A Georgia Supreme Court decision Tuesday saved DeKalb County more than $10 million it doesn't have, but it also means the county will have to share money with its cities going forward.
At issue is a decade-old sales-tax lawsuit over how the county and cities should divvy up the money raised through the homestead option sales tax, or HOST.
The court sided with the county in the lawsuit, arguing that neither side had the right to enter into a contract on how to divide the cash. That means the county doesn’t owe for the past 10 years it hasn’t paid any share to the cities, making DeKalb’s cities among the few in the state who don’t receive any sales tax money for their budgets.
“This is a good thing,” County Commissioner Stan Watson said. “It provides an opportunity to stabilize HOST and work with our cities going forward in a more friendly way.”
The two sides will need to cooperate. That’s because in a ruling last year between Dunwoody and DeKalb, the state’s highest court ruled that all the county's cities were entitled to a share of the proceeds from the 1-cent tax, based on the city’s tax values.
Dunwoody alone had been getting $1.6 million to $2.5 million a year directly from the state Department of Revenue because of the ruling.
With Tuesday’s decision, other cities now qualify, with smaller cities such as Doraville and Stone Mountain in line to get several hundred thousand dollars and larger ones such as Decatur projected to receive as much as $1 million a year.
Chamblee especially wins in the ruling. The city just added more than 6,000 people -- and their homes -- to its tax digest. That boost means it will move from being lumped in with the smaller cities to joining Decatur in receiving more of the sales tax from the state.
“The ruling is very disappointing to us,” Chamblee Mayor Eric Clarkson said. “But at the same time, it’s great to think we can finally start budgeting tax dollars instead of balancing our budget on the backs of our property owners and businesses.”
Voters approved the 1-penny HOST tax in 1997 as part of a pledge to reduce county homeowners' property taxes. Up to 20 percent of the revenue was designated for capital improvement projects, and the county and its cities agreed to share that portion as a way to give city residents tax relief equal to residents in the unincorporated areas.
Four cities, led by Decatur, sued in 2000, saying the county shortchanged their payments. The county countered by saying it never had the authority to enter into the deal in the first place.
The state Supreme Court heard the issue twice, sending it back to lower courts before finally ruling Tuesday.
With the issue settled, the cities and county must now decide how the sales tax money will be disbursed to the cities. That work had yet to be done Tuesday, as attorneys on both sides were still reviewing the ruling and other decisions that affect the payout.
The cities can spend the money only for capital projects such as building renovations, sidewalks or roads. The county, meanwhile, continues to use the bulk of the HOST funds to offset property taxes.
The county plans to use the cash to lower its proposed 21.36 millage rate by 8.83 mills in 2011. That leaves $12.53 in taxes for every $1,000 of assessed value on homes in unincorporated DeKalb.
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