In the local option sales tax deal Hall County and its cities cut last week, the biggest earners also were the biggest losers.
Hall County saw its percentage of LOST revenue go down from 75.49 percent to 74.40 percent. Gainesville’s share also took a hit, falling to 17.38 percent from 19.87 percent.
The winners in the agreement were the smaller cities that all increased their percentage of the pot.
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.
After nearly two years of fighting, mediation and mandated court “baseball-style” arbitration, Hall and the cities had to act fast after the Georgia Supreme Court struck down the arbitration process, leaving future LOST revenue in limbo. The General Assembly approved the court arbitration in 2010.
The Georgia Municipal Association and the Association County Commissioners of Georgia told its member cities and counties that they needed to file a new agreement by 4:30 p.m. Oct. 17 or risk losing LOST. Several of the cities had decided, or were in the process of deciding, to become “absent” after Hall and Gainesville approved an agreement Oct. 15 that used the same distribution formula adopted in 2002, which didn’t reflect 2010 census numbers.
State law allows a county and a city that has 50 percent or more of the population of all the cities in the county to sign off on LOST distribution without the participation of smaller cities. But GMA and ACCG recommended everyone agree to the deal or risk losing LOST.
The phone calls started early the morning of Oct. 17 and an unanimous compromise was struck about four hours later.
Hall and Gainesville, negotiating on behalf of all the cities, used $26 million as the average total amount of LOST received yearly.
According to that average, Gainesville’s LOST funding is expected to go down about $600,000 a year and Hall’s will decrease by $283,000 annually. Angela Sheppard, Gainesville assistant city manager, said it was too early to tell what the effect will have on future budgets.
“I think the legislature has let us down and this is a rushed deal,” Gainesville Mayor Bob Hamrick said last week after signing the new agreement. “You have to do this and do that, I don’t think anyone knew what they were doing.”
Sheppard said the full effect of the loss will not hit in fiscal year 2014 because the distribution is changing in the middle of a budget year. A fiscal year runs July 1 to June 30.
“We have some other revenue that is coming in higher than projected, so we feel like for this budget year we will be able to offset the LOST,” she said.
A new motor vehicle title tax helping the city also helps the county boost its revenue since it went into effect in March. Hall County budgeted a loss of $480,000 from LOST revenue for the 2014 budget, Financial Director Vickie Neikirk said. So the county may have some money left over at the end of year, although Neikirk said it’s not clear the exact amount of LOST revenue that will come in.
“The commissioners could decide if we see that we’re going to have extra money, use it for capital (improvement projects) or other purposes,” she said. “Whatever the commissioners decided they wanted to do with it.”
Some Hall cities had their percentage rise a lot, some a little. Population plays a large part in determining who’s entitled to what, along service delivery agreements. Hall County as a whole experienced a lot of population growth in the past 10 years. Oakwood’s percentage went up from 1.63 percent to 2.04 percent, a revenue increase of about $100,000.
Flowery Branch’s percentage went up about 1.5 percent, from 1.39 percent to 2.92 percent, while Clermont’s went up 1 percentage point.
Flowery Branch sent the county a letter last week threatening legal action if the new agreement wasn’t based on 2010 population figures. The threat helped add a projected $400,000 a year to its coffers.
Lula’s percentage went from 1.05 percent to 1.34 percent, adding about $83,331 a year, City Manager Dennis Bergin said. Lula could get about $269,000 annually under the old percentage, but budgeted for only $251,000.
Lula officials are going to wait until at least mid-November to get a better idea of the position of Attorney General Sam Olens and the Department of Revenue on the issue, Bergin said. Then city officials will decide what to do with the extra LOST funds.
“We have a rule around here,” Bergin said. “We don’t count our chickens before they hatch.”