The new sales tax, which exempts groceries, certain hygiene products and prescription medicines, was approved last week. (Mike Platania photo)
Making good on its pre-election pitch to lower certain taxes if voters approved a new schools-focused sales tax, City Hall is kicking off the process to consider reducing the city’s meals and property taxes.
At Monday’s informal meeting of Richmond City Council, Chief Administrative Officer Odie Donald II gave a presentation to council regarding Mayor Danny’s Avula’s planned rollback of the city meals tax from 7.5% to 6.5%, and reduction of the city real estate tax rate from $1.20 to $1.19 per $100 of assessed value.
The planned reductions were part of the promise Avula made over the summer when he proposed increasing the city’s sales tax by 1% to create more revenue for Richmond Public Schools. The extra sales tax money is set to be earmarked exclusively for RPS capital projects.
The proposal was approved by the Richmond electorate during last week’s elections, passing with nearly 68% of the vote. Now it needs approval from city council, and could go into effect as soon as July 2027. The city estimates the increased sales tax will generate around $47 million annually for school facilities, and RPS is currently working on a “Facilities Modernization Plan” that will guide capital projects going forward.
In the meantime, the mayor and some members of council said they’ve begun the legislative process to reduce the meals tax for the first time in nearly a decade. It was last increased in 2018 from 6% to 7.5%, likewise to create more funding for RPS facilities.
Councilwoman Katherine Jordan wrote in her newsletter this week that she’s “begun the process of drafting legislation on both the sales tax measure and to reduce the meals tax by 1%.”
Councilman Andrew Breton also wrote in his newsletter this week that he’s committed to pushing for a 1% reduction in the meals tax “to ensure that Richmond restaurants are not asked to carry any additional burden.”
Donald told council Monday that the mayor’s office has “committed to roll back the meals tax, and … we have a resolution for it.”
It’s unclear when the city is aiming to have a reduced meals tax go into effect.
As for a potential real estate tax reduction, Avula said in a statement last week that in March he will introduce a budget that includes the one-cent cut. But at Monday’s meeting Donald indicated that the city is facing a roughly $17 million budget deficit heading into 2027, and that the shortfall would reach $21 million if the real estate tax rate is reduced.
“For this year, we do have fiscal pressures. We’ve made commitments in the past that come due this year,” Donald said.
General economic headwinds are a cause for those fiscal pressures, Donald said, as are personnel costs and unexpected costs to repair or replace the city’s aging John Marshall Courts Building, which just weeks ago suffered water damage.
Donald said he’s advised department heads at City Hall to look into ways to reduce their budgets by up to 10% for the next fiscal year, and that City Hall will begin a hiring freeze on Nov. 16.
Donald added that a schools reserve fund could be used to help cover some of the revenue the city would lose by reducing the meals tax.
“If we use our school reserve to pay that debt for the meals tax, we’ll be able to cover the reduction,” Donald said. “So that is another burden that is lifted.”
This all comes as Councilwomen Reva Trammell, Sarah Abubaker and Stephanie Lynch are pushing to reduce the real estate tax rate even further to $1.16.
In February, council passed a resolution asking the mayor’s office to proposed side-by-side budgets with $1.20 and $1.16 tax rates for the 2028 fiscal year, and on Monday Lynch asked Donald if that’s something the mayor’s office will honor. Donald said he’s not sure if the mayor will do so, noting that the city would have to reduce its workforce under a budget with a real estate tax rate of $1.16.
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