Eat for Education roanoke, virGinia, Provides FiscaL First aid For k-12 education - GFOA
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Eat for Education Roanoke, Virginia, Provides Fiscal First Aid for K-12 Education
I
n March 2010, the Roanoke City Council took a bold step
to support K-12 education, unanimously voting to increase
the local meals tax by 40 percent at a time when anti-tax
fervor was sweeping the Commonwealth of Virginia. Then
the city worked with community and private organizations,
using the tax increase to rally the public, encouraging them
to eat at local restaurants in support of K-12 education. The
program succeeded, in large part because of the clear and
timely financial information provided to local media and the
community.
DECIDING TO FOCUS ON SCHOOLS
About a year before the recession struck, the city, the
city council, and the school board started down a path to
improve the performance of the city’s public schools. The
school board increased its level of commitment to improving
school performance. New school administration was hired,
and the city council increased its support.
The performance of Roanoke city schools was poor. The
graduation rate was less than 50 percent, and almost 70
percent of students received free and reduced-rate lunches.
Numerous schools were unaccredited, and some failed to
achieve federal Adequate Yearly Progress standards. People
who lived and worked in the Roanoke Valley often hesitated
to send their children to Roanoke’s public schools because
of these performance issues, as well as social and behavioral
woes within the schools.
Faced with deep cuts in funding from the commonwealth,
coupled with a reduction in funding from the City of Roanoke
under a local tax-sharing formula, Roanoke City Public Schools
was expecting budget reductions of up to 10 percent from fiscal
2010 to 2011 — in the range of $10 million to $14 million. Though
the city council had provided funding above and beyond the
tax-sharing ratio the year before, in an effort to maintain school
funding, the cuts expected for fiscal 2011 appeared to be damag-
ing to recent efforts to resurrect the schools.
Roanoke City Council members knew that for Roanoke’s
success in the arenas of economic development and qual-
ity of life, school performance had to improve. City council
members feared that such progress would be impossible
without adequate funding and that if funding to the schools
was reduced, it could have permanent devastating effects.
TWO CENTS FOR TWO YEARS
During the early part of the fiscal 2011 budget cycle, one of
By Ann H. Shawver the city council members came up with an idea to address
December 2010 | Government Finance Review 39
the problem: a meals tax increase that would be dedicated As discussions progressed, some officials suggested consid-
to the city’s public schools. After looking at the revenue that ering the lodging tax for an increase, along with the prepared
would be generated and the tax rates of surrounding juris- food tax. There were drawbacks to this idea, though, that led
dictions and other Virginia localities, he made his case. He some Roanoke officials and community leaders to decide
proposed increasing the existing meals tax by two percent- this tax would be a poor fit for support of the school division.
age points, to 7 percent from 5 percent, effective from July 1, First, increasing that tax by one percentage point would pro-
2010, until June 30, 2012, at which time the rate would revert vide only $360,000 in revenue. Also, that revenue had histori-
to 5 percent. cally gone to the local convention and visitors bureau.
This idea immediately won praise from K-12 supporters, Another idea was increasing the prepared food and bever-
and it drew little criticism. Other alternatives were exam- age tax by two percentage points for two years or so, and then
ined, but none provided as sizeable an impact on revenue permanently increasing the tax by a lesser amount such as
— approximately $2.2 million per percentage point of tax 1.5 percent. While the latter might have been a more sound
increase. Other attractive features were that this plan taxed solution from a budgetary standpoint, the “two percent for
those who had the ability to pay for restaurant meals, and the two year” proposal had already caught on by that point, and
tax was funded in part by non-resident visitors to Roanoke. supporters of the concept were quick to condition their sup-
As a city, Roanoke had the authority to increase its local tax port on the requirement that it sunset in two years.
without approval by the commonwealth and without holding As required for all tax rate increases, a public hearing was
a voter referendum. Roanoke leaders did not believe that held to allow citizen input. At the public hearing, numer-
this revenue initiative would have a major affect on people’s ous educators and school supporters voiced support for the
dining habits, but some parties were concerned that this increased tax, and the general citizenry voiced no opposi-
could be a risky move at a time of economic challenges tion. The restaurant community, however, felt it had been
because it would make Roanoke’s meals tax rate the highest singled out as an industry, and numerous restaurant owners
of any city in Virginia. took to the podium to object, although many felt that this tax
increase was probably a done deal.
ALTERNATIVES
During Roanoke’s budget season, city officials considered FORECASTING THE IMPACT
a number of alternatives to provide additional funding to The city council unanimously approved the “two percent
the schools. One of these was an increase in the real estate for two year” plan. The city had to consider any potential
tax, which would generate approximately $750,000 for each negative impact on the performance of the meal tax, given
penny of increase. This option was not popular among that it would be considerably higher than other communities
elected officials, however, for several reasons. First, assess- in the valley — in fact, 7 percent would be the highest in the
ment increases throughout the past decade had left citizens state. In preparing the fiscal 2011 forecast, the finance office
skeptical about the fairness of how their homes were taxed. determined an appropriate revenue estimate at the 5 percent
Roanoke’s tax of $1.19 per $100 assessed value was already level. Next, it determined the revenue equivalent of each
one of the highest rates in the immediate area, compa- percentage point of increase. In computing the expected
rable with many urban communities in the commonwealth. revenue at an increased 7 percent tax rate, the incremental
Increasing the real estate tax was also unpopular as a source revenue for a two-percentage point increase was discounted
of school funding because it would place an additional bur- by five percent. Thus far in fiscal 2011, this appears to have
den on elderly and others on fixed incomes. been a relatively conservative forecasting method, given the
dynamics in place.
Some elected officials and citizens inquired about the pos-
sibility of raising the local sales tax. While this was a logical The Roanoke School Board was to receive nearly $4.4 mil-
suggestion, the city lacked local authority to increase this lion in funding from the tax rate increase. The money was
tax rate without approval by the general assembly — and dedicated to:
language introduced in the 2010 session to give local govern- n estoring K-8 staffing above the standards of quality
R
ments such authority was soundly defeated. minimums
40 Government Finance Review | December 2010
n Restoring key high school positions
n Funding the Drug Abuse Resistance Education program
n Funding school resource officers
n Teaching elementary Spanish in grades 4-6
n Providing key central office staff
n Restoring athletics, chess club, and maintenance spending
In the end, the additional revenue meant restoring a major-
ity of the positions that were to be cut when the fiscal 2010-
2011 budget was adopted, many of them teaching positions.
THE EAT FOR EDUCATION CAMPAIGN
In the truest spirit of seeking ways for the community to The Eat for Education campaign was launched with a
work together in support of common goals, Roanoke’s city press conference on June 30, 2010. A Web site was created to
manager quickly realized that an increased tax in the middle promote the program (www.eatforeducationroanoke.com),
of an economic recession could only be viewed as a win-win and a letter campaign invited 130 locally owned restaurants
situation if the city found a way to work with the restaurant — those with patrons most likely to be attracted by the proj-
community and generate support for dining in public res- ect — to participate. The city’s partners in the campaign also
taurants as a means of supporting public education. Thus, reached out to local restaurants. The Convention and Visitors
the Eat for Education campaign was born. Fittingly, the Bureau provided free membership to all restaurants, along
city enlisted assistance from the same public relations firm with dining out promotions on its Web site. The Chamber
that represented the restaurant industry when it resisted the of Commerce tailored its Small Business Assistance Program
rate increase. specifically to address the special needs of restaurants. In
addition, a video segment explaining the Eat for Education
Campaign was aired on the local government access chan-
nel’s “Inside Roanoke” program, explaining to citizens how
the increase in the meals tax was entirely dedicated to public
schools.
The city’s Web site page contains a link to campaign infor-
mation: the video segment, a link to the Eat for Education
Web site, and graphic presentation explaining the allocation
of the tax. (see Exhibit 1). The existing meals tax was already
subject to a funding formula, so the graphic presentation was
developed to show how the revised tax would be allocated.
There are five partners in the Eat for Education Campaign: This was done to maintain full disclosure and to help the pub-
the City of Roanoke, the Roanoke Valley Convention lic understand how the full tax would be distributed.
and Visitors Bureau, the Roanoke Regional Chamber of
Development of the Eat for Education campaign was
Commerce, the Roanoke Valley Hospitality Association, and
timed so that the campaign would be in place by the start of
Downtown Roanoke, Inc. (a not-for-profit downtown devel-
the school year. Letters explaining the campaign and encour-
opment organization). The campaign is also supported by the
aging families to participate were distributed throughout the
student chapter of the Public Relations Society of America
schools to take home to parents.
at Radford University. This group is working with the public
relations firm and the City of Roanoke’s office of communica-
tions to promote the campaign and assist with details such as ONGOING REPORTING
restaurant contacts, community outreach, and coordination An important element of the Eat for Education program
with local organizations that can help promote the program. is transparency about the performance of the tax and how
December 2010 | Government Finance Review 41
Exhibit 1: Graphic Presentation Explaining the Tax Allocation
revenue compares to both the budget and the prior year. In a further effort to keep citizens, business owners, educa-
Roanoke’s finance department has developed a tracking tors, and the broader community informed, a Facebook page
tool that models the typical ebb and flow of the meals tax was also created for the program: Eat for Education Roanoke.
throughout the course of the fiscal year, and this tool is This page shares public relations initiatives and is a good way
applied to the fiscal 2011 revenue estimate to gauge the to announce winners of the monthly drawings for restaurant
amount of revenue anticipated each month. At the end of gift certificates.
each month, city accounting staff can review results and The tax has also been helpful in making city and school
share the information with others. The local media have leaders and staff more aware of the value of dining at restau-
shown significant interest in the Eat for Education program rants within city limits. People keep this in mind when enter-
and revenue results. Finance staff work to help media per- taining guests or planning events for groups, and they think
sonnel understand how the growth or decline in the tax is about supporting Roanoke venues and the Eat for Education
measured, as adjusted for the change in tax rate to measure campaign. This awareness also helps support other retail in
true economic performance. Roanoke.
As of September 2010, three months into fiscal 2011, meals
tax results were relatively stable at a 0.5 percent increase from THE QUESTIONS
the previous year, when adjusted to eliminate the impact of When the tax increase was put into place, citizens and
the tax rate change. Actual meals tax results for the same the media immediately began asking questions about how
period exceed budget by 3.3 percent (see Exhibits 2 and 3). it worked. There was a misconception that it was a state tax
42 Government Finance Review | December 2010
Exhibit 2: Eat for Education Results
1,200,000
1,000,000
800,000
Dollars
600,000
n Budget
n Actual
400,000
200,000
0
July August September
Year-to-Date
and that funds flowed first to the commonwealth and then lected at the point of sale, and restaurants are required to remit
back to Roanoke. It became apparent that teaching the public their prepared food and beverage taxes to the City of Roanoke
about the steps in the tax collection process would be helpful, by the 20th of the following month The city’s office of billings
so the city included a segment in the “Inside Roanoke” video and collections processes these taxes and initiates collection
to explain the process — the tax on restaurant patrons is col- efforts against entities that do not remit the money.
Exhibit 3: Rate-Adjusted Meals Tax Revenue Comparison
4,000,000
3,500,000
3,000,000
2,500,000
Dollars
2,000,000
1,500,000
n F Y10
Rate Adjusted
1,000,000
n FY11
Actual
500,000
0
July August September
Year-to-Date
December 2010 | Government Finance Review 43
An interesting point to study will be whether the Eat for
Elements of the Eat for Education Campaign
Education program helps Roanoke reduce its delinquency
rate on prepared food and beverage tax. It is too soon to tell Restaurant Enrollment. Restaurants that enroll in the Eat
whether there will be an impact to this rate, which averages for Education campaign benefit from its marketing. Letters
approximately 4 percent. were sent to restaurants during the summer to invite them,
Another interesting element of the tax increase is the poten- and enrollment is optional and free of charge. The Eat for
tial for debate about whether the tax increase is helping or Education Web site publishes the list of member restaurants,
hurting the restaurant business. Finance professionals must including links to their Web sites. Restaurants that enroll
be careful not to get overly caught up in this debate, but they receive a window cling they can display to announce their
must be responsible for publishing information that is accu- involvement.
rate, up to date, and easy to understand. Ironically, there are
Monthly Drawing. When patrons of participating restaurants
questions and debate about the stagnant or slightly declining
performance of the tax, but naysayers seem to be forgetting declare they are “eating for education,” they are invited to
that the reason a tax increase was needed was because the complete an entry form (supplied to participating restaurants)
stagnant (and declining) economy had led to severe revenue for a drawing held each month. Participating restaurants each
reductions to the schools. draw one form and send that name to Eat for Education
headquarters. All names are placed in a hat and Downtown
CONCLUSIONS Roanoke draws names for $50 gift certificates that can be
used at any of the participating restaurants.
The two-cent meals tax increase is an example of fiscal
first aid. It also provides an interesting story about how gov- School Lunch Day. Weekly, on a day to be selected, profes-
ernment and private sector can work together, in this case sionals will be invited to join the Eat for Education program by
through a public outreach program that supports the restau- leaving their brown bags at home and dining out in support of
rant industry while publicizing the Eat for Education effort education. Restaurants are encouraged to offer school-themed
to raise funds for Roanoke Public Schools. Fiscal resiliency specials on this day.
will mean finding ways to permanently reduce school system
expenditures so the reduction in revenue can be absorbed Educator’s Day. One day a month will be Educators’ Day, and
when the tax increase sunsets in June 2012. showing their city school employee IDs allows Roanoke City
School employees to take advantage of specials for breakfast,
The city does not yet have enough data to assess whether
lunch, or dinner.
the campaign is accomplishing its objectives. The only mea-
sure Roanoke officials have currently is the revenue collected Family Night Out. This promotion, which will be rolled out
for the meals tax, and so far that is exceeding expectations. soon, will encourage restaurants to offer family specials each
However, city leaders believe the true success of the cam- Tuesday for a family night out.
paign will be measured not so much by how much revenue
is collected or how many restaurants participate, but by the
campaign’s ability to affect public perception of the city as
wanting to help the community. The hope is that, in addition
to providing financial support to schools and helping to pro-
mote city restaurants in general, the campaign will create an
atmosphere of good will toward Roanoke City Public Schools
and our community for turning a negative (the meals tax
increase) into a positive (supporting the school system) dur-
ing difficult economic times.
ANN H. SHAWVER is director of finance for the City of Roanoke,
Virginia.
44 Government Finance Review | December 2010
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