Hazard City Commission Suspends 3% Restaurant Tax Pending Appeal

At a second reading held Tuesday, the Hazard City Commission unanimously approved a temporary suspension of the 3% restaurant tax, voting to halt collections effective Jan. 1, 2026. The tax, first implemented at the start of 2025, will be put on hold as the city navigates ongoing legal challenges.

The tax has already been the subject of multiple court decisions. The Franklin Circuit Court twice approved the city’s authority to impose the levy, but the state Court of Appeals later ruled against that authority. City officials said they will take the matter to the Kentucky Supreme Court, seeking a definitive ruling on the tax’s legality.

Mayor Happy Mobeilini addressed the policy’s intent, framing it as a modest, community-minded step. “We’re trying to improve the quality of life for all the residents. And this is one way that you can do this without putting a huge burden on anybody,” Mobelini said.

City leaders argue the revenue from the tax is essential to Hazard’s growth strategy, intended to fund initiatives that would expand tourism and increase local activities. Officials also noted that the previous administration controlled sizable coal severance funds but did not initiate new projects, a point used to justify the present administration’s push for new revenue streams to support development.

For local restaurateurs and customers, the immediate effect is clear: the additional 3% charge will not be collected beginning next week, offering short-term relief for businesses and diners. The suspension, however, leaves longer-term questions about municipal funding unanswered. Planned initiatives that city officials tied to the tax revenue may be delayed or require alternative financing if the Supreme Court does not ultimately uphold the levy.

The unanimous vote at the commission meeting signals local political alignment behind pursuing the tax as a revenue source, even as legal setbacks have put the program into limbo. The next chapter will play out in the state’s highest court, where a final ruling could determine whether the tax can be reinstated or must be permanently struck down.

Residents and local business owners should expect further announcements as Hazard’s lawyers prepare an appeal and the commission considers interim budget adjustments to cover projects previously anticipated to be funded by the restaurant tax.