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Gainesville: Hall still owes $5.3M in SPLOST funds

County attorney: More payments violate cities’ agreements

POSTED: February 6, 2013 11:42 p.m.

Hall County owes the city of Gainesville more than $5.3 million in special purpose local option sales taxes, according to court documents filed by City Attorney James E. Palmour III.

The city filed a lawsuit for breach of contract against the county in Hall County Superior Court on Tuesday afternoon.

It came after months of disagreement over a 2008 agreement between the two that spelled out how SPLOST VI revenue would be split and how it would be paid to the city, correspondence attached to the lawsuit shows.

In addition to asking the court to rule that Hall County owes the money, the complaint also asks that Hall County continue accelerated payments to the city. It also asks that the court rule Gainesville is not responsible for extra money the county pays to the city that’s not offset by tax collection revenue because of the accelerated payments.

Hall County Administrator Randy Knighton said to Gainesville officials that, upon advice from counsel, unless the tax revenue significantly increases, Gainesville has received what it’s entitled to under the agreement.

“Since the city has presently received what is estimated to be its total SPLOST proceeds, there will be no basis for continued SPLOST payments during the next 32 months remaining in the SPLOST VI collection period,” County Attorney Bill Blalock wrote in a January memo to Knighton.

In the intergovernmental agreement, Hall County agreed to make 48 monthly payments to Gainesville of $593,750, which is $7.1 million a year and after four years, Gainesville would receive $28.5 million, about 17.6 percent of what is now projected to be the total SPLOST VI revenue collection. However, the agreement also says that Gainesville’s share of “total SPLOST VI collections” would be about 14.79 percent and the city would pay back the surplus funds the county advanced it and pay an annual interest fee to Hall for the additional upfront money.

“They agreed to pay us four years of installments, and they did not meet their obligation the last year,” Gainesville Mayor Danny Dunagan said Tuesday evening. “That’s a breach of contract.”

Gainesville wanted the speeded-up payments to finance its $20.4 million public safety complex on Queen City Parkway that opened in 2010. It stills owes $6 million on the project.

SPLOST VI, a penny sales tax approved by the voters to pay for projects in Hall County and the neighboring cities, started in July 2009 and runs until June 2015. It was expected to collect about $240 million, but that was revised downward to a projected $162 million. The complaint filed with the court said Gainesville was to receive 80.3 percent of the municipal allocation of SPLOST V funds and it claims it should be credited $185,659 against the payments it says Hall County owes for SPLOST VI. Blalock said continuing to pay the city was “illegal” and would violate its agreements with the other cities.

Hall County Purchasing Manager Tim Sims sent an email to Melody Marlowe, Gainesville administrative services director, in early June of last year that said the city was nearing the end of its payments. Marlowe has said the county has paid Gainesville $23,156,250 in SPLOST VI revenue. Hall officials say the city is only entitled to $23,959,800, which is 14.79 percent of $162 million. Marlowe replied to Sims’ email, saying that the city was assuming it would receive the full 48 months of payments regardless of the actual amounts of collections.

Knighton sent a letter to Gainesville City Manager Kip Padgett dated Jan. 28 that said the city would have about a 14 percent share of the estimated tax revenue in 40 months, not 48 months, and the county was stopping the payments.


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