Bill would dip into tourism funding

  • BY GINA KINSLOW gkinslow@glasgowdailytimes.com
  • Feb 29, 2016

     

    Image result for cave city ky

     

    GLASGOW — A piece of legislation now being considered by the State Senate will allow a restaurant tax of 3 percent or less to be levied on all cities and merged governments, and for the revenue collected from the tax to be distributed between the tax jurisdiction and the relevant tourist and convention commission.

    Currently, Kentucky Revised Statute 91A.400 only allows fourth and fifth class cities to levy a restaurant tax that is not to exceed 3 percent of the retails sales made by the cities’ restaurants. All revenue collected from the tax is to be appropriated to the tourist and convention commission established by the city.

    If Senate Bill 166 passes, only 25 percent of the tax revenue will go to the tourist and convention commissions.

    The Kentucky League of Cities supports the legislation, and according to J.D. Chaney, deputy executive director of the organization, cities are having a difficult time handing over monies generated by the levying of restaurant taxes to non-elected boards, such as the tourist and convention commissions, which make decisions on promotional efforts for tourism.

    “They (cities) actually want to construct something, operate something and maintain something that is useful to draw people into their communities and benefit their citizens,” he said. “We think it restores accountability back to the elected officials. … It also eliminates the net profits and gross receipts tax which are paid by the restaurants if the cities elects, it doesn’t require them to enact (a restaurant tax).

    “So they would be choosing, if (cities) enact a restaurant tax, they can no longer collect net profits or gross receipts occupational taxes directly from the restaurant.”

    Chaney continued that the state has no compensation-based taxation element in the menu of options beside the restaurant tax.

    “This provides an element to also collect revenues from people coming into the community who don’t necessarily live there, which is also an attractive revenue option for cities,” he said.

    Not all favor the proposal

    Officials with the Kentucky Travel Industry Association are opposed to Senate Bill 166.

    “This is not the first time that legislation has been introduced and so the Kentucky Travel Industry Association has maintained a longstanding opposition to it, and the key and core reason is the bill says that up to 75 percent of restaurant tax money can be taken by the cities and city governments,” said Hank Phillips, president and CEO of KTIA. “A part of the bill is intended to make all cities eligible for the restaurant tax, and if that were to occur tourism commissions that got 25 percent of that tax in cities that enacted it, they would probably be happy with it, … however, what is the element within the bill that we find impossible to support is that the over 40 cities that already have the tax, the tourism commissions would be subject to a 75 percent reduction of their restaurant tax funds.”

    Phillips continued that it is very important to understand why the restaurant tax exists, and why it was enacted, which he said was for only the small towns to have.

    “The reason is the other source of revenue for funding local tourism efforts is a hotel tax. Typically, a fourth- and fifth-class have a relatively few number of hotels and hotel rooms from which to generate that tourism marketing money, so at a point in the past, quite a long time ago, the legislature said we need to help them generate some additional revenue to promote tourism in the small towns so let’s put in a restaurant tax that only the small towns are eligible for,” Phillips said.

    “The restaurant tax is absolutely dedicated to tourism and on that basis all of those moneys go to the tourism entity in the small town. That’s why these small tourism commissions, many of them if not most, would be devastated by a 75 percent reduction in their primary funding source.”

    Tourism reaction

    One area tourist commission that would be affected by the legislation if it is passed is the Munfordville Tourism Commission.

    Coni Shepperd, executive director of the Munfordville Tourism Commission, said she is hoping to work with Munfordville Mayor John Freeman on the issue. The Munfordville Tourism Commission is funded only by the city’s restaurant tax.

    “That would probably put us out of business,” she said. “We hope it goes nowhere.”

    The legislation would also affect the Cave City Tourism and Convention Commission.

    The Cave City City Council voted in June 2015 voted to raise the city’s restaurant tax from 1 to 3 percent. A portion of the tax revenue is used to fund a grant program to which local business owners can apply and use the money to promote their businesses, or for signage or beautification.

    “As a part of that, the tourist commission agreed to give a third of those funds to the city of Cave City,” said Sharon Tabor, executive director of the Cave City Tourism and Convention Commission. “That’s how we are getting the money for the 150th anniversary and the concert series.”

    The city of Cave City is celebrating its sesquicentennial this year, and as part of the celebration a concert series featuring performances by jazz pianist Bee Gee Adair, who is originally from Cave City, and bluegrass musician Ricky Skaggs will be held.

    “If for some reason the restaurant tax initiative is approved by the House and the Senate, and if Cave City government decides to take that 75 percent that would take all of the increased tax money, plus a portion that we use for the convention center’s maintenance and upkeep,” Tabor said.

    Likely to move ahead?

    The sponsor of SB 166 is Sen. Jared Carpenter, R-Berea. According to Sen. David Givens, R-Greensburg, there’s a “significant” restaurant/tourism industry in the Berea/Richmond area and that is why Carpenter introduced the legislation.

    Givens said he believes Carpenter did so more or less to start a conversation than to see if the legislation would move all the way through the state legislature.

    The bill was introduced on Feb. 9 and sent to the State Senate’s Appropriations and Revenue Committee on Feb. 11.

    Givens does not anticipate the bill moving out of committee at this point.

    “It would be unusual in a budget session for us to pass a piece of legislation like that (because) the focus is going to be on the budget,” Givens said.

    As for whether he would ever support such a piece of legislation, Givens said, “I’m open to the conversation if it is part of a tax revenue neutral package. As a stand alone piece of legislation, it’s a little hard to support.”

    “Communities right now have some tools in the tool box to raise local revenues. A lot of those tools are either being under utilized because locals don’t want to vote a tax increase, or they are simply not feeling the need to raise taxes locally. So some of these pieces of legislation are actually efforts to cause us to give them a way to avoid making a tough vote. If locals want to raise taxes, they’ve got the ability to do it and they have the multiple means already.”

    CONTINUE READING…

    http://www.lrc.state.ky.us/record/16RS/SB166/bill.pdf

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