The expiration of a sales tax agreement between Chattanooga and Hamilton County could pump $10 million into city coffers and pull the same amount out of the county's budget, officials said last week.
The 1966 agreement distributes sales tax revenue among the county and its cities according to a formula.
It's set to expire May 23, and city officials say they see no possibility it can be renewed before that time.
County officials said there have been no discussions with the city about the agreement.
"I think the agreement is just going to expire," said Mayor Ron Littlefield, who was in Washington, D.C., last week for the U.S. Conference of Mayors.
If that happens, sales taxes will be distributed according to where they are collected. Because there are relatively few businesses in the unincorporated county, it stands to lose millions of dollars in revenue while Chattanooga and other cities gain, officials said.
County Mayor Jim Coppinger, who was sworn in Jan. 11, said he hopes the agreement will remain in place, but said he will not suggest raising taxes to pay for services if the agreement expires.
"There's a number of important issues in there to all the people in Hamilton County," Coppinger said. "I'm confident we can come to some type of an agreement."
Littlefield said Wednesday it's time for a new agreement.
"We have a very different city and county now [than in 1966]," he said.
DIVVYING THE DOUGH
JOINTLY FUNDED AGENCIESThe following agencies receive funds from the city-county sales-tax agreement:• Erlanger hospital• Chattanooga-Hamilton County Health Department• Speech and Hearing Center• Chambliss Shelter• Joe Johnson Mental Health Center• Veterans Service Office• Chattanooga Area Convention and Visitors Bureau• Civil Defense (Emergency Services)• Chattanooga-Hamilton County Regional Planning Agency• Scenic Cities Beautiful Commission• Chattanooga-Hamilton County Bicentennial Public Library• Social Services Administration• Family and Children's Services• Fortwood Center• Orange Grove• Team Evaluation• CADAS• Children's Advocacy Center• Community Research Council• Aim Center• Signal Centers• Bethlehem Community Center• Senior Neighbors• Allied Arts• WTCI Public Television• Regional History Museum• Urban League• Bessie Smith HallSource: 2001 sales-tax agreement amendment
The sales tax agreement was set up to fund schools and several social and governmental agencies, and to make sure smaller municipalities were getting a share of sales tax.
The 1966 agreement covered Chattanooga, Hamilton County, East Ridge, Red Bank, Signal Mountain and Lookout Mountain. In 2001, the agreement was amended to include Lakesite, Collegedale, Soddy-Daisy, Ridgeside and Walden.
The 2001 revision included a 10-year expiration. Hamilton County Auditor Bill McGriff said there are some legal questions about the end date, and he's not sure if the entire agreement will expire in May or just the 2001 amendments.
Littlefield last year asked county commissioners to start looking at the agreement and named City Councilwoman Deborah Scott to a committee on the subject.
But the committee never coalesced, and city and county leaders agree no one has said a word about the impending expiration.
"Everyone seems to be in denial," Littlefield said.
McGriff and Coppinger said it's partly about Coppinger adjusting to his new role as county mayor.
"It's something that the former mayor [Claude Ramsey] was anticipating, and now we've got a new mayor and that's just a matter of him getting up to speed," McGriff said.
Littlefield said letting the agreement expire could shift $7 million to $10 million from the county to Chattanooga."It's going to be a considerable amount of money," Littlefield said.
County Administrator of Finance Louis Wright calculated that the county will lose $10.5 million, but he said the county routinely kicks in more money from the general fund to pay for the agencies jointly funded with the city. In 2009, he said the county budgeted more than $2 million above what it receives from the agreement.
"We have never profited from the sales tax agreement," Wright said. "We're putting more in it than we're getting."
Scott said she wants talks to start soon.
"This is an issue that touches many people," she said. "It's just not about Chattanooga."
SUPPORTED AGENCIES
ALLOCATIONChattanooga and Hamilton County allocated millions of dollars last year to jointly funded agencies. A sampling of allocations includes:Agency / City allocation / County allocationPublic library / $2.8 million / $2.7 millionAllied Arts / $161,200 / $150,000WTCI-TV / $50,650 / $30,000Planning Agency / $1.4 million / $1.3 millionRegional History Museum / $15,200 / $28,000Source: Chattanooga, Hamilton County 2010-11 budgets
Littlefield said last week he expects more agencies to ask for more money from the city if the agreement expires.
He said that would give the City Council a lot more discretion on which agencies get money, and how much.
The County Commission will have that discretion as well, he said.
Commission Chairman Larry Henry said he didn't know if commissioners would be willing to spend from the general fund to support agencies now getting money through the sales tax agreement.
"That's going to be a tough call. I don't know what we'll do," he said. "We've just got to anticipate that it's not going to fall through because if they come back and ask for more money, I don't see how it's going to happen."
Eva Johnston, interim director for the Chattanooga-Hamilton County Bicentennial Library, said she has heard Littlefield talk about the library coming under one entity at the end of the agreement.
She said it makes sense for the city to control the library and the county to pay a yearly sum for services.
"We've had concerns for a long time about the dual funding," she said.
Dan Bowers, president of Allied Arts of Greater Chattanooga, said he was unaware the money given to his organization came from sales tax collections.
He's not sure how Allied Arts' support could change if the sales tax agreement expires.
"This will be absolutely new territory," he said.
NEW AGREEMENT?
Littlefield said he could see a new revenue sharing agreement come from the talks -- one that extends even beyond sharing sales tax.
He said he could see combining some services, such as parks and recreation, or looking at a countywide emergency services department.
Coppinger said he is open to discussions about things that he believes would save taxpayers money. But he called talks about consolidating specific services "premature."
"I think in fairness to Mayor Littlefield, he and I should be having those discussions," Coppinger said. "It's going to be done in a professional way."
Littlefield said he would not go into any talks with "fast and hard decisions on anything."
But one thing is certain if the agreement expires, he said. "The city has more money and the county has less," he said. "It's that simple."