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State Supreme Court: Judges can't allocate tax proceeds

ATLANTA — In an opinion released this morning on a case from Turner County, the Georgia Supreme Court has ruled that courts cannot settle disputes between county and municipal governments on the distribution percentages of local option sales tax revenue.

In its unanimous decision, the state’s highest court ruled that an amendment passed by the Legislature in 2010 authorizing courts to resolve those disputes between cities and counties is unconstitutional.

The case involved Turner County and three municipalities within it that were at odds on how the LOST funds should be distributed among the political subdivisions. The cities took the case to Turner County Superior Court, and the case was assigned to a judge outside the circuit. The judge chose the cities’ plan for distribution.

Today’s decision vacates that ruling.

In a release this morning, the Supreme Court said:

“The scheme set forth in the 2010 amendment improperly authorizes judicial resolution of the allocation and distribution of tax proceeds, an exclusively legislative power,” Justice Robert Benham writes for the Court.

“In this case, we hold that, absent an abuse of discretion or other showing of illegality, the allocation of tax proceeds by and among the political subdivisions of a LOST special district is left to the discretion of those entities and is not a matter for judicial determination.”

The case began when Turner County and the cities of Ashburn, Rebecca and Sycamore, GA reached an impasse over how LOST proceeds should be divided. A Georgia statute (Official Code of Georgia § 48-8-89) sets down how joint county and municipal sales and use taxes should be distributed. If the county and municipalities disagree and fail to reach an agreement within 60 days of submitting the dispute to nonbinding arbitration or mediation, the statute, as amended by the legislature in 2010, states that “any of such parties may file a petition in superior court of the county seeking resolution of the items remaining in dispute. Such petition shall be assigned to a judge…who is not a judge in the circuit in which the county is located.” Under the statute, once the petition has been filed, the county and municipalities are required to submit to the judge “a written best and final offer specifying the distribution of the tax proceeds. There shall be one such offer from the county and one such offer from qualified municipalities,” the amended statute says. The judge is authorized to then pick one of the offers.

Following the impasse, the three cities filed a petition in Turner County Superior Court. The county then filed a motion to dismiss the action, arguing the statute was unconstitutional on several grounds, including that it violated the separation of powers. A judge from another circuit was assigned to the proceeding, and following a hearing, he entered two orders: one that denied the county’s motion to dismiss the case and upheld the constitutionality of the amended statute, and a second which picked the cities’ plan as the “best and final offer,” over the county’s plan for distribution of the LOST proceeds. The county then appealed to the state Supreme Court.

“While this Court recognizes that the procedure set forth in the 2010 amendment represents an attempt to frame a remedy for the mischief created by the impasse that may occur by requiring competing political subdivisions to negotiate and agree upon allocation of the tax ‘pie,’ and although we have considered ‘the old law, the evil, and the remedy,’ nevertheless this particular solution does not pass constitutional muster,” today’s opinion says.

The opinion points out that “this Court presumes the acts of the General Assembly are constitutional and construes those acts as valid when possible. But in this case, we are not invalidating a tax and not striking the LOST Act or its terms for how the tax may be levied or for what purposes the proceeds may be applied. We are striking only the 2010 amendment…which effectively grants judicial resolution of the allocation and distribution of tax proceeds, a process that we deem to be a clear violation of the separation of powers doctrine.”

“In sum, the trial court erred when it denied Turner County’s motion to dismiss and sustained the constitutionality of the 2010 amendment to [Official Code of Georgia] § 48-8-89 and so its order on said motion is reversed,” the opinion says. Furthermore, the order that picked the cities’ plan over the county’s “is vacated.”