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Changes may come to tax sharing negotiations

POSTED: June 20, 2014 1:01 a.m.

The Association County Commissioners of Georgia and the Georgia Municipal Association have begun talks to determine whether the process of distributing local option sales tax revenue between counties and cities can be improved and made more equitable.

Hall County and Gainesville officials have participated in these discussions, providing the ACCG and GMA with insight into how LOST revenue is distributed locally.

Every 10 years, following the latest census, counties and cities enter negotiations about how revenue from the 1 percent sales tax will be split.

The last negotiation for Hall County and its cities wrapped up in October of last year.

Hall County wound up receiving about 74 percent of LOST revenues while Gainesville received about 17 percent. The rest was split between Flowery Branch, Oakwood, Clermont, Lula, Braselton, Buford and Gillsville.

The eight criteria that counties and cities use when negotiating with one another about how to divvy up LOST revenue is vague, at best.

An ACCG report published in August 2011 speaks to this point.

“The negotiations will be complicated by the fact that no one distribution formula will result in a sales tax distribution that achieves maximum equity for all county residents paying the sales tax,” the report states. “The debate will focus on the fairness of the LOST revenue distribution, but no objective standard exists to determine that one distribution formula is inherently superior.”

Based on existing parameters, local government officials are asked to consider the point of sale where the tax money was generated and the service responsibilities of each government entity.

But lacking a more coherent formula, these guidelines tend to complicate the process further.

“Unfortunately, what happens is it puts the counties and the cities in a very adversarial position,” said Hall County Commissioner Craig Lutz.

Having served as a councilman in Flowery Branch, and now as a county commissioner, Lutz said he understands both sides of the equation.

“Nobody can agree on any of the considerations because there’s no weight to them,” he added.

LOST negotiations are different in each county, but if agreement and compromise cannot be had, mediation follows. If this does not resolve the dispute, the next step is binding arbitration.

“I think there’s recognition that sometimes these LOST negotiations can be challenging and contentious,” said Hall County Administrator Randy Knighton. “I’m happy that GMA and ACCG are having these conversations to determine directly from the local governments if in fact there can be a better way to do this.”

Though the next round of LOST negotiations between Hall County and local cities won’t begin for another eight years or so, after the 2020 census is complete, officials hope outlining a clearer negotiating path can alleviate any fallout.

While perhaps only anecdotal in nature, Lutz said he believes the fallout is very real.

“I firmly believe we’re still seeing the repercussions of (LOST negotiations) today,” he said, adding all sides feel like they lost on the latest compromise. “Anytime you have a shared resource of money, there’s going to be some issues.”

Lutz said the ill feelings generated in the LOST negotiations could hamper discussions between the county and cities about what projects to fund if a new round of special purpose local option sales tax, or SPLOST VII, is approved by voters this fall.

That’s why officials are looking to identify new criteria and parameters to streamline the negotiations and make the process fairer the next time around.

“If I was king of the world and I could wave my wand to say how it should be done, I think it needs to be done based on the services delivered,” Lutz said.

Gainesville City Manager Kip Padgett said he had provided the GMA with previous court filings outlining the city’s preferred methodology.

“... Our position would be that future methodology should take into account daytime population, point of sale data and tax digest, in addition to the eight criteria already identified,” he added.

So what’s the next step?

“We are still very much at the beginning of the negotiation process,” said Jim Grubiak, ACCG general counsel. “One of the first steps was to gather thoughts and suggestions from counties and cities around the state. We’ll be working through those responses and hope to have a proposal by September.”


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