City Beat

New tax at midtown restaurants tough to handle

A sign etched in the front door of the Zocalo restaurant displays an advertisement for the Handle District. Some restaurants in the area – including Zocalo – include a 1.5 percent surcharge on customer bills to help fund the district.
A sign etched in the front door of the Zocalo restaurant displays an advertisement for the Handle District. Some restaurants in the area – including Zocalo – include a 1.5 percent surcharge on customer bills to help fund the district. Sacramento Bee file

Few people who dine at Zocalo in midtown identify their surroundings as the Handle District. Fewer still probably realize a small slice of their dinner bill goes to support the district, even if the evidence is right in front of their face.

But there it is: 1.5 percent of your food and nonalcoholic drink tab is going to fund a business district. Every restaurant on the block pays that percentage of their food receipts to the Handle District, a business area formed in 2012 of about 30 shops, including some of the best-known restaurants in town. It’s a lively block, sitting on L Street and Capitol Avenue between 18th and 19th streets.

Dinner tabs at Zocalo include an “HBID assessment” line in the summary, referring to the 1.5 percent surcharge they’re collecting from customers for the Handle Business Improvement District. Most – but not all – of the 14 restaurants in the district have similar line items.

Are Zocalo and others doing the right thing by informing their customers that 1.5 percent is being tacked on to their food bills? Should those restaurants simply roll the added cost into their food and increase prices? Or should restaurants keep their prices the same and handle the 1.5 percent themselves, just as Old Soul and Crepeville apparently do?

Jimmy Johnson, a Zocalo co-owner and chair of the Handle District’s board of directors, said he’s trying to be transparent. “It’s really a small amount, so most people don’t even notice it,” he said.

But some people have noticed, and some don’t like it. That includes Paul Mitchell, who crunches data for political campaigns around the state and lives in midtown. He says the tax line is restaurants’ “way of trying to be above the economics of it all.”

“It creates a false sense for the business that they are shelving the burden to the customer and the false sense for the customer that they are being forced to pay the tax,” he said. “It’s all meaningless, like a form of protest by the restaurant saying, ‘We aren’t paying this.’ 

Some other criticism of the practice on social media seems to originate from the fear that Sacramento – and midtown, in particular – is in danger of seeing the kind of cost-of-living hikes that are driving the creative class out of San Francisco. So it’s not surprising that the “Handle tax” debate was quickly connected in social media chats to the “Obamacare Surcharge” in San Francisco.

Many restaurants in San Francisco add 3 percent surcharges to bills to meet a city requirement that they fund health care for their employees. A growing number of joints in Los Angeles are doing the same.

So far, the special tax phenomenon in Sacramento appears to be limited to a couple of business districts on the grid.

More and more Sacramento neighborhoods are branding themselves and, in some cases, taxing business owners to pay for events and maintenance. In the Handle, the assessment paid by business owners is funding new streetlights that should go up next year, 40 new bike racks, security, street cleaning and events that draw big crowds.

“We can no longer rely on the city to provide basic needs like lighting and security,” Johnson said. “We’ve got to keep it nice, and someone has to pay for that.”

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