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March 6, 2014

Proposed tax draws a crowd

London is one step closer to a restaurant tax

CORBIN — By LeeAnn Cain / Staff Writer

London is one step closer to having a new restaurant tax.

An ordinance establishing the proposed 3 percent tax had its first reading approved at Wednesday’s London City Council meeting before a crowd of about 20 people. Officials have said the tax is intended to fund the city’s newly-formed tourism commission.

City Attorney Larry Bryson read the ordinance, which states the tax would be levied against any restaurant, with the exception of non-profit charitable organizations, beginning July 1.

The council voted on the reading, with Council Member Nancy Vaughn making the motion and Council Member Jason Handy seconding the motion. Council members Judd Weaver and Danny Phelps voted against the ordinance. Vaughn, Handy, Council Member Jim Hays, and Mayor Troy Rudder voted in favor of the ordinance. Council Member Bobby Joe Parman abstained from the vote.

Prior to the vote, Rudder gave the audience and council members an opportunity to speak about the tax.  

Jim Robinette, representing the local Dairy Queen, said, “Sales taxes are already in restaurants but not grocery stores. If you add 3 percent to that 6 percent it will be 9 percent. That’s pretty significant.”

“Eating out is not a luxury anymore,” Robinette continued. “It’s a way of life.”

Robinette mentioned a bill to raise minimum wage to $10 an hour and stated that a 3 percent tax on top of the raise in wages will make eating out significantly more expensive.

“The restaurant industry is the most risky business there is. It has the highest rate of failure, with an average 2 to 6 percent profit margin for restaurants,” Robinette said.

With the 3 percent tax from the city, he added, the tourism commission will make as much money as restaurant owners.

Herman Hatfield, 60, the owner of Frisch’s Big Boy in London, said “We’re like tax collectors. You guys aren’t going to have to listen to the complaints. We are. Taxes make people bitter and angry. We’re taxed enough already.”

London Downtown Manager Chris Robinson pointed out that Barbourville, Corbin, and Williamsburg all had restaurant taxes that fund the Barbourville Water Park, The Arena, and Kentucky Splash Water Park.

Robinson distributed a handout listing the potential benefits of the tax, including the improvement of existing parks and the creation of new parks, the construction of sports facilities, and downtown development. He said the restaurant tax cannot exceed 3 percent.

Troy House, a member of the London Tourism and Convention Commission, said the tax will help increase the city’s general fund due to the fact that the city will no longer have to dip into the general fund for city-sponsored tourism activities.

Richard Conley, who represented the local Burger King, told the council how the tax would affect him.

“My customers come in looking for a $5 meal deal,” he said. “Everything I’m buying is going up. This is the worst time to introduce a restaurant tax.”

Conley was among several restaurant owners who asked if surrounding areas had two tourism commissions. Rudder responded that Corbin, Barbourville, Williamsburg, and other cities all have two tourist commissions, saying it’s “common.”

“How many water parks are we  going to need?” Hatfield asked, in reference to the city tourism commission speculating on using the tax revenue to build a water park.

“That’s what people are asking for,” Rudder replied. “They ask for this and that, but the reason we don’t have those things is a lack of financing.”

“The city’s cost of operation is going up,” Rudder said. “Hopefully the city tourism will take over a lot of the activities run by the city. Like the bike park, which is being built with matching grants. Well, the grant money is running out.”

Conley said that things were moving out of the downtown area, and the city needed permanent, stable attractions to bring people in and for the residents of the area.

“What revenue enhancement are you going to get from the Redbud Ride?” he said. “You need to invest. You have to have daily activity. Not a four- or five-day event.”

“We’re bringing more people in with our events,” London-Laurel Tourism Commission Member Jim Handy said. “We tried to get a restaurant tax 10 or 12 years ago. What could we have done with $20 million?”

“In surrounding areas with the restaurant tax our [Burger King restaurants’] sales decline. They don’t go up. People are angry to have to pay another 30 cents,” Conley said. “I know my customers. I know what’s going on in my own restaurant.”

“Will your customers go somewhere else to eat just to pay the same tax?” Handy asked.

Danny Phelps said taxes can be proposed with good intentions but the money sometimes ends up in  the general fund.

“We shouldn’t hand the money over to people who don’t know what they want to do with it,” Phelps said. “I don’t want another tax on the backs of the working people.”

Phelps said the county tourism commission was doing good work, but said he believed that most of the tourist appeal of the area was from natural sites, such as Cumberland Falls and Levi Jackson State Park rather than events.

“It’s not New York,” he said.

“I do understand the concerns and needs in this economy,” Council Member Judd Weaver said. “There are cost of living increases across the board.”

Weaver said the tax was “unaccountable” and called it “an immediate burden.”

“Since my wife and I reopened Weaver’s Hotdogs in 2007 I can only say I see the tax as being harmful,” Weaver said. “My customers are all repeat customers. Not people from out of town. The tax would be a slap to the face for my customers.”

“The tax is for the local people. Not those who come from out of town,” Robinette said.

Weaver acknowledged the work of the city council in helping the city move forward, but stated the city could generate additional revenue without another tax. Weaver gave the example of curbside recycling.

“Our departments do need to grow,” Weaver said. “We need to dig deep and work with less.”

London Fire Department Chief Larry VanHook spoke up.

“It’s hard for us to eat at a regular time, so more often than not we eat out,” he said. “We eat at your restaurants. We figured what that tax is going to cost us. It’s very cheap. We’ll still eat out.”

“I’ve been in tourism my entire life,” Handy said. He mentioned that he would rather build an amusement park than a water park.

“I think we all have a common goal – a sustained daily activity that brings people in continuously. I spend $100 a month eating out. A 3 percent tax is an extra three dollars. I’d certainly cut out a dessert to be able to ride roller coasters,” Handy said.

Handy explained that the restaurant tax was designed to help restaurants increase their revenue, which is why larger cities like Lexington and Louisville can’t implement the tax; they get enough traffic and opportunity for restaurants to be reasonably profitable.

“That 3 percent is invested to bring in outside money to things that only get local traffic,” Handy said. The outside traffic would be added to local traffic in restaurants to increase their profitability.

Hays also said he didn’t like the thought of a proposed House bill that would allow 75 percent of restaurant tax revenue to go into general funds.

“If this House bill passes, I can say I would never support that [tax revenue] going into the general fund,” Hays said. “I would be opposed to taking one thing to fund another.”

“I agree with [Hays],” Council Member Bobby Joe Parman said. “I think the funds should only go to tourism. I want us to have a lot to offer, and to keep the city well-maintained. I think the tax is an investment.”

“The ordinance says 100 percent of the tax revenue is going to fund tourism,” Rudder said. “Every cent of this money will go to tourist-related activities and unused monies will roll over at the end of the fiscal year instead of going to the general fund.”

“I’m not going to jail for a few dollars of city tourism money,” Rudder joked.

Rudder told the council he had always been in favor of a restaurant tax and believed it was a way for London to move forward. Rudder also said that he had talked to the mayors of other cities, and those mayors had called their cities’ restaurant tax “a godsend.”

Rudder explained that the funds for local events come out of the city’s general fund.

“We’re at the point now where we need a parks and recreation department,” Rudder said. “We need to make sure we have people who know how to run our natural parks. We need an expansion at the community center; we’ve been storing tables and chairs for $85 a month for the last 15 years. There’s a lot of things that money can be used for.”

“I’ve been on the London-Laurel County Tourism Commission for a long time,” Jim Handy said. “We spend a lot of time and energy trying to make our area a destination. We don’t get enough money and we spend the money we do get on land. If we had the restaurant tax, we could develop our land.”

“I’m not for taxes,” Parman said. “I think 3 percent is a little exorbitant, but this tax can do good for the city.”

“It’s just the timing,” Little League Manager and mayoral candidate Jack Riley said. “The economy is bad. I’m against it because the timing is bad.”

After the first meeting passed, London Tourism and Convention Commission Chairman Bill Dezarn voiced his approval.

“I’m glad it passed,” Dezarn said as the council took a break. “It’s good for the future of the city. I think we can take the money and use it the right way. I think we can progress.”

In other council news:

–According to Rudder, the council received a clean audit for the 2013 fiscal year.

–Katie Burke came before the council with a proposal for a 5K run to benefit her son, who has muscular dystrophy. The council decided not to act, as they did not think they could do a run to benefit an individual. Burke told them she would get in touch with Parent Project and contact them at a later date.

–The council unanimously voted to accept into its road system Jordan Drive. The deed is to be conveyed to the city by Kenneth R. James.

–The council voted unanimously to approve the exchange of maintenance and ownership of various city, county, and state roadways. The roadway mentioned specifically was a road behind Jerry’s Restaurant, which according to Rudder needed to be upgraded to the level needed for approval.

–The city voted unanimously to approve a Kentucky Infrastructure Authority loan for the Sampson Branch project. According to Bryson, the amount of the loan was not yet known; the bids had to be placed for an estimate of the project’s cost before an amount could be set.

Kyle Crager with Summit Engineering said they were in the process of kicking off the project, and he still needed to meet with the Kentucky Infrastructure Authority. Crager said the loan would be low-interest, with a rate of .75 percent over 30 years. However, Crager said, there would be no opportunity for loan forgiveness.

Crager said the council needed to give Rudder the authority to sign on the loan, and the applicant for the loan would be the London Utility Commission.

–The council unanimously voted to authorize advertisements for bids on the Sampson Branch project. Bryson reminded the council that they must review all bids. According to Crager, the pipe has deteriorated significantly within the last two years. Rudder said that he had been told by a company that they would have to move the pipe or bore somewhere else, and with the coming spring the council had been “put in a hurry.”

–Sheila Wittenback and Holbert Hodges were unanimously appointed to the Vacant Property Commission. Rudder said he was still talking to London Corbin Airport Manager Larry Corum about appointing Robert Ocasio to the London Corbin Airport Board.

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