UPDATED: Emails reveal GSO elected officials’ and power players’ desire to pass prepared-food tax without voter approval

(UPDATE 5/2/2023, 11:45 p.m.): In an interview with TCB on Tuesday night, council person Zack Matheny said that he “attended some meetings and was copied on emails” but that he “hadn’t heard of anything in a while.”

“We’ve been talking about that for probably 20 years,” Matheny said, adding, “That’s a long conversation.” Matheny noted that he remembers talking before he was first elected to city council in 2007.

Mayor Nancy Vaughan told TCB that at this point there is “no movement.”

For the last year and a half, powerful members of Greensboro and Guilford County have been talking behind closed doors about passing a tax to raise revenue for tourism.

What is a prepared-food tax? And why are elected officials and business owners in Greensboro and Guilford County so keen on implementing it? Analyzing emails compiled on Open Gate City, Triad City Beat uncovered conversations that show some of the city’s most powerful individuals’ attempt to pass a 1-percent prepared-food tax, which would affect all of Guilford County, without voter approval. The main goal? To raise revenue for tourism.

Otherwise known as a “meal tax,” a prepared-food tax is a blanket tax on all restaurant-prepared meals. According to state law, prepared food is defined as food that is “sold in a heated state or is heated by the retailer,” “consists of two or more foods mixed or combined by the retailer for sale as a single item” or food that is “sold with eating utensils provided by the retailer, such as plates, knives, forks, spoons, glasses, cups, napkins and straws.” Prepared food does not include food the retailer sliced, repackaged or pasteurized but did not heat, mix, or sell with eating utensils. The definition does not include “foods containing raw eggs, fish, meat, or poultry that require cooking by the consumer as recommended by the Food and Drug Administration to prevent food borne illnesses.”

Currently, the total of state and county sales tax rates for Guilford County is 6.75 percent. With a prepared-food tax, an extra 1 percent would be tacked on the check for meals served out of local restaurants.

According to the Tax Foundation, 20 states and the District of Columbia authorize meals taxes. Of these, 17 exclusively authorize local-option meals taxes.

Currently five NC jurisdictions — the counties of Wake, Dare, Cumberland, Mecklenburg and the Town of Hillsborough — each have the authority to impose a meals tax under a local act, according to a March article by Connor Crews, Assistant Professor of Public Law and Government at UNC-Chapel Hill. 

“The general assembly has never authorized all of North Carolina’s counties and municipalities to levy a meals tax,” Crews wrote. But through the adoption of local acts, state lawmakers have authorized a small number of jurisdictions to levy a tax upon the sale of prepared food.

Currently, Greensboro and Guilford County officials are trying to get lawmakers to pass a law that allows their jurisdiction to levy the tax.

When drafting a local act, the general assembly may dictate the terms of how a meals tax may be imposed. The state legislature may require that constituents get a say in the matter and voters may be asked via a referendum whether or not to enact the tax. Durham County chose this option in 2008, but voters rejected the measure. Emails analyzed by TCB show that leaders in Guilford County want to pass the tax without voter approval.

So what’s going on in Guilford County?

Emails analyzed by TCB show that in Guilford County, elected officials are working with power players like Matt Brown, the managing director of the Greensboro Coliseum, to try and circumvent voter approval to pass the tax for tourism funds.

On Dec. 8, 2021, Marlene Druga — the finance director for financial and administrative services for the city of Greensboro — sent councilmember Nancy Hoffmann an email about the prepared-food tax.

“Good Evening Ms. Hoffman, Our estimate for a Guilford County-wide 1% prepared-food tax collection is in the range of $12 – $15 million per year,” Druga wrote. “The County would need to get special legislation to levy this tax and then decide how it would be distributed, ie for specific purposes, or by population. It is noteworthy that both Wake County and Mecklenburg County’s prepared-food tax doubled in the last 15 years, to $28 million and $35 million, respectively, as of June 30, 2020. Please let me know if you need further information.”

Mayor Nancy Vaughan along with Zack Matheny and Nancy Hoffmann were the only city council members included in the emails obtained by TCB regarding the meetings about the food tax.

On Aug. 26, 2022, Greensboro Coliseum Managing Director Matt Brown wrote to elected officials and others, requesting their availability during the week of Sept. 19-23 to attend a “follow-up luncheon meeting” to discuss the city’s efforts to retain the ACC Offices and “for an equally important discussion regarding the need for and urgency implement a Prepared Food Tax for Guilford County.”

Formerly founded and headquartered in Greensboro, the Atlantic Coast Conference announced their relocation to Charlotte in September. An article by Scott Fowler for the Charlotte Observer called the ACC’s exodus from its home city “a move that simply made too much sense not to make,” but disappointment abounds for Greensboro as the relocation heralds a decline in the city’s business since the yearly influx of tourism that ACC events attract is sure to decrease.

Brown has managed Greensboro Coliseum since 1994, and for years has been the highest-paid city employee in the Triad with an annual salary of $387,033 — around $100,000 more than the second highest earner, City Manager Taiwo Jaiyeoba. Past reporting by Yes Weekly! has shown Brown’s close relationship with city leaders when it comes to enacting tourism plans such as the proposed building of a music events center downtown.

Brown wrote in his email that the tax would be “an essential tool” to keep the city’s sports, cultural and entertainment facilities in a “state of the art condition” and would be used as “economic generators for attracting and hosting major statewide, regional and national events” in Guilford County.

President of Greensboro Area Convention and Visitors Bureau Henri Fourrier wrote back, “I’m in,” that same day.

Local acts restrict how the proceeds from the meals tax may be spent. Mecklenburg County uses some of the proceeds from the tax toward costs relating to convention-center facilities and “activities and programs aiding and encouraging convention and visitor promotion.” According to Crews, all permissible uses relate to the promotion of tourism in some way.

Mayor, city council, county commission chair, Matt Brown all involved

On Sept. 12, Mayor Nancy Vaughan wrote in an email that she had “started some groundwork” and that they “need to work quietly until after the November election to avoid a possible campaign issue. The County Commissioners will elect a Chair in December. I would like to see Skip maintain that position.”

It has been long known that Vaughan and Skip Alston — the chair of the Guilford County Board of Commissioners — have a strong working relationship. While local government decisions for the city are guided by the mayor and city councilmembers, the county is governed by a nine-member board of commissioners who are elected by district and at-large to serve 4-year terms. Commissioners’ terms are staggered and general elections are held in November during even-numbered years — five seats were up for grabs last year. Every December, the board elects a chairman and vice chairman to serve for the upcoming year. While Alston’s current term began in 2020, his role as board chair was up for renewal in late 2022.

In a Sept. 16 email, Brown wrote, “As a follow up to our community’s positive joint Public Private response to the ACC Office Relocation challenge, our ACC Response Public/Private Committee enthusiastically came to appreciate the need for and the value of having a 1% County wide Prepared Food Tax to support our Sports and Tourism industry economic growth needs.”

The email was addressed to City Attorney Chuck Watts, City Manager Taiwo Jaiyeoba, Vaughan, Hoffmann, City Finance Director Marlene Druga and Greensboro Sports Foundation President and CEO Richard Beard. 

Brown wrote that the initiative is “equally” and “enthusiastically” supported by Vaughan and Alston, with Brown adding that both he and Beard were “leading the effort to kick off a Public/Private campaign to implement this initiative successfully through to State Legislative approval ASAP.” 

“We are compiling information to present to our Committee such as: a listing of Cities/Counties within the State who have enacted this tax (WITHOUT THE NECESSITY OF A VOTER REFERRENDUM [sic]), the legislation models used by Wake County and Mecklenburg County/Charlotte; and the intended limited purposes of the benefits of this funding source,” Brown wrote.

Brown also wrote that he “was hoping” the city could assign one of their staff attorneys who may be knowledgeable of or “had some experience with this topic at another City/County within the State who could assist our Committee.”

Eventually a meeting date was set for Oct. 11 with business leaders like Koury Corporation President and CEO Richard Vanore and Executive Vice President Kelly Harrill noting their availability for the meeting.

Hoffmann relayed to Brown in an Oct. 2 email that she would be unavailable for the Oct. 11 meeting but that she was excited about the prospect.

“You know I have favored this for some years,” Hoffmann said, and thanked  Brown for “bringing together all the players.”

“Count on me to help in any way I can,” she added.

In a Nov. 23 email, Brown scheduled a follow-up meeting for Dec. 2 to discuss their “next steps toward the implementation of a Guilford County wide Prepared Food Tax,” inviting Vaughan, Jaiyeoba, Matheny, Hoffmann, Alston, Watts, Druga, Beeninga, Fourrier, Harrill, Vanore, Beard, Marc Bush, President and CEO of Kontoor Brands Scott Baxter, former Greensboro Mayor Jim Melvin, President and CEO of ArtsGreensboro Laura Way, President of the Community Foundation of Greater Greensboro Walker Sanders, County Manager Michael Halford, President and CEO of Greensboro Chamber of Commerce Brent Christensen, Wyndham Championship Tournament Director Mark Brazil, Guilford County attorney Andrea Leslie-Fite, Director of Operations for Greensboro Convention and Visitors Bureau James Watterson, and Greensboro Coliseum staff members Jo Milos, Jason Close, Terence Forde and Andrew Brown. 

“Please respond if you are available to attend the Prepared Food Tax meeting on FRIDAY DECEMBER 2, 2022 Noon -2PM at the Greensboro Coliseum Complex Special Events Center ACC Conference Room,” Brown wrote.

The Nov. 23 email was the last email that TCB found in the database that mentions the prepared-food tax. TCB also made a public records request for all emails and text messages related to the topic but was sent an incomplete sample of emails that did not align with the public database. TCB has yet to receive text messages. For the purposes of this article, TCB reached out to all city council members, Mayor Nancy Vaughan, county commissioner Skip Alston and to Greensboro Coliseum Director Matt Brown. We did not receive a response from any in time for publication.

How could a prepared food tax impact residents?

According to the Economic Research Service for the US Department of Agriculture, food-away-from-home prices increased 8.8 percent between March 2022 and March 2023.

Food insecurity spiked during the pandemic and remained high through late March 2021 according to the Center on Budget and Policy Priorities, which reported that Census Bureau data from late March 2021 suggests that 8.8 percent of adults in the US said their household didn’t get enough to eat sometimes or often in the last seven days. CBPP reported that in NC in 2021, 10 percent of children in households with children and 8 percent of adults did not have enough to eat.

According to the Tax Foundation, “these high prepared-food taxes are sometimes justified as a luxury tax intended to target higher-income individuals, although the wide diversity of takeout dining options suggests that such a tax is poorly targeted to achieve that goal.” 

While it’s true that people who eat out tend to be younger and wealthier according to the CDC, “one could say that it is a tax on individuals with less flexible schedules or who do not like to cook – rich or poor,” the foundation argues.

According to data collected by the US Bureau of Labor, 44 percent of food spending was food away from home in 2018. Data also found that while those under 65 years old usually spent more on food away from home, those age 65 and older “reported higher and more frequent expenditures for breakfast and brunch, and for lunch, but only at full-service restaurants.”

Oftentimes when the option to pass a food tax gets put before voters, the measures fail.

In Virginia, where county food and beverages taxes must be adopted by referendum, voters have rejected the imposition of a meals tax 47 of the last 60 times a proposal gone to a vote, with 57.4 percent of all votes on these ballot issues cast against adopting a meals tax,” according to the Tax Foundation. In Oregon, where voter input is also required, only two meals tax proposals — both in tourist communities — have succeeded.

Read all of the emails gathered by TCB for this story here.

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