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Cities, Hall at risk of losing local option tax revenue

Court rules arbitration method unconstitutional

POSTED: October 9, 2013 12:51 a.m.

A recent Georgia Supreme Court ruling leaves Hall County and its cities at risk of losing millions of dollars in local option sales tax after the court said baseball arbitration is unconstitutional.

Clint Mueller, legislative director of the Association County Commissioners of Georgia, said the decision about whether counties and cities are eligible to continue collecting LOST was up to Attorney General Sam Olens.

"Where do we go from here?" said Amy Henderson, spokeswoman for the Georgia Municipal Association. "Because obviously the Supreme Court ruled on the constitutionality of the law, of one section of the law, which leaves what happens next up to the policymakers."

Hall and Gainesville, on behalf of the cities, couldn’t decide last year how to distribute the local option sales tax.

LOST is a 1 percent sales tax that is collected on an ongoing basis with counties and cities revisiting the distribution formula every 10 years.

The current Georgia Municipal Association list has 17 counties where no new certificates have been filed with the Department of Revenue. Hall is one of those.

County Administrator Randy Knighton said Hall filed an extension of LOST certificate with DOR late last year that continued the LOST collection even though a new agreement with the cities and counties hadn’t been reached.

"It definitely affects 17 counties," Henderson said.

She said it could affect a lot more cities and counties, depending on the attorney general’s office opinion interpreting the decision.

If there is no certificate filed with DOR, then it’s possible the ability to collect LOST has expired, Henderson said.

The matter went to the state’s highest court when Turner County appealed after a judge ruled in favor of cities Ashburn, Rebecca and Sycamore. The state Supreme Court’s decision is likely to impact nearly all of the state’s 159 counties, putting hundreds of millions of tax dollars at risk

Currently, LOST is distributed with Hall getting 75.49 percent and the cities getting 24.51 percent. Hall’s best and final offer was the county getting 73.58 percent and the cities getting 26.42 percent. Gainesville also gave a best and final offer, with the county getting 70 percent and the cities receiving 30 percent.

Both Gainesville and the county declined to make a comment while the matter was still in litigation.

In baseball arbitration, a Superior Court judge would hear the best and final offer from the cities and the counties and make a decision based on several criteria, including population, service delivery responsibility and intergovernmental agreements.

Mueller said his organization met with Olens’ office to make its pitch about what should happen.

"So we don’t know what they are going to do, and it’s really right now in the AG’s hands because the DOR has to go by whatever the AG tells them to do," Mueller said.

The ACCG stated its opinion that the tax itself is valid even if resolving the conflict is invalid.

The General Assembly attempted to simplify LOST negotiations between cities and counties in 2010 by adding a mediation period and then court arbitration for parties that couldn’t agree.

The arbitration process has been ruled unconstitutional, but ACCG wanted the counties to continue to file notice and collect money under the old process.

"The counties and cities that relied on the law at the time filed notice saying they wanted to continue the old formula for splitting the money until such time as they reached a final resolution under this resolution process," ACCG said.

Knighton said LOST revenue makes up about 23 percent of general funds. The county budgeted about $20.2 million in LOST for fiscal 2014. The fiscal year runs from July 1 to June 30.

The county and its biggest city, Gainesville, haven’t appeared to take Henderson’s scenario of no LOST revenue seriously.

"I don’t think it will impact us really at all because, of course, our budget for (fiscal year) (20)14 will run throughout the rest of the year," Knighton said. "Because we were fairly conservative in our budgeting, regardless of what the outcome is in terms of where we are right now with this proposal."


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