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Some area cities resist new local option sales tax agreement

POSTED: October 16, 2013 8:29 p.m.

With the possibility of losing local option sales tax revenue, Hall County and Gainesville have rushed this week to approve a new proposal for distribution of LOST revenues between the county government and its municipalities. But some Hall cities have decided not to sign off on the new agreement, which has the same distribution formula as that adopted in 2002.

The local option sales tax is a 1 percent tax that must initially be approved by voters. Every 10 years, county and city governments where the tax has been approved must agree on a formula for distribution of the revenues it generates. Those revenues are collected by the state and returned to the local governments.

Earlier this month, a court decision that the arbitration process defined in the law was unconstitutional left the status of LOST negotiations in some counties, including Hall, in a state of turmoil.

Gainesville and Hall County approved a new LOST agreement, called a certificate, on Wednesday. Under that agreement, Hall County would get 75.5 percent of the monthly revenue check, and the cities would split about 24.5 percent, with Gainesville getting 19.87 percent of the total.

The county only needed Gainesville’s sign-off because it represents 50 percent or more of all the population in the cities. But other municipalities in the county have said they don’t support the agreement, and with the law now in a state of flux there is uncertainty as to what that means.

Because of the court ruling, there is some uncertainty as to what happens if there is not unanimous support for a LOST certificate by a county and its municipalities.

One issue of concern for some of the cities is that the agreement, which simply carries forward what has been in place, is based on census numbers from 2000 rather than 2010.

State law previously mandated that certificates not filed by the deadline lost the ability to collect LOST. However, the Georgia General Assembly changed the law in 2010 so counties and cities that couldn’t agree on a new distribution formula went into mediation and then court arbitration, also known as “baseball” arbitration, if they still couldn’t agree.

However, the Georgia Supreme Court ruled last Thursday that baseball arbitration is unconstitutional. The matter went to the state’s highest court after Turner County appealed when a judge ruled in favor of the cities of Ashburn, Rebecca and Sycamore. Either party has until the end of today to ask the court to reconsider the decision.

Hall and its cities were in the court arbitration process when the ruling was handed down.

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.

Despite strong recommendations by both the Association County Commissioners of Georgia and Georgia Municipal Association for governments to reach an agreement by today, the cities of Oakwood and Braselton have elected to be “absent” on the new certificate.

Absent cities don’t participate in renegotiations, and the money is distributed to them according to a formula that factors in the absent city’s population, the total population of all the qualified cities and the amount of LOST the cities receive.

“The calculation of distribution of LOST funds for absent municipalities is one of the most complex provisions in state law pertaining to local government revenues,” stated a GMA brochure on its website.

Changing the amount of money paid to absent cities from what is in the certificate will result in changes to the amounts paid to all of the governments involved, as they are all taking a portion of the same total dollar amount. If one government gets more than proposed, some others will have to get less.

Buford and Clermont officials said they were still debating whether to support the new certificate. The Lula City Council called a meeting for 8 a.m. this morning to vote on the matter. Gillsville Mayor Larry Poole didn’t respond to a request for comment.

Some cities said the distribution agreement Hall and Gainesville signed earlier this week was a worse deal than becoming an absent city.

“Our share under absentee would be higher than our share was in 2002,” said Braselton Town Manager Jennifer Dees.

Oakwood City Manager Stan Brown said the city is an absent city on this certificate because the percentage it was going to receive under Gainesville’s best and final offer to the court was about the same as what it expects to receive as an absent city.

The cities had started arguing for a bigger piece of the pie in 2002. A Times article from January 2012 quoted city officials as proposing a 9 percent decrease for the county.

Hall’s best and final offer to the court had the county getting 73.58 percent and the cities getting 26.42 percent. Gainesville’s best and final offer had the county getting 70 percent and the cities receiving 30 percent.

Flowery Branch officials declined to say if they would absent the city from the new certificate and refused to publicly release a letter regarding LOST they sent Hall County officials, saying it was “potential pending litigation” and attorney work product.

Hall County Administrator Randy Knighton also refused to release the letter, citing potential pending litigation.

“At this point, it’s the city’s position that any LOST decisions or certificates should be issued on the 2010 versus 2000 census,” Flowery Branch Mayor Mike Miller said in a statement. “Flowery Branch will do what we need to do to ensure that we receive proper funding based on the 2010 census.”

Lisa Laskey contributed to this report.


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