City hires attorney to defend liquor-tax issue
by JOYANNA LOVE Banner Senior Staff Writer
Mar 25, 2014 | 992 views | 0 0 comments | 11 11 recommendations | email to a friend | print

The Cleveland City Council has chosen Doug Johnston with Barrett Johnston, LLC “to defend the city against the county’s motion for declaratory judgment” regarding liquor-by-the-drink distribution.

The motion was passed during a Council meeting Monday.

Bradley County Schools has asked for a declaratory judgment on whether the city of Cleveland owes the school system more than $700,00 from previously collected taxes.

The motion was approved unanimously. Councilman Dale Hughes was absent.

Councilman Richard Banks asked if the city had been officially sued yet. City manager Janice Casteel said the papers had not been served.

“I would urge my County commissioners … and my county mayor to hold off on this lawsuit,” Banks said.

The County Commission has previously passed a resolution leaving the decision on whether to pursue litigation solely up to the Bradley County Board of Education.

The City Council had previously voted to wait 120 days to see if any judgments were made on the issue in other parts of the state that could apply to the local situation.

“I thought we had some kind of agreement when the school board left. Then I read in the paper that they are coming after us,” Councilman David May said.

Casteel recently attended a Tennessee Municipal League meeting at which the issue was discussed. However, she did not share any information at the meeting Monday.

The city maintains it does not owe the county school system any funds from this tax because it operates its own school system.

Attorney James Logan, representing Bradley County Schools, contends the law does not list an exception from sharing the funding based on a municipality operating a separate school system.

Bradley County Schools is currently making payments to the city to pay back what a judge determined was wrongfully distributed funds from the 2009 half-cent sales tax increase.

Similar issues are taking place through out the state.

Casteel said previously a recent attorney general’s opinion on the law does not apply to the Cleveland/Bradley County situation because the opinion does not address cities that operate a school system independent of the county.

“I think it’s a little different because they (Chattanooga) operated a school system for a period and then got out of the school business,” Banks said.

Schools were the topic of a second motion during Monday’s meeting.

The Council voted to allow for reimbursement from issuing bonds for any money it spends from the city general fund to build a replacement gymnasium at Cleveland High School.

The motion passed unanimously.

This motion does not mean the Council will borrow money for the project. It simply gives the option for reimbursing the general funds if the Council decides to borrow money later for the project.

At the last meeting of the City Council, the body approved using the $12.1 million fund balance for the project.

Without the motion, even if money was borrowed for the project, it could only be used for the present or future stage of the project. It would not be able to go toward the general fund to cover monies already spend.

Casteel said passing a motion allowing the city to reimburse itself would be a way to rebuild the general fund balance.

Banks wanted to delay the vote to allow Hughes to be there. He also wanted to include wording that would limit borrowing money until after funding expected from the state required funding of Bradley County Schools capital projects became available. This wording was not added to the final motion.

Casteel said the county is not planning to borrow money for school capital projects, namely the Lake Forest Middle School renovation, until 2016.

She said the gymnasium project might be completed by then.

“So, it might be a timing issue,” Casteel said.

Banks said the Commission after the coming election could vote to borrow the money sooner.

Councilman Bill Estes said the resolution needed to be “as broad as possible.”

BCS has a $3.3 million general operating fund balance.

“The state of Tennessee doesn’t even require it, only suggests — the auditors come in and they suggest — 3 percent,” Estes said.

For Cleveland City Schools, this would be $1.3 million.

Estes said he would have liked to see the school system use part of its fund balance toward the project to keep the city from pledging nearly its entire fund balance.

State legislation passed last year could mean the city school system does not get any money from funds borrowed for the LFMS renovation.

City attorney John Kimball said the law passed last year allows the county school system to complete a single one-time capital project without sharing funding.

He said there was a bill pending that would “fix that.” However, Kimball said he was not sure if the bill would pass.

Discussion of a stormwater fee to Cleveland Utilities customers outside the city boundaries was placed on the agenda for the April 28 budget session by Banks.

The fee is seen as a way to help fund flooding mitigation projects.