Next month, a mediator will try to help bring tax-sharing negotiations between Hall County and its municipalities to a close.
But challenges are looming ahead — especially for cities that opt to roll back property taxes to zero for their residents — if negotiations do not go as planned.
In August, local option sales tax revenue-sharing negotiations between leaders in Hall County failed to reach a conclusion and, per law, mediation was required.
LOST revenue is meant to help offset governments’ reliance on property taxes to fund day-to-day operations.
How it’s distributed is determined every 10 years following a federal count of the population.
Hall County has proposed it keep about 75 percent of that revenue, nearly the same as the current agreement.
The county’s municipalities want to see that number at around 58 percent.
But a part of the county’s proposal is to give more of the tax revenue to Flowery Branch, Oakwood and Buford, while decreasing the share for smaller cities such as Lula, Clermont and Gillsville.
And, for those smaller cities, that could mean a drastic change in how they provide services or tax property owners inside their city limits.
“Anything less than (what we’re already getting) is going to predicate two challenges,” said Dennis Bergin, Lula’s city manager. “One would be you do away with services or lessen the services, or the council would have the option to not roll back the millage rate to the extent they have up to this point.”
He said for nearly a decade, the council has been able to roll back the city’s millage rate to zero because of the LOST revenues the city receives.
Under the county’s proposal, Lula would lose about 25 percent of its LOST revenue, which makes up about a quarter of its general fund.
Right now, Lula’s LOST revenues are predicted at around $260,000. If the county’s proposal was accepted, that would fall to around $195,000.
Bergin said either cutting or lessening services, like garbage pickup and park maintenance, or implementing a property tax for residents would likely be the only two options since the city is already running on a small budget.
However, if the cities’ proposal were pushed through, Lula would see a 108 percent increase in LOST revenues.
LOST revenues make up nearly half of Clermont’s budget and city officials said they would be in the same situation as Lula: tax or cut services.
“We don’t have a property tax and the major part of our funding comes from our LOST revenues,” Mayor James Nix said. “If we lose it, I don’t know. We’d have to, if we wanted to continue to be a town, we’d have to have a property tax or something to support it.”
Under the county’s proposal, Clermont would lose about 36 percent of its LOST revenue, projected at $119,000 for fiscal year 2013. An approval of the cities’ proposal would increase those revenues about 68 percent, to an estimated $198,000.
“Anything we lose below what we’re getting is a real burden on us,” Nix said.
“I mean, we’ve been tight, tight with the drop that we’ve had in the last two or three years with tax revenues falling off. That’s put us in a real squeeze to keep operating.
“(If LOST revenue drops even more), it’s either find another source of revenue or turn out the lights.”
For the city of Gillsville, LOST revenues make up “the single largest funding source.”
According to the city’s mayor, Larry Poole, Gillsville received around $22,000 in LOST revenue from Hall County and about $6,000 from Banks County.
Hall’s portion would drop to around $14,700 if the county’s proposal were accepted. But that revenue would nearly double if the cities had their way.
Poole said most of the city’s money goes toward day-to-day expenses and city projects, including maintenance of City Hall and the library.
All governmental parties involved have adopted their fiscal year 2013 budgets under the current agreement.
“We knew how challenging this was for the county as well as how challenging it was for the city,” Bergin said.
“Imagine adopting a budget and you’re not sure you’re going to get that revenue. That’s exactly where we’re at right now, which is why we tried 10 months ago to get the county to sit down and discuss this at great length.”
He said he understands the challenges on both sides of the table, but said the purpose of the LOST revenue was to keep city residents from paying property taxes to keep governments afloat.
“There’s a willingness on all the municipalities’ part to work with the county in this difficult task of arriving at a formula,” Bergin said. “These are tough times. We want to help the county — we don’t want to hurt them.
“(But) the intention of LOST legislation years and years ago was to roll back property taxes. Now they’re threatening not just us, but every city would have to go up on property taxes in order to cover the shortfall.”
Mediation for the negotiations is scheduled for the third week in October.
Denny Galis out of Athens will mediate at a rate of $250 an hour.
If mediation proves fruitless, negotiations could make their way to Superior Court.