Georgetown, Kentucky is proposing a 3% tax on meals served in restaurants that operate in the city. Because previous city governments failed to rein in profligate, irresponsible spending and simultaneously to placate their constituents, the budget deficit for the city of Georgetown last year had swollen to nearly 4 million dollars. That represents an incredible debt for a city claiming little more than 20 thousand residents. Through massive cuts, mostly in payroll and services, the budget deficit currently looks to be closer to a more reasonable 2 million dollars. Now the Georgetown Mayor and City Council are looking at raising revenue, a task that should have been the first undertaken. The restaurant meal tax has been largely misrepresented by the Tourism Board, the Mayor, and in front of the City Council as being limited in scope and impact. The justification is the false claim that the restaurant meal tax is discretionary for the individual and will fall mostly on visitors and tourists. As for the tax being discretionary, not everyone has the time or competence to prepare meals in their home. Most work lunches are taken away from the home, and therefore most of that local, as opposed to tourist, dining will be impacted by the restaurant meal tax.
The point of all this is that now is not the time to impose this sort of new tax upon an already distressed market. While revenue generation would be accomplished, that revenue would be reduced from current projections as has happened in other communities. The destabilizing of the local restaurant economy would not be long term, lasting perhaps six months, but the shock effect would in all likelihood lead to some closings while also preventing new businesses from opening, and this is exactly opposite to the effect that Georgetown’s government should be seeking at this time.
The following comes from an email I sent to City Council members and the Mayor regarding the Tourism Board’s own survey, which does not support the contention for the meal tax falling primarily upon visitors to Georgetown. Also, I have included the results from an informal telephonic survey which I conducted of other Kentucky communities which have imposed a restaurant meal tax.
The Tourism Board’s own survey:
The results of the Interstate vicinity restaurant survey counted a total of 4,004 cars. Of these, 38% were from Scott County, 49% were from other Kentucky Counties and 13% were from out of state. The results of the South Broadway restaurant survey counted 1,243 cars. Of these, 69% were from Scott County, 26% were from other Kentucky Counties, and 4% were from out of state.
| Overall Results | ||||
| Cherry Blossom | South Broadway | Total | Percentage | |
| Scott County | 1,502 | 869 | 2,379 | 52% |
| Kentucky Other | 1,404 | 339 | 1,633 | 36% |
| Out of State | 505 | 48 | 553 | 12% |
| Total | 1,909.15 | 1,256 | 4,557 | |
Please note, that since Kentucky truck license plates do not include the county of origin, all Kentucky trucks were counted in the Kentucky Other County category. Obviously, this would result in some Scott County vehicles not being counted in the Scott County numbers. Also note that it is impossible to determine if a Scott County license is that of a Georgetown resident or a resident of the county. Data for 2003 obtained from the Georgetown/Scott County Chamber of Commerce reports that the total population of Scott County was 36,726. The population for the City of Georgetown was 19,013, or 52% of the total Scott County population. It would be reasonable to assume that of the Scott County license plates counted, 48% were not residents of the City of Georgetown.
http://www.georgetownky.com/revdevelop2.html
So, apparently, the Tourism Board’s own figures show that the majority of Georgetown diners on any given regular day are more likely than not to be from Georgetown, not out of town. The use of the population county/city ratio to claim equivalent percentages represented in Scott County license plates at eateries is ridiculous. One usually eats close to where one lives, which means that Scott County plates in Georgetown restaurant parking lots are probably owned by Georgetown residents. Additionally, since Kentucky motor vehicle plates stay with the vehicle, there is a high probability that out of county plates still belong to Georgetown residents who bought second-hand vehicles. In my own immediate family, there are seven vehicles; of these, four have out of county plates. Finally, these figures are from 2005, when there was considerably more travel going on and the presence of out of town diners was more likely. The current economic situation has greatly curtailed travel for all purposes, and decreased travel results in increased localized dining. All one need do to realize that Georgetown restaurants are patronized most by locals is to visit these Georgetown restaurants.
I have seen it written and heard it said that fully 70% of the restaurant meal tax would probably be paid by out-of-town diners; given the evidence of the Tourism Board’s own survey, I would counter that it looks more like Georgetown residents will be paying the 70%. And, claiming the Interstate traffic argument doesn’t work when travelers know that Lexington is just around the bend.
As for the consequences to locally-owned restaurants, I did a phone survey of restaurants in Berea and Mt. Sterling. In Berea, which most recently passed its meal tax measure, four of the seven restaurants surveyed indicated a definite drop in month-to-month revenue since the tax went into effect, on top of the year-to-year loss experienced as a result of the recession. One reported no discernible effect beyond a lot of complaining about the new tax. Another, to my surprise and the owner’s admitted own, had actually seen an uptick in sales. The seventh restaurant I attempted to contact had closed since the imposition of the tax.
In Mt. Sterling, I could not locate a single locally-owned restaurant that was under the same ownership as before their meal tax went into effect. I contacted a couple of Winchester restaurants, and they didn’t seem to know anything about a restaurant tax.
I will be following up on this to give everyone a clearer picture about the possible consequences of a restaurant meal tax in Georgetown at this time. It seems that the meal tax will have a de-stabilizing effect felt most by those restaurants that help define the community atmosphere. Many of the few truly locally owned places are already financially distressed, and this new tax may be the needle that tips the cart.
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