Mount Sterling tourism director outlines proposal to raise restaurant tax to 3%

Tracy Pierce, tourism director for Mount Sterling and Wyoming County, told a city-hosted public forum that city officials are discussing raising the local restaurant tax from 2% to the state-allowed maximum of 3%, and that a change implemented on Jan. 1, 2027, would be expected to yield about $575,000 in additional revenue per year.

Pierce rooted the proposal in the ordinance establishing the tax—Ordinance 16690, passed May 15, 1990 and effective July 1, 1990—and in Kentucky law that limits local restaurant taxes to a 3% maximum. She said the tax is dedicated to tourism and recreation activities and is collected from consumers; restaurants remit the amount to the city.

The city reported recent aggregate collections of roughly $1,150,000 for the most recent year, with prior years at about $1,100,000 and $1,000,000. Pierce provided a breakdown of how those collections were distributed last year: Parks and Recreation received roughly $1,080,000 (about 94% of the total), tourism about $30,000, the regional arts center about $15,000, the airport about $15,000, and the historical society/museum about $10,000. Pierce said those allocation percentages predate her term in office.

Explaining the rationale for a targeted increase, Pierce said Parks and Recreation has identified about $5.2 million in capital wants and needs. "We can't come up with $5,200,000," she said, noting the scale of that request relative to the city's annual property-tax collections and explaining why leaders are exploring revenue options beyond raising property or occupational taxes.

To illustrate the effect on consumers, Pierce offered a $7.99 breakfast example and said raising the tax from 2% to 3% would add about 7¢ to that meal. "This tax is a usage or a consumption type tax, which basically means if you don't eat out, then you don't pay this tax," Pierce said, characterizing it as an approach that spreads costs among residents and visitors who dine locally.

Pierce also presented visitation data from Placer AI for ZIP code 40353 and samples of local restaurants and parks to show that a noticeable share of restaurant customers and park users come from outside Montgomery County. She argued those outside visitors help fund tourism-related activities when they dine or use local facilities.

On confidentiality, Pierce said the city cannot disclose individual restaurant payments because that information is protected; she provided only aggregate totals. She summarized constituent feedback received so far—one phone call raising concerns about rounding, three emails supporting the tax increase for parks, four emails opposing an increase, and multiple other requests for information—and said staff would record attendees' contact information to follow up on unanswered questions.

Pierce directly addressed several social-media claims about the tax: she said there is no sunset clause in Ordinance 16690, that the restaurant tax does not fund roads or school sports, and that restaurants within city limits that prepare meals are required to collect the tax. "There's no sunset clause in this ordinance anywhere," she said.

The forum closed the presentation portion and opened for public questions and comments; Pierce said she would collect contact details and try to provide answers when she could not respond immediately. The forum did not record any formal council vote or ordinance change during the session; any change to the rate would require action by the city council.