Alcohol Tax

Timber co-owner Nathan Brand said the restaurant has been operating at a fraction of its normal capacity during the COVID-19 pandemic.

With health officials encouraging eateries to cut capacity to guard against transmission of COVID-19, Johnson City commissioners will consider Thursday a temporary reduction in the city’s alcohol privilege tax for restaurants.

The city issues an annual privilege tax to restaurants that serve liquor on premises based on their seating capacity. Establishments with 75 to 125 seats must pay $600 by the end of the year, which increases incrementally as capacity goes up. At the maximum, restaurants with 276 seats or more must pay $1,000, and restaurants with fewer than 75 seats don’t pay a tax.

The proposed ordinance, which acts as an amendment to the city’s alcohol code, would move each establishment down one seating category, meaning restaurants with 75 to 125 seats won’t pay an alcohol privilege tax, those with 126 to 175 seats will pay $600 instead of $750, and onwards.

The ordinance is narrowly tailored so the tax cut only applies in the event of a state-wide pandemic that exceeds 12 months as identified by executive orders from the governor. The state must have also issued guidance that encourages restaurants to reduce their seating capacity.

Johnson City Staff Attorney Sunny Sandos said the tax reduction, if approved, would become effective 12 months after Gov. Bill Lee issued an executive order declaring the pandemic in March 2020. In that case, the tax break would apply to bills due in 2021.

Johnson City Mayor Joe Wise suggested the change during a City Commission meeting in December and has said the city should charge a fee that better reflects the capacity public health officials have encouraged restaurants to maintain during the outbreak.

“All I’m suggesting is that for the year we’ve encouraged people to be at 50% occupancy we don’t charge them like they’re getting to be at 100%,” Wise said.

Guidelines from the state include recommendations that restaurants space tables six feet apart and that bars, night clubs and limited service restaurants operate at reduced capacity.

The city also charges a privilege tax for on-premise alcohol consumption at private clubs and hotels, but according to the city alcohol code, officials don’t calculate the taxes for those establishments based on their seating capacity. They are not included in this ordinance.

City commissioners are scheduled to consider the changes on first reading during their meeting Thursday. If approved, the temporary tax reduction would require two more votes before going into effect.

Restaurants have faced a steep uphill battle during the pandemic.

The Bureau of Labor Statistics reported that employment in the U.S. leisure and hospitality sector declined by 61,000 in January with 19,000 of those jobs associated with food services and drinking places. This is on top of sharp job losses totaling 536,000 positions in the leisure and hospitality sector in December.

Many of those December job losses were in the restaurant industry.

Other business

City staff will also present on Thursday an update on the city’s reopening plans.

“That’s pretty much finalized now,” City Manager Pete Peterson told commissioners during an agenda review meeting on Tuesday. “So we’ll be making an announcement on Thursday about what’s going to be opening and when and under what conditions.”

In December, the city temporarily closed most of its facilities with the exception of the tax and utility payment lobby. That has included the Memorial Park Community Center, Johnson City Senior Center, Carver Recreation Center and the Langston Centre.

Peterson said the city has consulted the governor’s executive orders, guidelines from the U.S. Centers for Disease Control and with the local health department while developing its plans.

Many outdoor sports are getting ready to begin, he said, and the city is trying to have plans ready to accommodate the normal time for registration.

Commissioners will also consider Thursday a retainer agreement with the law firm Bass, Berry & Sims to provide “specialized legal advice and representation regarding the city’s wastewater and treatment and collection system.”

Peterson told commissioners that the city has permits it has to acquire to operate its water and wastewater plants.

“We’re in the midst of the permit process right now, and we’re contesting some of the ... interpretations of terms and conditions that the state is wanting to impose on us,” he said.

By charter, only the City Commission can hire attorneys, Peterson said, and the decision will allow staff to have easy access to input on questions or projects without having to come back repeatedly for permission from commissioners.