What should a city charge for renting a sidewalk?

Boston's fees for restaurants using city sidewalks for dining is in need of updating

The city of Boston rents its sidewalks for outside dining to more than 50 restaurants using a fee structure that is getting poor reviews from budget watchdogs and economists.

The base fees the city charges restaurants for using sidewalk space haven’t changed since the program’s inception 13 years ago, even though a lot has changed since then in the local real estate market. The rate is based on citywide building rents from 2000, with annual increases pegged to the Con­sumer Price Index.

The Cask ‘n Flagon restaurant, for example, operates a 1,012-square-foot cafe on the city sidewalk next to Fenway Park at the corner of Lansdowne Street and Brookline Avenue. The restaurant launched its outside service in 2005, but started out paying the original 2000 base rate, which then rose in accord with the CPI in subsequent years.

Boston offers restaurants a substantial volume-based discount on their al fresco service, meaning restaurants that rent more sidewalk space pay a lower rate per square foot. The annual rate for 100 to 199 square feet, for example, is $25 per square foot, while the rate for 900 to 999 square feet is $11 a square foot.

The rates also aren’t adjusted for location. The South Street Diner, for example, receives no discount even though it’s located on gritty Kneeland Street, where car traffic often exceeds foot traffic. By contrast, the swank Oak Long Bar + Kitchen at the Fairmont Copley Plaza Hotel pays no premium even though it is located in bustling Copley Square.

Samuel Tyler, president of the Boston Municipal Research Bureau, a business-backed group that monitors city finances, says he thinks the $160,000 the city collects in yearly sidewalk rentals is less than it should be.

“I don’t understand charging the same for square footage in all parts of the city, and I don’t understand charging less per square foot for more square footage,” he says. “There are some locations that are more lucrative and more attractive, and the city ought to capture that in their license fees.”

Christopher Muller, a professor and former dean at Boston University’s School of Hospitality Administration, says Boston’s volume-discount approach “punishes” those restaurants with smaller outdoor spaces because they have to pay more for space that will yield less revenue.

Andres Branger, the owner of Orinoco Café, a Venezuelan restaurant on Shawmut Avenue, agrees. “Restaurants like mine with smaller outside spaces are not able to put out many tables. For us to then have to pay extra doesn’t make any sense,” she says.

Legal Sea Foods pays $9,729 for its sidewalk space near the aquarium, but it would probably pay $35,000 for such a prime
location in New York.

Victor Matheson, an economist at The College of the Holy Cross in Worcester, says he thinks Boston’s every-sidewalk-is-the-same approach isn’t a good deal for the city’s taxpayers and does a poor job of promoting economic development across the city. It discourages restaurants in less thriving areas to try outside dining, according to Matheson.

“Restaurants in areas where the indoor rents are high should pay more to the city for sidewalk space than those where the indoor rents are lower, and those rents, not the Consumer Price Index, should be used to make periodic adjustments,” he says.

Matheson says Boston’s current approach is a bargain for established restaurants. “You get lots of restaurant expansion in places that need it the least and little expansion in the areas that could use the economic boost, such as Allston and Dorchester,” he says.

Another possible approach, Matheson says, would be to charge restaurants based on a percentage of their sidewalk sales, but he acknowledges it might be complicated for restaurants to separate their outdoor and indoor sales.

Dot Joyce, a spokeswoman for Mayor Thomas Menino, says there are no plans to adjust the city’s approach to sidewalk rentals, although she describes the practice of charging the 2000 base rate whenever a restaurant institutes sidewalk dining as an “oversight” that will be corrected next year.

New York City takes a different approach to sidewalk rentals than Boston. It charges more overall for sidewalk space and more in the most desirable parts of Manhattan and less in not so desirable areas. New York also requires restaurants to pay the monthly sidewalk rental fee all year around; Boston charges just for the traditional outdoor-dining months.

In addition, New York tacks on a $510 two-year license fee, a one-time $310 charge to cover the cost of plan review, $190 for those restaurants using portable heaters, and a security deposit of $1,500. In Boston, no such fees are collected.
The Legal Sea Foods on State Street pays the city of Boston $9,729 for 929-square-feet of sidewalk, but in a prime location in Manhattan that same space would go for closer to $35,000.

Meet the Author
Muller, the BU professor, says New York’s approach is a good model. He says diners love outdoor seating, it makes a city more lively, and restaurants enjoy the added revenue it brings in. But, he says, municipalities have to walk a fine line between promoting outside dining and making sure that taxpayers are not shortchanged.

“It’s a balancing act,” says Muller, a one-time restaurant manager himself. “It’s a policy decision and it’s an income decision for the city all in one.”