James City County supervisors consider increasing meals tax amid school budget woes

JAMES CITY COUNTY – The James City County Board of Supervisors is considering raising the meals tax to generate more revenue for Williamsburg-James City County Schools.

County Administrator Scott Stevens raised the possibility during the board’s work session on Tuesday. Stevens said that for each percentage point increase in the meals tax, the county would generate an additional $2 million per year.

The county’s current meals tax rate is 4%, and the maximum allowable tax is 6% for any county, according to Virginia code.

Williamsburg City Council is also mulling an increase in the meals tax as part of the city’s proposed budget for fiscal year 2026. The proposal has been met with heavy pushback from city restaurant owners, who say the increase could significantly harm their business by pushing people to dine in lower cost localities.

“I would suggest you maybe consider [raising the meals tax] in the next budget year,” Stevens said. “As we get into school funding, one of our recommendations there would be to use some fund balance and let this meals tax be that ongoing revenue replacement in the future.”

Supervisor Michael Hipple said the tax would be paid “not only by our citizens but by anybody coming through our area,” suggesting an increase would make sense because the burden would be partially shared with non-residents.

While the board seemed to be interested in the idea, Stevens said the tax could not be increased until at least January of 2026, so it would more likely be included in next year’s budget.

The possibility of a meals tax hike was floated during discussions about WJCC Schools’ current budget shortfall. The division is set to receive nearly $2 million less than it requested from the localities under a revised budget. That amount could change depending on the state’s budget decisions, but no one will know for sure until next month, when the finalized budget is expected to be signed by the governor.

Stevens said Busch Gardens is a major contributor of meals tax revenue for the county, though all dining establishments would be impacted by the change.

The supervisors also reviewed potential areas where the county could save money that would be reinvested into the schools, including eliminating a proposed 1% raise for county staff that was set to go into effect in January of 2026, removing new proposed staff positions, reducing departmental operations through vacancy freezes and delaying needed purchases and delaying bond-funded Capital Improvement Projects.

Stevens recommended allowing the school division to keep $1 million of their budget surplus from last year. Any excess funds are normally required to be returned to the county, but the supervisors seemed to agree that an exception should be made this year.

Supervisor Ruth Larson said that although she would like to provide the schools with the full amount of money they requested, the county simply cannot afford to meet the full request this year.

“I desire to give them what they need, but there’s going to come a cost on the other side unless we have a change in our tax rate or if we’re able to do so something with the meals tax now,” Larson said. “We have to have a real conversation moving forward with the community, because we know the school system’s needs are growing.”

Supervisor Michael Hipple, who recently announced plans to retire this year, said that while he wants the schools to have the resources they need, the division has been “trending over budget” by $6 to $8 million for the past four to six years, which has become a concerning pattern.

“We are living within our budget as close as possible, and I would expect the schools to do the same,” he said. “I don’t understand why it is so difficult. To me, it’s common sense.”

Hipple also urged the City of Williamsburg to chip in more money to support the schools’ needs. James City County is currently paying for 90% of the school’s operating costs. The City of Williamsburg would contribute an additional $1.6 million under a new proposed funding model that they have not yet agreed to.

“James City County is holding their end. City, it’s up to you,” Hipple said.

Supervisor John McGlennon stressed that even though he has been through the county’s budget process every year since his election to the board in 2012, this year’s budget has been especially challenging because of uncertainties surrounding the economy both locally and on the federal level.

“We don’t have a state budget yet. We don’t yet know what the economy is going to be like and whether tourism will be strong or weak,” McGlennon said. “This spring has given some indications of a pretty strong economy for tourism, but we also have concerns about the degree to which international travel may be cut back.”

While some constituents have expressed significant concerns about the county’s real estate property tax rate, a cut or credit seems unlikely for FY2026. Last year, the county maintained a rate of 83 cents per $100 of assessed value but provided a 5-cent rebate, bringing the effective rate down to 78 cents.

The credit was implemented after property tax assessments soared in the county, but no credit appears to be on the table this year.

“I just don’t think this is the year to give back a tax credit,” Larson said.