Meals, hotel levies help cities, towns make do

In the first two years it was available, the 0.75 percent meals tax generated $14.3 million in revenue for 29 municipalities north of Boston, including $3 million in the 2010 fiscal year and $11.3 million in fiscal 2011, which ended June 30, according to a Globe review of state Department of Revenue figures.

To date, 35 cities and towns in the region have adopted the tax option, with 29 collecting the revenue in the first two fiscal years and six adopting the option by July 1.

The communities in the region collecting the most under the meals tax option in those two years are Somerville and Saugus, both of which received $1.29 million; Burlington, which received $1.20 million, and Peabody, which took in $1.01 million.

Twenty-two area communities have not adopted the local meals tax.

The fiscal 2010 state budget allowed municipalities to levy the local tax on top of the state’s 6.25 percent meals tax. To date, 146 communities have done so, or about 42 percent of the state’s 351 cities and towns, according to the Department of Revenue. In fiscal 2010-11, $70.5 million was collected from the local tax by communities statewide.

“It’s entirely up to an individual community’s discretion whether or not to do it,’’ Robert Bliss, a spokesman for the Department of Revenue, said of the local meals tax. While a majority of communities have yet to adopt the tax, he said, the 146 that have “is a fairly substantial number, when two years ago the number was zero when this started.

“It certainly is delivering revenue pretty effectively,’’ he said, “and I think, as time goes by, that is going to probably entice a few more communities that may have taken a wait-and-see approach . . . to get into it.’’

Also as part of the fiscal 2010 budget, the state increased the maximum allowable local hotel and motel tax rate by 2 percentage points, to 6 percent. To date, 22 area communities took advantage of that change, with 21 increasing their previous 4 percent rates to 6 percent, and one to 5 percent.

“It’s been extremely helpful,’’ Saugus Town Manager Andrew Bisignani said of the meals tax.

If the town had not adopted that tax and the hotel and motel tax increase, he added, “we would be in serious financial trouble. Now we’re just in plain trouble.’’

Bisignani said he had not heard any complaints about negative effects on business.

“An extra 19 cents on a $25 meal I don’t think is going to keep people home,’’ he said.

Patricia D. Schaffer, Peabody’s finance director, said the meals tax has become “a significant source of revenue for the city.’’

Schaffer pointed out that the city is earmarking $250,000 of the annual revenue it receives from the meals tax and the increase it approved in its local hotel and motel tax to fund street and sidewalk repairs each year.

She said the combined added revenue, which in fiscal 2011 totaled about $1.1 million, is also helping the city fill the revenue gap created by the loss of nearly $5 million in state aid over the last three years.

Schaffer said she had not heard reports of the meals tax posing a burden to local restaurants.

“The total tax on a bill is not really significant for a meal,’’ she said. “But in the aggregate, it’s significant.’’

Medford collected $878,730 from its meals tax over the two fiscal years, $528,388 in fiscal 2011, the first full year it was in effect. Mayor Michael J. McGlynn said he expects the annual figure to rise this fiscal year, based on growth in the city’s restaurants.

“We have a number of restaurants that are coming to Medford,’’ the mayor said. “Historically, we didn’t have a large number, but that number has grown over the last three or four years. . . . They are all doing well, and others are looking at it right now.”

McGlynn said there is no indication that the city’s growth has been hampered by the adoption of the meals tax in 2009.

“I never had a call on it,’’ McGlynn said when asked about the effects on restaurant business.

He said the city is projecting that there will be about $1 million in fiscal 2012 in revenue from the meals tax and the increase in the hotel and motel tax, money that is allowing the city to hire additional police and firefighters and to avoid teacher layoffs.

The Massachusetts Restaurant Association opposed the meals tax when it was adopted and still does, said the group’s president, Peter Christie.

He said the association believes that the tax unfairly singles out meals for an additional tax on top of the state sales tax, arguing that the meals tax is technically the application of the sales tax to meals.

“It’s taken $70.5 million in discretionary income out of the economy,’’ Christie said of the effect of the tax so far.

“That’s not the end of the world when you are talking about a $13 billion industry, but it’s still significant.’’