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Counties and cities may settle LOST in the courtroom

Deciding how to divvy up sales tax revenue is more difficult than deciding who gets the wishbone from a Thanksgiving turkey.

That is why local officials filed necessary paperwork this week to have a Superior Court judge decide what percentages of Local Option Sales Tax, LOST, collections will go to city and county governments.

“We are deep into negotiations of LOST distribution,” attorney Chad Young said during last week’s meeting of the Catoosa County Board of Commissioners. “If a petition isn’t filed with the court and no agreement between the county, Fort Oglethorpe and Ringgold is reached before the Dec. 31 deadline, LOST expires.”

LOST revenue funds operating budgets at both the county and municipal level. Without LOST, officials say maintaining day to day operations would require increasing property taxes or cutting back services — or both.

State law requires that a new formula for sharing optional sales tax revenue be prepared following each decennial census, the most recent being Census 2010, and filed with the Georgia Department of Revenue.

Attorneys for both Catoosa and Walker counties said last week they hope an out of court agreement can be reached in the negotiations that began in late June before reaching an impasse that has continued through the fall. Currently still deadlocked after mediation, the final recourse will be a judge selecting one of the proposals put forth and making it law.

Walker County Attorney Don Oliver said he believes the county and its four cities — Chickamauga, LaFayette, Lookout Mountain and Rossville — can resolve their differences outside the courtroom. But he said the county would file a petition seeking arbitration as a fail-safe remedy while efforts to reach a settlement continue.

“We are getting very close to an agreement; however, I think it will take another couple of weeks to get everything worked out,” Oliver said. “Unfortunately, by law we have to file the petition for arbitration by Tuesday, Nov. 27 if an agreement is not signed and submitted to the Department of Revenue.”

Whatever the outcome, losing LOST can have a massive impact on funding.

Catoosa County’s population in 2011 is figured as being about 64,000. Of those, about 9,870 live in Fort Oglethorpe, about 2,850 call Ringgold home and the remainder reside in unincorpated areas.

Catoosa County now keeps 70 percent of LOST revenue, about $6.65 million annually, while Fort Oglethorpe’s share is about 20.5 percent, roughly $1.9 million, and Ringgold receives 9.5 percent, or about $900,000.

When negotiations began, the county asked that its share increase to about 78.6 percent while city shares decline to about 15.5 percent and 6.84 percent respectively.

The cities’ counter-proposal was for the county share drop to 61 percent of LOST revenue over the next 10 years; at the same time Fort Oglethorpe would receive 26 percent and Ringgold 13 percent of those taxes.

Walker County officials expect a total of about $54 million of LOST revenue will be collected over the next decade, and it is pretty much agreed that the formula for its distribution will change.

Of the cities therein, only Chickamauga is satisfied with extending the current 80/20 split between the county and its combined municipalities. From an initial call for Walker’s cities keeping 45 percent of LOST, more than double what they now receive, the numbers had shifted to a 63/35 division proposed by the cities and a 75/25 sharing plan proposed by Commissioner Bebe Heiskell.

Even though each county is prepared to go to court, negotiations are ongoing. That is partly because once the matter goes to arbitration there is no compromise; a judge from outside the Lookout Mountain Judicial Circuit will pick either a county's plan or its cities’ plan.

“We will file the petition as a fail-safe remedy but keep on working toward settlement,” Oliver said of legal action filed in Walker County.

Young said the same is true in Catoosa County.

“This [filing the petition for arbitration] does not prevent an agreed-on settlement, but it does keep LOST from expiring,” he said.

LOCAL OPTION SALES TAXES

In addition to the 4 percent sales tax collected by the state of Georgia, three other 1 percent sales taxes may be collected at the county level. The first of these is the Local Option Sales Tax (LOST) dating from 1978, the revenue from which is allocated between a county and the municipalities located therein. This was followed in 1985 by the Special Purpose Local Option Sales Tax (SPLOST), designed to assist counties in fulfilling their obligations as legal extensions of the state. Finally, the Educational Local Option Sales Tax (ELOST), operating as a variation of SPLOST, extended this method of funding to county and independent school districts in 1997, though control of the levy resides with the county government.

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