District 51 NY Council Member Joseph Borelli (R) joins Yahoo Finance’s Kristin Myers to discuss how the New York City Council agreed to a restaurant surcharge during the pandemic.

Video Transcript

KRISTIN MYERS: Well, New York City restaurants are now allowed to reopen at just 25% capacity, and as many restaurants struggled, the city has lifted a ban on surcharges, now allowing restaurants to charge customers a 10% fee to dine. So for more on this, we're joined now by New York council member Joseph Borelli, representing District 51 in the jewel of the Atlantic, as he described it, Staten Island.

So councilman, I know that you sponsored this legislation. You called the surcharge a COVID recovery fee. I'm wondering how much of a safety net this fee is going to provide restaurants moving forward, especially now that only 25% of dining is allowed.

JOSEPH BORELLI: Well, that's the point. I mean, 25% isn't really going to be enough to cover the cost of bringing the kitchen staff in, a full cleaning crew, keeping the lights on, you know, all the soft costs that don't really change-- depending on the capacity of the restaurant-- the owner will still have to pay all of those. So restaurants came to us and they basically said, you know, we would like to charge a surcharge so that our customers know- and it's optional-- that our customers know that this is sort of a temporary thing, while we're dealing with the pandemic, while we're under capacity limits we'd like to ask them to pay you know an extra 3% or 4% or 5-- whatever the number is, up to 10% is now allowed.

But the interesting thing is, almost every other jurisdiction in the United States already allows restaurants to tack on certain surcharges. New York City had this antiquated law where New York restaurants-- and only restaurants, by the way. If you go to a nail salon or you go to some other type of businesses, they can do this. But only New York City restaurants were legally barred from charging a surcharge. So we gave them, actually, relief from a silly law, rather than having to jack their prices up.

I mean, let's be honest. A restaurant's not going to open up to lose money every night, so the only other option available to them if we didn't change this was to increase their price per meal. New Yorkers are starting to get pretty sick of wondering why the $12 hamburger is now $15 and soon it will be $17. So hopefully this gives a few restaurants a different option.

KRISTIN MYERS: Was there at all a concern-- I know you're saying that restaurants essentially came to you and other New York City council members-- but was there at all a concern that, perhaps, diners would opt instead to go to the chain restaurants, which are not allowed to charge this surcharge if they have more than 15 locations, or perhaps to a restaurant that opted not to charge this surcharge?

JOSEPH BORELLI: Well, I will say this. If you're visiting New York City and you're coming to a chain restaurant, you should probably stay home. Stay wherever you are. Don't come here. But look, I mean, that's why this is an option. Some restaurants do get complaints that they've charged more money for the same menu items over the past couple of years. That's a regular complaint diners get.

So this allows them to put it in writing and just say, hey, you know, we're adding a 5% on your bill the next couple of months, just so we can help keep our kitchen staff employed, just so we can make sure our workers have health care, whatever the case may be. Restaurants did want to have this just as a tool in their arsenal, much like they do in pretty much every jurisdiction around the country. And the law we passed is really a way to repeal a silly law.

Now some restaurant owners will think this does insult the customers. Some customers will inevitably get mad. But it's better we give the businesses the option of choosing how they can extract some money from their customers' pockets than us, as government, saying yes or no to certain things.

KRISTIN MYERS: So I hear what you're saying. Extract some money from customers' pockets. However, in my mind, restaurants are now saying that their funds from the federal government in the form of PPP are running out. We also have winter coming, so outdoor dining is going to be scaled back, or perhaps still open for those that want to brave the really difficult New York City winters.

Do you think, however, that ultimately the solution for restaurants-- and I know that as a New York City council member, you can only do so much-- but isn't the real solution for the federal government to really provide more funding for those small business owners, including restaurants?

JOSEPH BORELLI: I would love to see more funding. But the solution is to reopen restaurants. I mean, you look at some states that have been a bit more aggressive in reopening, you know, Florida, Georgia, Arizona, Texas. I mean, if you look back a month ago, we were in doom and gloom predictions how those states reopening were going to lead to some wildly uncontrollable surge in COVID. And now here we are a month or so after those predictions, and we see all four of those states have had their cases actually drop.

So I think we're at the stage now in New York-- in fact, if you listen to the CDC, we are, actually, at the stage now in New York where we can actually begin opening up more. And it is only Governor Cuomo and Mayor de Blasio who are going beyond what the CDC is recommending and keeping restaurants closed at such a low capacity. That is the only solution. That's what restaurant owners want, that's what customers want, I want to go back to my favorite restaurant and sit inside in the winter, and up until the time we do that, I think they'll still be struggling.

KRISTIN MYERS: OK, I hear what you're saying. And we all want the world to reopen again. We all want to go to movie theaters and bars and restaurants. I definitely do, but I also don't want to get coronavirus. Just here in New York City, we've seen positivity rates triple over just the last couple of days. And, I mean, the CDC, you mentioned, those recommendations-- frankly, Dr. Fauci has said himself that the reason New York City's positivity rates were so low, and praised the city and its efforts were because of the really stringent guidelines around reopening and gathering in groups.

So, I mean, is it really prudent to allow restaurants to open indoor dining beyond that 25% capacity? Are we not looking at another surge in the city if we do that?

JOSEPH BORELLI: But, I mean, listen to what you just said and sort of play it back. We have the strictest rules. We have the strictest rules regarding, specifically, restaurants and theaters and mass gathering, and our rate is trickling up. Whereas some of the states that have been more aggressive in reopening have rates that are going down.

So obviously it is related. If people are in contact with more people, obviously, the chance is greater. No one's denying that. But if people keep complying with social distancing guidelines and starting to resume their life as normal, there is the opportunity to reopen safely and give people the ability to go out and eat.