Building. Those interested in speaking during the public hearing can sign up here.
City Manager Valmarie Turner said the extra revenue from the proposed 1.5% meals tax increase would go into two pools of money, with 0.5% going toward what Turner called “unfunded priorities,” including overtime increases, technology and other contractual increases, and temporary wage increases. The other 1% would help pay for deferred capital maintenance, including repairs to 14 elevators in city buildings.
This is consistent with what Mayor Joe Cobb has identified as his largest priorities in this budget season: employee compensation, including getting 200 city employees up to a living wage, and addressing backlogged maintenance, potentially at increments of $4 million to $6 million yearly.
‘As an industry, we’re upset’
Jason Martin, who owns three restaurants in downtown Roanoke — Martin’s Downtown, Sidecar and Jaybird Tavern — has been in the restaurant business for around 30 years. He said the effects of the meals tax add up over time.
A customer might be comfortable with the price listed on the menu, Martin said, and later experience “sticker shock” when they see that their bill is higher.
“The last thing they remember walking out of my restaurant is, ‘Man, that was kind of expensive.’ It’s startling, and it’s just not a good overall perception or look for the restaurant.”
Martin was one of five restaurant owners who participated in a video circulating on social media that urges the council to rethink the tax hike. A petition opposing the tax increase had garnered more than 1,700 signatures as of Friday morning, citing long-lasting effects of the pandemic on the industry and rising food and utility prices.
Martin said that for his businesses, this tax increase would be just another challenge to face.
Matt Bullington owns Texas Tavern in Roanoke, which is almost 100 years old, and has been in the restaurant business for over 30 years.
“It feels like every time the city gets in a financial crisis, they come to our industry to fill the shortfall,” Bullington said during an April 7 Roanoke City Council meeting.
He said that in his eyes, the pandemic hurt the restaurant industry the hardest.
Nathaniel Sloan owns Bloom Restaurant & Wine Bar, which opened in the Wasena neighborhood in 2019, not long before the pandemic hit.
“As an industry, we’re upset. We’re exhausted. Tired. Broke,” Sloan said during the same council meeting. “To think we are a source of tax revenue for a city that is progressive and has a lot of opportunities and ways we can manage our funds more efficiently, it seems like this is an opportunity for change.”
He asked that the city “find ways to cut the fat” and said restaurant owners do it themselves every day.
“I think [the city] has to look back in the mirror and figure out how to fix it without penalizing the community, and especially one specific industry,” Martin said.
Cobb said the city’s intention is not to “put an unfair burden on restaurants.”
“It’s to look at what we, within the scope of our revenue sources as a city, have options for,” adding that the only other options for bringing in these large sums of money would be to increase the real estate or personal property tax. The city has not proposed increases to either of those taxes, which have both remained steady for years.
Andrew Hayashi, a professor at the University of Virginia School of Law with a background in tax policy and behavioral law and economics, said that increasing a meals tax can be “politically easier” than raising the real estate tax, but that broader tax increases, like a sales tax increase, are more economically efficient.
In Virginia, localities aren’t allowed to raise the sales tax without specific permission from the General Assembly. The rate currently sits at 5.3%.
Hayashi said some cities “aggressively” try to collect revenue from penalty fees and fines. “And this is better than that. You’re much better off adopting a broader tax base than trying to squeeze revenue out of fees and fines and things.”
“It sounds like it’s a bad choice to have to raise taxes anywhere in a case like this,” Hayashi said. “But it’s probably driven by the fact that you can do it and it’s politically going to be easier than raising real estate taxes.”
A disproportionate impact on lower-income residents?
At its current 5.5% rate, Roanoke’s meals tax is comparable to a few of its neighbors, according to Davenport, the city’s independent financial adviser, which recommended the tax increase. Franklin County has a 4% meals tax, as does Roanoke County. The town of Blacksburg, Botetourt County and Salem are all at 6%.
Lynchburg, with about 80% of Roanoke’s population, has a 6.5% meals tax. Bristol, which is significantly smaller than Roanoke, charges 10%.
Several council members have raised concerns about the tax.
Councilman Nick Hagen said the meals tax disproportionately affects people of lower incomes, who might be working multiple jobs and are more likely to grab a bite to eat out.
“People are living paycheck to paycheck, and then the increase of that by 1% to 1.5% on top of everything else, that adds up,” Hagen said. He added that he’s opposed to tax increases in general.
Hayashi said that this idea is consistent with his findings from a few years ago.
“Consumption taxes in general are regressive, because lower-income people consume a higher share of their income than higher-income people,” Hayashi said. “This is probably going to be felt more by lower-income households.”
Councilman Terry McGuire said from years of experience working in restaurants, he understands that the food industry is “under a lot of pressure with their profit margins.”
He said a small amount added to the bill “doesn’t make a huge difference” for the customer, but it might inhibit the restaurant’s ability to raise prices due to product and material price increases, while keeping their customer base.
In general, he said he doesn’t like the proposed increase. He acknowledged that eating out is discretionary. “I know some people do eat a lot more fast food than others for just their lifestyle, like if they work a bunch of jobs. So I’m not diminishing the financial pressures people are under,” he said. “But as far as taxes go, [eating out] is an optional thing and it doesn’t land just on Roanoke city taxpayers.”
Councilwoman Evelyn Powers declined to comment on the meals tax proposal at this time, and council members Peter Volosin and Vivian Sanchez-Jones did not respond to emails asking for comment.
Who does the meals tax affect more, locals or out-of-towners?
Councilman Phazhon Nash said he believes that increasing the meals tax would have less of an impact on city residents than would a jump in the real estate or personal property taxes.
“We’re kind of tied on where we get revenue from, and you can’t cut everything,” Nash said. “Who do we let go of in the city where the citizens don’t suffer?”
The Davenport recommendation had noted the fact that the meals tax would not only target Roanoke residents, but would also collect revenues from out-of-towners coming to the city for a bite to eat. Some are refuting this idea.
“People like to think it’s just the affluent out-of-towners, but a lot of times, I’ve got a mom on the go who comes by to get something really quick to eat,” Bullington said.
The National Restaurant Association says that 70% of restaurant checks between $15 and $25 are paid by local residents. A 2024 infographic from the Virginia Restaurant, Lodging and Travel Association says that lower-income households spend the largest percentage of their income on restaurant food and beverages — the U.S. Bureau of Labor Statistics estimated that households making less than $30,000 yearly spend 9.3% of their income in this way.
The bureau data shows that as income increases, the percentage of income spent on meals and restaurants decreases — those making $100,000 to $199,999 per year spend 3.8% on meals.
Cobb said he has been looking into a potential deduction to the meals tax rate for restaurants that pay the tax on time, as “a nod to the restaurants that pay on time, and maybe an incentive for those who struggle to see that there’s some kickback to them.” Any deduction would have to be approved by the city manager and council.
Cobb noted that grocery and convenience stores with fresh deli food prepared on-site also must collect the meals tax, but only for those prepared goods.
The city’s meals tax last went up in 2010, when the city council raised the rate from 5% to 7% for two years. It was part of a program called “Eat for Education,” and all additional revenue supported city schools.
Cobb said tapering off, or sunsetting, the increase is also an option the city may look at this year. This is something that McGuire said he’d ask the city to consider, too, if the increase is approved.
“I think because of what we want to prioritize this for, we need to be realistic about those deferred capital needs and how much time it’s going to take us to catch some of this up,” Cobb said.
New: Share your thoughts on the meals tax here.
