Fulton County and 12 of its 14 cities have agreed to a formula that will determine how billions of dollars in local sales tax revenue gets returned to taxpayers over the next decade.
The big loser — Atlanta, which wasn’t part of the agreement that would give the city about $5.8 million less per year than what it receives under the current formula.
The loss is “not just a drop in the bucket since our revenues have been declining,” said Atlanta District 9 Councilwoman Felicia Moore, the chairwoman of the City Council’s finance committee. “That’s another hit we’ll have to absorb.”
Among the winners — north Fulton cities that will see more money for funding services while helping keep property taxes down. Milton would get almost $4 million more per year. Alpharetta would bring in an additional $1.4 million per year.
Atlanta would still receive the largest amount under the new formula, although its share would drop from about $102 million to $96 million.
Because the 12 cities form a majority of the county’s population, and Atlanta doesn’t, the deal they struck with the County Commission will likely become the final plan for divvying up roughly $240 million per year in money from the 1-cent local option sales tax, or LOST. The agreement, which likely won’t take effect until the beginning of 2014, brings an end to more than a year of tense, fractured negotiations between multiple governments sharply divided by politics, demographics and geography.
Talks between the 15 governments stalled past the point of mediation, so state law moved them into arbitration, with a Superior Court judge poised to decide among the “best last offers” with no room for middle ground. Losers stood to lose big, possibly being forced to raise taxes or cut services.
“Everybody in our group, including the county, decided there was a lot of risk to us if we left it to a decision by the judge,” said Sandy Springs City Attorney Wendell Willard, who is also the state representative who sponsored the 2009 bill requiring arbitration. “Not everybody’s happy, and that may be a good thing because nobody’s getting the upper hand on anybody else.”
LOST funds, a pot of money fed by every swipe of a credit card or ringing of a cash register, are meant to go back to taxpayers through lower property taxes. Negotiations occur every 10 years to determine how much of the money returns through the county government and how much through taxpayers’ respective cities.
The county and local governments use the money to hire police and firefighters, pave roads, keep libraries open, fund health, senior and youth services and do just about anything else involved in operations.
As the negotiations dragged on, Alpharetta was losing about $100,000 per month because it remained under the current formula, Mayor David Belle Isle said.
“I think at some point, the Legislature is going to have to look at Fulton County to make it more manageable,” he said.
According to the Georgia Municipal Association, 21 counties throughout the state remain in arbitration with their cities over LOST funds. Ten counties that were in the process have settled their differences, including Clayton and Fayette counties.
Cobb, DeKalb and Gwinnett counties don’t have to go through negotiations because they don’t collect LOST taxes.
Fulton County Commission Chairman John Eaves at one point suggested the county should get as much as 35 percent, saying the county provides services to nearly 1 million people. But city leaders said that, with more than 90 percent of the population living inside cities, the county’s significance has been diminished.
Eaves said he feared that if a judge made the decision, Fulton could end up with a single-digit percentage.
The deal calls for the county government’s share to go from 15 percent ($36 million per year) to 14 percent ($33.2 million). The loss of $2.8 million per year would bring the county’s projected 2014 deficit up to more than $116 million.
“We’re clearly going to have to cut out some popular services and programs,” Eaves said. “We’re going to have to do a thorough examination of our services and make some tough decisions.”
In deciding shares, state law allows population and sales tax generation to be among the deciding factors. The former category worked against Atlanta, which saw little growth between the censuses in 2000 and 2010. Atlanta has filed a challenge against the 2010 census, saying it missed 5,000 to 6,000 people.
Relations between Atlanta and the county have been tense lately, with Mayor Kasim Reed criticizing the county’s criminal justice system, saying it has been letting criminals out of its overcrowded jail and creating crime issues.
“We understand that Fulton County’s finances are in a dismal condition and that Chairman John Eaves and the board are facing a $100 million shortfall,” Reed spokeswoman Sonji Jacobs Dade said in an email. “As such, it seems they believe their proposal is the best path forward to stem the bleeding as they seek to prevent the county from going over a financial cliff.”
To bring other cities into their fold, the north Fulton cities offered relief to some cities that lost population and stood to lose millions of dollars, absorbing their loss amongst themselves.
East Point’s population has dropped 14 percent since 2000, and its LOST share makes up about a third of the city’s operating budget. Instead of losing $2 million, the city would lose just $1 million under the agreement, with an annual share of about $9.4 million.
“I am eternally grateful to the other cities in working with us to get this done,” East Point Mayor Earnestine Pittman said. “We desperately need every cent that we can get, and to have lost $2 million would have been devastating.”
Changes in LOST distribution
Fulton County and 12 of its 14 cities have come to agreement on how to distribute revenue collected from the local option sales tax, or LOST. The 1 percent tax produces a pot of about $240 million to be divided each year among the county and the cities. Below is a breakdown of the what the cities and county were getting and what they would now receive under a formula expected to take effect at the beginning of 2014:
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