Local government leaders have made Owensboro’s ability to levy taxes a community priority. Mayor Tom Watson, who led the discussion on this matter at a community forum last week, said state representatives need to “level the playing field” in regard to which Kentucky cities get the benefit of levying local taxes in order to boost economic development.
A restaurant tax, a bill that was brought up but not passed at the 2018 General Assembly, would require people who eat at restaurants, cafes and fast food establishments to pay a 3 percent tax on the gross retail sales of all food and beverage items. The tax is added to the 6 percent sales tax on these items. Cities such as Elizabethtown, Shelbyville and Madisonville have imposed restaurant taxes, and the revenue from that tax goes toward supporting local economic development.
However, second-class cities like Owensboro and Bowling Green’s sizes aren’t allowed to impose restaurant taxes, Watson said.
“Elizabethtown is able to, and we can’t. Hartford raised, I think, $1.3 million [through the restaurant tax]. Generally speaking, the third, fourth and fifth-class cities that were allowed to impose that tax didn’t have convention centers,” he said. “It’s an archaic tax code in Kentucky that needs to be brought to the 21st century.”
Elizabethtown, for example, is responsible for the administration and collection of the restaurant tax for the city. A 4 percent tax on alcohol sales is collected by retail stores and restaurants and a 2 percent tax is imposed on all prepared food sales. According to the Elizabethtown Tourism and Convention Bureau, the restaurant tax has allowed the city to fund local projects, such as completing the renovation of the historic state theater and building a sports park to attract tournaments to the area.
“Proceeds would also be used to alleviate current city debt service on the property in which the Sports Park would be located as well as assist in sponsoring an annual city concert,” the ETCB states.
According to Watson, the restaurant tax isn’t something he’d necessarily like to see in Owensboro, but he’d like the playing field leveled for all cities across the state that are attempting to grow and develop.
“I hate the term, ‘restaurant tax’ to begin with. It’s economic development revenue is what it is,” he said. “By singling out restaurants, people going out to eat don’t know why they’re paying a restaurant tax and restaurants don’t know why they’re paying for it. But as long as they level the playing field — they can take it away from Elizabethtown, even. It just needs to be level.”
Owensboro could see upwards of $14 million in tax revenue go toward economic development if the City were able to impose a restaurant tax. Watson said that money could go far in improving Owensboro’s sports tourism — an industry that used to attract athletes and teams from all across the state, but that, in recent years, has had a difficult time keeping up with competing cities who’ve improved their sports tourism.
A referendum vote regarding where that money would go could be held, Watson said.
“If you’d like to invest $5 million to go toward a marina downtown, it could, and then you’d have an opportunity for that tax to sunset after it goes toward what it needs to,” he said. “That’s how a lot of cities built their parks, their downtown development.”
Watson said part of the beauty in giving local governments some power to levy taxes means taking less trips to Frankfort to ask state representatives for help in getting things accomplished.
“And they want to keep some of that power, and it makes sense,” he said. “But we have to have a discussion about it.”
According to Watson, there’s no doubt a restaurant tax would create some much-needed revenue in Owensboro.
“We don’t sell ovens or stoves — we sell hamburgers in Owensboro. We’re a huge restaurant, fast-food community,” he said.
For something like this to happen, it would take more than a public forum, though Watson thinks the community priorities forum is a good place to start.
“I’ve been told it’ll never be a free-standing bill. It’d have to be done through a complete tax reform,” he said. “We need to sit down with local, elected state representatives and decide which two or three topics that were brought up at the forum have a chance.”
Other priorities discussed at the community forum included a new judicial center and extending I-165 to the William H. Natcher Bridge.
