HAVERHILL — When the city created a local meals tax two years ago, some restaurant owners said they feared it would drive customers away.
The downtown restaurant district was growing in popularity and the tax added just 38 cents to a bill of $50. But the owners said the perception of a city that charged such a tax would hurt its reputation with customers.
Today, restaurants — particularly those in the downtown restaurant row — are still thriving. So is the city’s pocketbook. The tax has brought nearly $1.6 million to the city, more than supporters of the tax predicted.
Mayor James Fiorentini said critics of the tax insisted it would kill downtown, but he said that hasn’t come close to happening.
“There’s more meals tax money coming in today than two years ago,” Fiorentini said. “People are spending more money, not less. And parking counts show there are more people going downtown than two years ago. If the critics were right, we’d have less revenue, but we don’t.’’
Fiorentini said he has not received any complaints from downtown restaurants since the tax went into effect.
In May 2010, the City Council approved the mayor’s proposal to add a local meals tax of .75 percent to the state’s 6.25 sales tax. The tax was estimated to generate $500,000 annually for the city, But it has raised more than that.
According to the city auditor’s office, the tax generated $518,316 over a 10-month period from Aug. 2010, when it went into effect, to June 2011. It raised $685,890 over the last fiscal year, July 2011 to June 2012, according to the auditor. From July 2012 to Dec. 30 of last year, the tax raised $372,699, the auditor said.
“We indicated it would help, not hurt downtown,” Fiorentini said. “Other communities like Methuen saw what we did and adopted the meals tax. It doesn’t hurt your community. It helps you.”
Methuen received $229,000 in local meals tax revenue over the final six months of 2012 and expects to take in an additional $350,000 by June 31, the end of the fiscal year. Patrons of Methuen restaurants, eateries and coffee shops began paying the .75 percent surcharge this summer on top of the existing 6.25 percent state sales tax on meals.
“It’s a good move,” Methuen City Councilor Jamie Atkinson said. “For a small fee per customer, it’s really turned into a good thing for the city.”
Methuen enacted the tax July 1, but no revenue was collected over the initial month and a half, which is typically the case for communities new to the program, said City Auditor Thomas Kelly. Because of this, the city received just $54,000 from July to September. Revenue rose to $175,000 between October and December. In total, Kelly projected the city will receive $575,000 from the local meals tax in the fiscal year ending June 30. That figure is expected to rise to $700,000 in the following fiscal year.
“We’re anticipating this will grow to about $750,000 this fiscal year, so we consider this from a financial point of view a great success,” he said.
Fiorentini said the first year the tax went into effect in Haverhill it helped keep the Bradford Fire Station open and provided about $250,000 that prevented layoffs of five teachers.
“The money goes into the general fund,’’ he said.
Fiorentini said meals tax revenue helped fund the creation of the Creative Haverhill organization’s website, which promotes the downtown, and also allowed for increased sidewalk and street sweeping as well as steam cleaning of sidewalks. He said the city was also able to buy several ash containers, or smokers, for downtown. It also paid for some trees planted downtown and their upkeep, he said.
“We’ve been able to keep the Merrimack Street parking garage cleaner as well,” Fiorentini said. “This money also helps us pay for police and firefighters and not lay people off.”