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Proposed Bills Could Expand Louisville's Taxing Power, Including On Restaurants

John Varanese prepares duck for a turducken in the kitchen of his Frankfort Avenue restaurant, Varanese.
John Varanese prepares duck for a turducken in the kitchen of his Frankfort Avenue restaurant, Varanese.

For months, Louisville Mayor Greg Fischer has called for broader taxing power for the city. A pair of bills filed Friday in the Kentucky House of Representatives could grant his wish.

A pension bill that is expected to rise and eat up more of the city's budget over the next several years is a primary driver in Louisville's search for new tax revenue.

Last year, the Metro Council shot down a proposal to raise the insurance premium tax, and subsequently cut more than $25 million from the budget, leading to decreased city services.

The House bills take two approaches. One would allow cities to levy a tax of up to 3% on dining out. Fischer previously told WFPL that would be a "relatively easy" option that is already available to smaller cities in Kentucky. The other would put forward a constitutional amendment to allow Kentucky cities to explore other taxing options, including on restaurants.

Stacy Roof, the CEO of the Kentucky Restaurant Association, is against both proposals. But she said the broader constitutional amendment bill is more dangerous "because it pretty much gives every city and county any ability to enact any fees and taxes that it wants to."

Fischer's spokeswoman Jean Porter said in an emailed statement that the administration "heartily" supports the amendment, saying it could help Louisville attract jobs and investment. Sarah Davasher-Wisdom, president and CEO of the metro chamber of commerce Greater Louisville Inc, similarly praised House Bill 475.

In an emailed statement, Davasher-Wisdom said the amendment "is necessary to give city and county governments in Kentucky increased flexibility in generating revenues and allow them to develop forward-thinking, business friendly tax systems to compete and thrive in the 21st century."

But Roof questioned the need for either that measure or House Bill 470, the restaurant tax bill, given that Louisville could have a surplus of nearly $19 million this fiscal year. She said restaurants and their patrons are not responsible for the city's growing pension bill.

"Cities have done a poor job of planning for a rainy day," Roof said.

City CFO Daniel Frockt recently told the Metro Council's budget committee that the surplus came from higher than expected corporate payroll revenue as well as a delayed one-time payment from the Jefferson County Sheriff’s office. He said the excess could help Louisville avoid budget cuts this year.

But he said the rising pension bill will continue to put pressure on Louisville's budget. He said the bill will grow to $141 million, up from $80 million, by fiscal year 2023.

"Even though the revenue forecast is positive, the recurring piece is not enough to overcome the challenges that we're going to face," Frockt said.

Roof, of the restaurant association, said taxing restaurants is not the answer. She said that Louisville might raise money from the restaurant tax, but it could impact the other taxes restaurants pay to the city if they have to cut workers' hours, for example.

She said about 20% of Kentucky's more than 200,000 restaurant employees are in Louisville.

Amina Elahi is LPM's City Editor. Email Amina at aelahi@lpm.org.

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