Cleveland wins sales tax dispute

TAX TIMELINE1967: Cleveland, Bradley County agree to equally share local sales tax revenue.1972: City and county amend the contract to include a new sales tax hike.1980: Contract amended again to reflect new sales tax hike.March 3, 2009: City voters only approve half-percent sales tax increase.May 14, 2009: County voters only approve half-percent sales tax increase.

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CLEVELAND, Tenn. - A dispute between Cleveland and Bradley County over more than $845,000 in sales tax revenue may be settled.

Lawyers are studying a Chancery Court ruling released Wednesday in which Chancellor Jerri Bryant ruled the city need not share with the county revenue generated by a city sales tax increase between July 1, 2009, and June 30, 2010. That money is outside a sales-tax sharing agreement dating to 1967.

City and county voters approved separate half-percent sales tax increases in 2009.

"The court holds the city did not have to share any property taxes with the county until such time as the county passed its own referendum," Bryant's ruling states. "At that point in time, pursuant to statute, the city was allowed to collect its own sales tax through that current fiscal year which ended June 30, 2010. After that appointed time and absent any agreement between the parties, the statute sets the basis for which the sales tax is to be divided.''

She noted that the 1967 contract allowed the city and county to equally share sales tax revenue. It was amended in 1972 and 1980 to reflect new sales tax increases, but not to address the 2009 referendum.

The disputed revenue, which is being held by the county trustee's office, amounts to $845,384.47.

The case was argued April 21. The City Council approved a resolution earlier this year to make a settlement offer, and Mayor Tom Rowland vetoed it.

"I'm glad I did," he said Wednesday.

Bradley County had contended that a Tennessee appeals court upheld the 1967 contract in 1999 and that the phrase "any additional taxes" in the 1972 amendment covered the 2009 referendums.

"Two years ago when the city of Cleveland and Bradley County passed separate sales tax referendums, it was unclear how the tax would be divided," County Mayor D. Gary Davis said Wednesday.

He said the trustee's office asked for guidance on how to divide the money and the county asked for a ruling from Chancery Court.

He said his staff and attorneys are reviewing the six-page ruling "for clarification."

"The city and county are partners in several areas, and it is good to put this issue behind us and move on," he said.

County Commission Chairman Louie Alford expressed disappointment that Bryant ruled against the county, but he said the tax increase has helped Bradley County Schools.

"The increased funding for Bradley County Schools was the County Commission's primary objective in the sales tax referendum, and that revenue is not impacted by the chancellor's decision," Alford said in a statement Wednesday.

In his own statement, County Commissioner J. Adam Lowe said he has heard concerns that a "continuing appeals process" would "keep much of the disputed dollars in 'governmental limbo' for months on end."

"I do not speak for the full commission; however, I am calling for my fellow officials, in both the city and county, to accept the decision of Chancellor Bryant and put this dispute to rest," Lowe wrote.

"Budgets are tight, and we are still in recovery from the worst natural disaster in our community's history. Our residents need all their tax money at work at a time like this."

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