Atlanta on the fence about joining county-wide sales tax agreement, risking millions

What’s next

Fulton and other counties with a Local Options Sales Tax must send agreements on how to divide the taxes to the state by today. At stake in Fulton is $240 million in sales taxes collected annually to lower property tax bills that is divided among 14 cities.

A deal reached last month divvying up billions of dollars in Fulton County’s penny sales tax proceeds could be in jeopardy, putting residents at risk for property tax hikes and igniting more tensions between the county’s local governments.

Atlanta and College Park are deciding Thursday whether to join Fulton County and a coalition of 12 cities in approving a plan to split up local option sales tax, or LOST, money. In a deal reached earlier this year by Fulton County and those cities, Atlanta stood to see its annual share cut by $5.8 million per year, while some Northside cities gained millions of dollars to help fund their services and keep taxes down.

But Mayor Kasim Reed, unhappy with the prospect of losing more than $50 million over the 10-year life of the tax, called a special meeting with the Atlanta City Council during which he was granted the authority to make a last-minute decision Thursday. That’s the deadline for counties to submit plans to the state’s Department of Revenue, lest they risk losing the sales tax which brings in roughly $240 million to Fulton annually.

Reed, who is now the sole decision-maker, told councilmembers he hasn’t decided whether to join the plan, which calls for reducing Atlanta’s share from 43 percent to around 40 percent. The mayor said he was willing to explore the ramifications of not signing, which could include losing LOST altogether. Should that happen, Fulton would have to ask voters to authorize another local sales tax option, revenue officials said.

“If we don’t sign,” Reed said, “we don’t know what’s going to happen because we’re in uncharted waters. Nobody has been here before.

“What we know is if we don’t sign, all of the cities and counties will be out of luck,” he said, adding that revenue officials could make a decision for no sales tax to be collected. “We’re well positioned from a cash standpoint to withstand that.”

The last-minute showdown comes after the Georgia Supreme Court struck down last week a key provision in state law designed to force governments to work together on a plan for sharing the money. Fulton is one of 17 counties across the state scrambling to submit a LOST plan to state revenue officials by end of Thursday — the last day any government can challenge the Supreme Court’s decision.

LOST funds, a pot of money fed by every sales purchase across the county, are meant to lower property taxes. The county and local governments use the money for many government services: to hire police and firefighters; pave roads; keep libraries open; and fund health, senior and youth services.

The law said that if counties and their respective cities couldn’t settle on an agreement, a Superior Court judge would choose a plan in so-called “baseball arbitration.”

Atlanta planned to make its case in a courtroom this November, arguing against the practice of considering just population majority in reaching a deal. Fulton County and its 12 city supporters comprise 51 percent of the county, while Atlanta and College Park have 48.5 percent of the share.

Reed believes the courts should consider factors beyond population in deciding the revenue split, such as daytime population. Even so, Reed said he expects Atlanta will soon regain majority control with its growing population.

Atlanta has filed a challenge against the 2010 census, saying it missed 5,000 to 6,000 people.

The high court, however, ruled arbitration unconstitutional because it gave the courts legislative power. Now Atlanta’s court date is off and it’s unclear whether Fulton County’s deal with 12 cities remains valid, since it was reached under the threat of going before a judge.

Fulton County Commission Chairman John Eaves said the agreement from September should stand. The County Commission agreed to a 14 percent share, or about $33 million per year.

Baseball arbitration may be invalid, Eaves said, but the county and 12 cities reached that agreement out of court.

“No judge ever decided our distribution,” he said. “As far as I know, once we submit and the Department of Revenue and the Attorney General’s Office sign off, it becomes law.”

But Sandy Springs City Attorney Wendell Willard, who is also the state representative who sponsored the 2009 bill requiring arbitration, wasn’t so sure.

“There’s no assurance about how things will shake out,” Willard said. “There’s a lot of uncertainly about everything.”

The court decision has even Revenue officials perplexed. On Wednesday they couldn’t say for sure whether jurisdictions representing more than half of the county’s population can still make a final deal for the whole county, or if now all governments must reach a unanimous agreement.

Revenue spokesman Nick Genesi said DOR’s legal team was still reviewing that issue.

He’s among those waiting to see what happens next as Atlanta weighs its options on an unclear path.

“…There’s nothing final about Fulton County at this point,” he said.