Hodgenville city government is reviving consideration of a restaurant tax which dominated the first council meeting of the year.
An ordinance proposed last year would have imposed a 3 percent tax to restaurants and other prepared food sold within city limits. This can include some grocery and convenience store deli items and food trucks. It was tabled in March after the pandemic hit.
Hodgenville Mayor Jim Phelps opened Monday’s meeting by saying it was time to reignite discussion on the idea but an ordinance had not been written to propose to the council.
“If you remember, according to the Kentucky League of Cities’ survey, restaurant sales in Hodgenville are approximately $6 million,” Phelps said. “We can pass a restaurant tax up to 3 percent.”
Phelps is referring to a report done by the league which was brought before the council last year. The report said based on the 2018 population estimate of 3,238 citizens, Hodgenville has an estimated restaurant sales totaling $6 million.
A 3 percent tax would yield about $180,000 annually. Setting the rate at a 2.5 percent would bring in about $150,000 and a 2 percent tax $120,000. Phelps said the Kentucky legislature did not take up the bill last year to rework how the money can be used.
“Right now, we would have to form a tourism board. The board would have the sole power to spend the money, somewhat with the council overseeing,” he said.
Current law requires the money be dedicated to the promotion tourism in the community.
“It could be used to help parks and rec; it could be used to help the development of our trail system that the guys have been working on; promote Lincoln; promote our downtown businesses, businesses all over the community.”
“Well, anytime you promote tourism if it brings more people into the community then more money is spent in the community. So, everybody benefits in the long run whether you are a restaurant or a shoe store,” council member Lisa Reidner said.
Some questioned if the timing is appropriate to bring the topic back up for discussion as small businesses come out of a global pandemic.
“It kind of takes me by surprise at this point of time in the stage of our economy,” Ray Despain, owner of Hodgenville Grill, said before the meeting.
“In corporate they probably really don’t care. Us little guys, independent people, are just lucky through the pandemic that we are still here,” Despain said.
Like many other restaurants, Hodgenville Grill was closed for two months because of state orders related to the pandemic. During that time, Despain still had expenses, including the city water bill that had to be paid.
“The city could have not charged me for whatever, but I paid a minimum water bill for two months and wasn’t even open. The city hasn’t done anything for any of the restaurants.”
Despain mentioned an emergency budget allocation made by Elizabethtown city government in April which gave small businesses in need of assistance up to $3,000 each, based on an application.
“It’s just not at a good time in the economy,” he said.
Serena Erizer, owner of Vibe Coffee with locations in Hodgenville and Elizabethtown, said in a message it was “Bad, bad, bad timing. This is the worst time to be considering an additional tax on businesses that are already struggling due to the pandemic. We deal with a restaurant tax at our Elizabethtown location, and it’s been really hard on us during the pandemic. It’s not responsible for the council to consider this option, especially in the middle of the economic crisis.”
Phelps said most people in the community have been to Elizabethtown to eat without paying any notice to the restaurant tax, which is set at 2 percent of the bill.
“And I know a lot of restaurants are struggling right now, a lot have been closed due to the COVID-19 issue, but we all pay it wherever we go,” he said. “When you go to Louisville, Leitchfield, E’town and you don’t pay any attention to it. You don’t even notice it on your bill.”
Reidner asked if this tax will cost the restaurant any money. Phelps said it would not as the consumer would pay the cost. It would work similarly to the ABC regulatory fee, which he said the city has not heard any complaints about.
Cody McDowell, owner and operator of Lincoln Lodge, questioned if the proposed tourism board would only cover the city or the agency also could be established with county government and serve all of LaRue County.
Phelps said as far as he knows the county has not shown interest.
McDowell said many of the local restaurants are inside city limits and while the city has around 3,000 residents, almost 15,000 people live in the county.
“Pretty much mostly people in the county will be paying this tax, but people who live in the county won’t have any say in how it is spent because it is the city of Hodgenville tax,” McDowell said.
“I understand what you are saying and if you turn that around, all of us in the city limits pay county tax for services that we do not get in the city. So it goes both ways,” Phelps said.
Near the end of the discussion, Phelps said council would not “blind side” anybody when the topic is brought up for consideration. He said the public would be notified when it again will be discussed.