ALBANY, Ga. — Stakes are high for the 147 of Georgia’s 159 counties that levy voter-approved 1 percent local option sales taxes as the state’s Supreme Court considers the appeal of a Turner County LOST ruling.
The high court heard arguments in the appeal of Turner County v. the city of Ashburn et al on June 4 from Valdosta attorney Walter Elliott, representing Turner County, and Albany’s Tommy Coleman, representing the municipalities of Ashburn, Rebecca and Sycamore. Now state and municipal governments are holding their collective breath, awaiting a ruling that will impact hundreds of millions of tax dollars that could be in limbo with a reversal of the Turner case.
“What happens next? That’s the $64,000 question,” Dougherty County Attorney Spencer Lee said last week. “This case is really messing with the goose that laid the golden egg. And no one can answer the question right now of what the Supreme Court’s going to come up with and how it’s going to affect the LOST collections.”
The state Legislature, in an attempt to simplify the means by which counties and municipalities divide the decennial 1 percent local option sales tax implemented in 1975 as tax relief for property owners, decided in 2010 that counties and their municipalities should use nine vaguely defined criteria, including population, to determine how to split the money. Counties and municipalities that failed to reach an amicable agreement by a determined date then entered a mediation period, during which they sought to settle their differences.
Failure to reach an agreement through mediation led to what state officials called “baseball arbitration,” in which each side would come up with a “best and final” offer. The legislation called for a state superior court judge to stand as an arbitrator and choose the side that best met the criteria laid out by the General Assembly.
Coleman represented the municipalities of Ashburn, Rebecca and Sycamore in their attempt to gain a 50-50 split of LOST funding with Turner County, up from a 35-65 split in favor of the county. Turner County Senior Juvenile Court Judge O. Wayne Ellerbee ruled in the municipalities’ favor.
Turner County officials chose Elliott, the Dartmouth-educated Valdosta attorney, to represent the county in an appeal of Ellerbee’s ruling.
In briefs filed on behalf of the appellant, Elliott wrote that the procedure implemented by the Legislature violates Article III, Section V of the Georgia Constitution. In essence, Elliott argued that a ruling on tax matters by a state judge violates the “separation of powers” laws of the Constitution.
A ruling by a Superior Court judge “delegates to the judiciary the legislative function of allocation or determining the benefit of a tax,” Elliott said in arguments before the Supreme Court. “This court, ruling in a LOST case (Taylor County Board of Commissioners v. Cooper) in 1980, recognized that allocation of the tax is a legislative authority.
“(Such a ruling) lies beyond the scope of judicial power.”
In an answering brief on behalf of the appellees, Coleman disputed Elliott’s claim.
“(The cases Ward v. city of Cairo and Albany Surgical PC v. Georgia Department of Community Health determined) ‘some overlap of functions between the three branches of government is inevitable and to be expected,’” Coleman wrote. “The separation of powers provision is sufficiently flexible to accommodate this practical arrangement for the solution of a problem.
“A judge does not determine,” Coleman further argued, “the distribution of taxes (under the new LOST legislation). He or she determines which offer most closely complies with the criteria of the statute.”
Elliott argued during the June 4 hearing before the Supreme Court that Ellerbee had “disregarded the law” when he made his decision in the Turner case based on a “written report (by consultants) that is, as a matter of law, hearsay and of no probitive value.”
Supreme Court Justice David Nahmias questioned Coleman extensively about the intent of the Legislature during the oral arguments.
“How does a judge choose between two sets of political considerations without making his or her own political considerations?” Nahmias asked Coleman. “How do you choose between political factors in a non-political way? Tell me a single situation where a judge gets to decide distribution of tax money.
“Are county officials allowed to tell judges you are no longer a judge, you’re an arbitrator?”
Coleman said he could not “point to another case in which (such a ruling) is applied this way.”
Noting in his brief that the high court shouldn’t even hear the Turner appeal because “constitutionality issues must be ruled on by a trial court before going to the Supreme Court,” Coleman wrote, “Many of the statements made in the preliminary portion of the appellant brief ... are self-serving interpretations of the LOST statute.
“It is clear that it was the intent of the General Assembly to avoid litigation by providing arbitration as an alternative thereto. To allow this foreshortened procedure to be maneuvered into a full-blown litigation would frustrate the whole purpose of the arbitration.”
Perhaps the most critical element of the case pending before the Supreme Court — the “$64,000 question” that Lee spoke of — is spelled out in an exchange that occurred between Elliott and Supreme Court Justice Harold Melton.
Speaking of city and county governments’ inability to decide on an equitable LOST split, Melton asked, “And if they can’t reach a decision?”
“Then the tax is not levied after 2013 because their agreement to levy it is a prerequisite beginning in 2013,” Elliott said.
If that is the case, Lee’s question becomes a much more expensive one. In his county alone, the city of Albany collected $9.6 million in LOST funds in Fiscal Year 2013, while the Dougherty County government collected $6.6 million. City of Albany Finance Director Kris Newton said the city incorporated $9 million in LOST funds into its FY 2014 budget, while Dougherty Finance Director Martha Handley said the county budget calls for $6.7 million in the new fiscal year.
Albany and Dougherty County are among some 21 state counties and municipalities that have not reached an equitable LOST agreement. The city has collected 60 percent and the county 40 percent of the funds for the past 20 years, and while county officials have hinted that a continuation of that split would suit them, city officials are adamantly opposed.
Neither city nor county officials would reveal their planned best offer, but reports have surfaced indicating Albany officials are looking for a split closer to 80-20, while county officials were hoping for a 50-50 division. Each percentage point, according to Newton, is equal to $175,000.
“It seems (that the appeal) has us on a suicidal course if the Supreme Court decides to overturn Judge Ellerbee’s ruling (in the Turner case),” Coleman said last week. “If you remove baseball arbitration, you strike the entire law. And since the General Assembly did away with the old law (by which SPLOST funds are divided), how would you determine the split?
“Think about the chaos that would create.”
Lee said officials in Albany, which is being represented in its LOST case by Coleman, and Dougherty County, which is being represented by Vidalia attorney Wilson R. Smith, had decided to wait until the Supreme Court made its decision on the Turner appeal before moving forward. Their case is pending before Pataula Judicial Circuit Superior Court Judge Ronnie Joe Lane.
“It wouldn’t make sense to pay consultants and attorneys for work that might become moot with the Supreme Court’s ruling,” Lee said.
Former Dougherty Superior Court Chief Judge and current Senior Judge Loring Gray, who has been selected to hear five LOST arbitration cases, said he’s put off holding any hearings on those cases pending the Supreme Court ruling.
“In the interest of judicial economy, after talking with the lawyers involved, I thought the best thing to do was wait and get direction from the Supreme Court,” Gray said. “They’ll resolve a lot of issues, including some left out of the statute.”
Gray paused to ponder a question about what a ruling in favor of Turner County, a ruling that would render the LOST legislation unconstitutional, would mean to county and municipal governments.
“You might as well ask me how long a piece of string is,” Gray said. “The only answer is twice as long as half of one. ... There’s just no way of knowing the answer to that question.”
Elliott said that while the Supreme Court has a Dec. 10 deadline to render a ruling in the case, he expects one to be handed down sooner. Meanwhile, cities and counties wait ... afraid to exhale.