Coffee County schools sue for liquor revenues

Coffee County schools sue for liquor revenues

June 10th, 2014 by Ben Benton in Local Regional News


• Manchester: $137,340

• Tullahoma: $387,488

Source: Coffee County Chancery Court records and the University of Tennessee County Technical Assistance Service

Coffee County Schools has filed a lawsuit against Manchester and Tullahoma, Tenn., to recover more than $500,000 in liquor tax revenue owed to the system going back to the 1980s.

Coffee is among several county school systems across the state seeking the liquor-by-the-drink tax money owed by municipalities where liquor is sold. A state attorney general opinion issued in February sides with county schools in the dispute.

"The money that was paid to the cities of Manchester and Tullahoma was to be distributed partially to Coffee County Schools and that was not done dating back almost 35 years," said Eric Burch, the attorney hired by the Board of Education to file last month. Burch and board attorney Frank Van Cleave are co-counsel in the suit.

A 15-percent liquor tax is collected on liquor-by-the-drink and wine sales. Half of that revenue is returned to the cities to be split between the government entity and schools systems in the home county, based on average daily attendance percentages in schools.

"About 55 percent of that money should go to the Coffee County school system, around 30 percent should go to the Tullahoma school system and about 15 percent should go to Manchester schools," Burch said.

The combined total the cities owe Coffee County Schools is $524,828, according to Burch and court records.

Officials moved quickly to file suit on May 30 because legislation passed by the General Assembly in April that provides for negotiation and structured payment agreements between cities and county school systems became effective on June 1. That bill also requires that suits initiated after that deadline be filed in Davidson County Chancery Court regardless of where the dispute is taking place.

Coffee County wasn't named in the suit because county officials agreed to pay the $2,500 or so owed.

Manchester and Tullahoma officials say their attorneys are reviewing claims as they prepare a response to the suit. Both cities operate their own municipal schools systems.

"Our position is that in a situation where you have a city school system, our interpretation is that the clear intent of the law is that the funds remain with the local education agency," Tullahoma City Administrator Jody Baltz said. "That's where the dispute comes from."

Baltz said the city's liquor tax funds were distributed to the city's K-12 school system and the city contends that was appropriate.

"It would be different if we didn't have a city school system," he said.

Manchester Mayor Lonnie Norman said he'd hoped an amount owed to the city by the county several years ago -- which he says was $800,000-$900,000 -- would have helped settle the dispute for his town.

"It's a hard pill to swallow," Norman said.

Locally, lawsuits were filed in April by the school systems in Hamilton and Bradley counties against their respective county seats. Hamilton County's school system is seeking more than $11.7 million from the city of Chattanooga, while Bradley schools are seeking almost $720,000 from the city of Cleveland.

The cities have until June 30 to respond.

Contact staff writer Ben Benton at or 423-757-6569.