Council members voted March 26 to appeal the latest ruling handed down Feb. 29 by Chancellor Jerri Bryant with the hope of breaking the 1967 sales tax agreement with Bradley County. At-Large Councilmen Banks and George Poe, and 5th District Councilman Dale Hughes voted against appealing the decision. Voting in favor of the motion were Charlie McKenzie, 1st District; Bill Estes, 2nd District; Avery Johnson, 3rd District; and David May, 4th District. Mayor Tom Rowland refused to veto the 4-3 decision.
Rowland said Monday he did not exercise his veto power because one, the Council was elected to look out for city taxpayers and two, “We shouldn’t look like the bad guys because we’ve been sued and we’re defending our lawsuit.
“We disagree with a portion of the ruling and that’s what we’re appealing. And, should we win, we can do a lot of paving and would probably not have to have a property tax increase [for] a decade or more.”
Banks said during the discussion the Council is at a crossroads in its relationship with the Bradley County Commission.
“It seems that relationships have deteriorated since this lawsuit was filed by them,” he said. “It’s no question, they made a mistake in not joining the city, in my opinion, on seeking the increase in the sales tax.”
The immediate windfall if the appeal is dropped is $1 million being held in trust by Bradley County Trustee Mike Smith. However, if the appeal continues and the city wins, then sales tax would be collected where the transaction is made. Since the city accounts for about 85 percent of retail business, it would gain about $900,000 a year. That amount would help cover the loss of revenue after the fire contract fully expires on June 30, 2013. The city lost about that much this year after Bradley County Fire Rescue assumed responsibility for more of the fringe area outside the city limits. The county department will be responsible for all rural areas, plus Charleston, beginning July 1, 2013.
Banks said if the lawsuit continues, “joint funding will not occur. There will be hurt feelings, decisions not made in the best interest of our citizens, but based on the fact that we’re still in litigation.”
Poe seconded Banks’ motion because, “I don’t think you can ever win by suing each other. I think the farther you can stay away from court, the better off you are.”
McKenzie said he was opposed to voting on the impromptu motion.
Johnson said he gets “so many” requests for paving in his district and the first budget cut every year is in paving.
“We’ve got to do something to come up with more funding for our streets,” Johnson said. “We’re beating a dead horse with this tax thing and I really want it to go away. I hope we can just let it go this last step and see what the appeal process will present to us. It can be done with once and for all.”
He said his relationship with the county has not diminished simply for doing his job.
“We disagree, but we don’t have to be disagreeable,” he said. “You’ve got to be big enough and wise enough to move on and still maintain relationships.”
City Manager Janice Casteel said mediation has been tried. Several offers have been sent to the Commission to no avail.
Estes said numerous people have contacted him recently with favorable comments saying the appeal was one of the best decisions the Council has made.
Estes disagreed with Banks that the case would have to go to the State Supreme Court.
“If we win, it’s over,” he said. “We’ve heard from our counsel that very likely we would win this on appeal. We can’t control what other people do. When we say ‘Here’s a joint funding project we like’ and if the County Commission says, ‘You know, you didn’t go with us on this lawsuit, we’re not going to’ — let them. If that’s their rationale and logic, that’s fine.”
The city argues the 1967 agreement does not have a termination clause, but merely changes the distribution formula should the city and county school populations become equal. Therefore, the agreement is not a legal contract. Also, the city contends the 1982 sales tax increase of .75 percent is not a continuation of a failed 1980 referendum.
According to Casteel, correcting that one item would solve the city’s fiscal year 2014 budget problem. Improved sales tax collections helped balance the 2013 budget.
The appeals court has ruled against the city on one other occasion.
The dispute over sales tax distribution began at a joint city and county work session Oct. 21, 2008, in which discussion concerning the need to fund capital projects and the possibility of a referendum allowing the voters to decide to raise the sales tax by .5 percent was discussed.
The City Council approved an ordinance for a referendum on Nov. 24, 2008. County commissioners voted not to participate in a countywide referendum as they had on three previous occasions in 1967, 1972, and a failed referendum in 1980, which was presented again to voters and approved in 1982.
Cleveland voters approved increasing the city sales tax rate by .5 percent. The March 10, 2009, ballot referenced the ordinance, which limited the funds for capital needs of the city and Cleveland City Schools. Bradley County commissioners changed their position and voted 9-5 to approve a referendum for voters residing outside the city of Cleveland on May 14, 2009. The referendum passed by county voters did not restrict the use of funds solely for capital needs.