“To our understanding, we have followed the requirements of the law,” Cleveland City Manager Janice Casteel told the Cleveland Daily Banner late Thursday.
Whether the liquor tax revenues have been distributed properly was the topic of discussion Wednesday during a called session of the Bradley County Board of Education.
At the meeting, attorney James Logan Jr. said the city of Cleveland owed the Bradley County Schools system more than $700,000 based on information he received from the County Technical Assistance Service. In a prior session Monday of the Bradley County Commission, Logan said the County Commission owed Bradley County Schools $30,000.
The taxes are collected by the commissioner of the Tennessee Department of Revenue.
Casteel said she contacted the state revenue department for further information.
“We have researched it,” the city manager said.
Casteel said she explained to department representatives how the tax is being divided by the city of Cleveland. She said a Department of Revenue spokesman later confirmed the formula is correct.
“When she (Amanda McGraw, director of Financial Control at the Tennessee Department of Revenue) called me back that same day she said that the commissioner of revenue agreed that the formula that I had used was correct,” Casteel pointed out.
McGraw also told Casteel the state would be willing to further discuss the tax distribution formula with other individuals or government groups, the city manager advised.
The city has given 50 percent of its portion of the liquor tax revenue to Cleveland City Schools since the tax was created in 2002.
“Even if you take the perspective of share it like the property tax is shared, none of our property tax is going to go to the county schools,” Casteel said. “However, the county property tax is shared with (all) school (systems) within Bradley County.”
The education portion of the county property taxes is divided between the two school systems, based on average daily attendance.
Although the Cleveland City Council is scheduled to meet Monday at 3 p.m. in a voting session, Casteel and Cleveland Mayor Tom Rowland said the Council is not planning to discuss the matter then.
Rowland said the Council relies on city staff for information on such issues like tax revenue distribution and related matters.
According to Tennessee Code Annotated 57-4-306, half of the revenues from taxes on liquor by the drink are retained by the state and are used for education. The second half comes back to local governments.
State law dictates how this money will be divided. It cites, “... One half of the proceeds shall be expended and distributed in the same manner as the county property tax for schools is expended and distributed (T.C.A. 57-4-306).”
At Wednesday’s called session of the county school board, members passed a resolution on a 5-1 vote asking the city of Cleveland to pay [liquor tax revenue] funds they believe are still owed to the county school system.
The lone vote against the measure came from board member Chris Turner, who said he felt the resolution was worded too strongly. The board agreed to soften the wording, but Turner wanted it done prior to the formal vote.
Turner told his fellow board members he feared the resolution’s wording made it appear as if the county school board was “picking a fight” against the city of Cleveland.
Board member Troy Weathers countered, saying he felt the resolution is not an attack against the city.
“All we’re doing is making a claim that, basically, we believe we have a legal claim,” Weathers said at the board gathering. “This is not an attack on the city. This is a business issue.”
Johnny McDaniel, director of Bradley County Schools, joined board members in saying they want to discuss the tax collections issue with Casteel and members of the Cleveland City Council before advancing into any legal action.