No compromise found regarding LOST distribution

No compromise found regarding LOST distribution

September 5th, 2012 by Mike O'Neal in Walker

Mediation is the next step in the once-a-decade chore of establishing a formula for deciding how local option sales tax (LOST) revenue will be divided between the county and its cities.

Hiring a mediator will be necessary, because the county and three of its four cities - LaFayette, Rossville and Lookout Mountain - cannot agree on equitably sharing roughly $5.5 million annually.

Dividing an amount so great is not as simple as deciding how to share a box of Girl Scout cookies or slice a cake. The amounts in question are substantial and whatever formula is decided on regarding how to share LOST will be in place for the next 10 years.

Unlike other optional sales taxes citizens impose on themselves, the revenue from LOST can be used for general operations, not just capital projects. The current LOST is projected to generate a total of about $54 million over 10 years.

"Chickamauga was happy with an 80/20 split and the others asked for 55/45," County Attorney Don Oliver said during a called meeting Aug. 27.

He said LaFayette, the largest of the cities, had adjusted its position to wanting a 63/35 split, but that too was beyond what the county could comfortably live with unless services were cut and/or property taxes increased.

"I don't think it right that the state has pitted the county and cities against each other," Commissioner Bebe Heiskell said.

She said that when LOST was made possible by the Legislature in 1975 it was seen as a way to provide property tax relief to a county's residents. The following year cities began asking for a share of LOST revenue and have continued to ask for ever-increasing amounts.

Oliver proposed basing the division of LOST collections on population. The most recent figures show about 76 percent of Walker County's citizens reside in unincorporated areas and sightly less than 24 percent live in one of the four main cities (a few hundred reside within the Fort Oglethorpe city limits).

With the current 80/20 split, LOST puts about $4.3 million into the county's coffers and generated about $1.1 million for the cities to share.

Heiskell said she thought a 75/25 formula would allow the county to continue offering services and make payments on bonds sold to finance SPLOST (special purpose local option sales tax) projects.

The county, which has an annual operating budget (for 2012) of about $21 million, would give up about $800,000 if the 75/25 split was in place. Again, that $800,000 would be divided among the cities.

LaFayette City Manager Frank Etheridge said he hoped they would receive more.

"Population is only one portion of the criteria," he said. "The county only looked at population, but this negotiation cycle will return to more closely match previous divisions."

Representatives from the cities note that the majority of retail sales occur in the cities, which means the majority of sales taxes are collected within their boundaries, but the biggest share of LOST revenue goes to the county. Since city governments shoulder the burden of providing services used by all but that are funded primarily by city residents, municipal leaders are asking that more of those LOST revenues be returned to provide those city services.

"You could argue for a 50/50 split, but that is unrealistic and irrational," Etheridge said. "A 10- to 15-point shift [from the current 80/20 to a 70/30 or 65/35 division] would let all parties walk away with something they can live with."

Oliver, in a letter to all those who attended last week's meeting, provided figures used by the county's accountant in tabulating LOST disbursements, showing that the total population in incorporated areas compared to the countywide population has grown from 23 percent in 2000 to 23.5 percent in 2010.

Of the municipalities, figures show that Chickamauga's share of city dwellers has grown by 18 percent. During the same decade, Rossville's percentage of the total living in an incorporated area has barely changed while Lookout Mountain's and LaFayette's percentages have declined.

Heiskell remained firm in saying she represents all Walker County residents and would surrender no more than 25 percent of LOST revenues to the municipalities to divide among themselves.

Oliver said that because city property owners get to double dip on the LOST benefit, even at the current 80/20 split, the city property owners receive approximately 39 percent of the benefit of this LOST sales tax rollback of the property tax burden. At the offered 75/25 split, the cities' benefit would be more than 42 percent for a group that totals roughly 23.5 of the population.

LaFayette City Councilman Ben Bradford questioned the accuracy of Oliver's statement, saying city residents are not "double dipping" because they pay both county and city property taxes.

Since no agreement could be reached, all parties involved in the process are looking to the University of Georgia's Carl Vinson Institute of Government for mediation assistance.

If a compromise acceptable to all parties cannot be reached during mediation, the matter will be decided in Superior Court. Should that happen, a judge will pick either the cities' or the county's proposal.