City, schools should settle for $11.7 million liquor tax payment

City, schools should settle for $11.7 million liquor tax payment

April 27th, 2014 in Opinion Free Press

Can't we all just get along?

It's time for leaders of the city of Chattanooga and the Hamilton County Schools to put the unpaid liquor-by-the-drink taxes issue behind them before a lawsuit drags out an unseemly drama worthy of the Lifetime Movie Channel.

In April, months after an August 2013 agreement to settle the issue was first reached by the two parties but not signed by Hamilton County Schools officials, Chattanooga Mayor Andy Berke proposed to pay the entire $11.7 million the city owes the schools for 1998-2013 taxes in a six-year repayment plan that came with a couple of caveats.

Instead of accepting or rejecting the offer of full payment, the counter-proposal from Hamilton County Schools Superintendent Rick Smith included the city paying the entire owed amount (in installments), plus the Poss Homes property the city previously offered, forgiveness of $1.7 million in stormwater fees accrued by the Board of Education, and forgiveness of debt and release of lien on the North River YMCA swimming pool.

When that counter-proposal was dead on arrival at City Hall, the school system filed suit, which Board of Education members had authorized in March.

That's how we got here.

What's clear from documents obtained from Berke's office is the city's longstanding desire to settle the issue but ultimately not finding a willing partner in Smith.

The August agreement is one example. At that time, a memo from Smith laid out the bones of a proposal, which did not ask the city to repay past liquor taxes in lieu of other payments. It was formalized by the city. Two minor issues, neither having to do with the amount of liquor taxes the city would pay, were smoothed out. Both parties agreed on the proposal, and a news release was written, which included comments from Smith. But the superintendent never officially inked the agreement, said later he was advised within days not to sign it, but left the city hanging for two months.

Fast-forward to March, in light of the Board of Education's suit authorization, when Berke and Smith agreed to have a task force meet over the next 30 days to try to hammer out an agreement. Progress was made at subsequent meetings, but false charges that Berke was trying to influence state legislation on the liquor tax were thrown up as an apparent smokescreen. Then, on the same day the city attorney's office suggested another meeting between the sides, the Board of Education filed suit.

To be clear, this mess isn't Berke's fault. The liquor revenues apparently weren't paid for several mayoral administrations. Then, former Mayor Ron Littlefield's administration learned of the little-known statute and began making payments in February 2013, according to school system records.

So what to do now?

Both sides agree the $11.7 million is owed. And, according to state Attorney General Robert Cooper, there's no getting out of it.

His opinion, released in February, said there is no statute of limitations on the fees, municipalities can't offset the costs with local-option sales tax revenue, county school boards can't waive any past-due liquor taxes and municipalities don't have to pay it back all at once.

What either side said, when they said it, or who sat at the table longer over the nearly year of negotiations, is now sound and fury signifying nothing.

What should happen immediately is the two sides should meet, agree solely on the $11.7 million payment plan, have their attorneys dissolve the lawsuit and set a fair negotiating period over the side issues.

Imagine the good $11.7 million could do for the schools, what with some $200 million in maintenance projects the system has, the schools it recently agreed to build and the technology upgrades its students deserve.

Once the payment plan is in place, negotiations could probably lead to a subsequent decision with benefits for both sides.

The city, perhaps, could agree to turn over the Poss Homes property to the Hamilton County Schools for a long sought after new football and track stadium for Howard School and cede the schools the North River YMCA pool. In exchange, the Board of Education would pay the stormwater fees it owes since it stopped paying them to the city in 2009 and forgive a yet to be determined amount of liquor taxes the city owes from 1971, when the city approved sales of liquor by the drink, through 1998.

Now, doesn't that feel better?