Restaurant tax will not provide 'sustainable funding'

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By Linda Ireland

 A proposed 2 percent restaurant tax will not provide sustainable income to LaRue County Park and Recreation.

That was consensus of a pair of speakers at an Aug. 28 forum hosted by the recently-formed Hodgenville Restaurant Association.

Ray Gillespie and Bill Abner, members of the Kentucky Hotel and Lodging Association spoke to a group of about three dozen people at the Hodgenville Civic Center about the tax and its uses.

Members of the Park and Rec board of directors asked Hodgenville City Council to enact a restaurant tax numerous times this year. The request did not appear to be going anywhere until May when four of the six council members voted to support it.

Since then, the council has approved the formation of a Tourism and Convention Commission to oversee the funds. No members have been appointed to the commission and the city council postponed first reading of the restaurant tax ordinance until Sept. 10.

Mayor Terry Cruse and City Attorney Mary Gaines Locke had expressed doubt several months ago that the tax could be used for sustained funding of any group.

Gillespie, executive director for the KHLA, was one of the original authors of the state law passed in 1968 that permitted fourth and fifth class cities to pass a restaurant tax of no more than 3 percent. He said there are current and past lawsuits regarding abuses of the tax.

“Most of our city fathers use good judgment,” Gillespie said. “… some are bad apples.”

Abner said there are ways Park and Rec could benefit from the funds, such as advertising a tournament, purchasing additional seating for the tournament or beautifying the park.

Gillespie described the way money would be disbursed. Any group planning an event that will attract tourists can apply for a grant from the local tourism commission. 

The commission will decide how to allocate the funds and act as a watchdog over the usage. Proper recordkeeping is expected from all parties and an annual audit is required.

Individual tourism commission members can be sued individually if the money is deemed to have been misappropriated. Abner recommended that anyone who serves be bonded, an expense that can be paid through the restaurant tax.

Jack LaRue, a member of the Park and Rec board, said the group saw the restaurant tax as “an avenue to update the park ….”

Gillespie said most cities had enacted the tax when it “could still be spent on recreation.” The law was amended in 1990 to reserve the tax for tourism-related purposes.

Audience members asked several questions including how many businesses in the city will be subject to collecting the tax (17 or 18); how much revenue is anticipated (about $200,000); and whether the funds must be spent in the year they are rewarded (no – the funds can be “bankrolled,” according to Gillespie).

Abner said 70 to 80 percent of the people who will be paying the restaurant tax would be local. Businesses can be shut down for non-payment of the tax.

The tax can be collected on prepared food, including take-out and delis, with the tourism board determining which businesses are affected.

Rick Roach, a member of Land of Lincoln Planning and Zoning, noted that $200,000 “wasn’t much” and asked, “What will keep Park and Recreation from not getting what they get now?”

Several voices chimed in: “Nothing.”

Three members of City Council attended the meeting: Bonni Clark, Glenda Wathen and Jim Phelps Jr.

Pat Durham, who moderated the meeting, is president of the restaurant association.

In a previous interview with the Herald News, Durham said the group would continue to meet even if the restaurant tax isn’t passed.

If the tax is passed, one of the members of the Tourism and Convention Board will be selected from members of the restaurant association.

For more information about the restaurant association, call Durham at 735-3558.