The Bradley County Board of Education has contracted Cleveland attorney James Logan Jr. to represent the governing body in talks with the city of Cleveland to resolve concerns over the distribution of revenue from previously collected liquor taxes.
In a special called meeting Wednesday night, the board reviewed the issue of tax money that it believes should have been paid to the county school system.
Tennessee state law dictates that a 15 percent tax be tacked onto liquor that is sold by the drink in places like restaurants. The rule is that 50 percent of the money is supposed to go to the state’s general fund for educational purposes, and 50 percent goes directly to the local “political subdivision” to be distributed the same way county property taxes are disbursed.
During the called board session, Logan said he had spoken with the Tennessee Department of Revenue spokeswoman, Kelly Cortesi. Logan said the state official advised him that it was up to local governments to resolve any discrepancies in how the tax revenues are distributed.
“She just told me that the position of the Department of Revenue is that they distribute the funds through local political subdivisions provided by statute and that they then take no interest in following up with that division,” Logan explained.
Citing examples like a current case between the Hamilton County government and school system, he said that situations like the one facing Bradley County have also been going on statewide, a fact he said Cortesi had confirmed.
Locally, about $735,000 of tax revenue that should have been paid to the Bradley County School System had not been paid, Logan alleged. He said both city and county governments are at fault.
At Monday’s meeting of the Bradley County Commission, Logan presented the issue to commissioners, pointing out that the county owed its school system about $30,000. The Commission then voted to waive any conflict of interest for Logan to represent both entities — County Commission and county school system — in resolving the discrepancy.
The amount owed to county schools by the city of Cleveland dominated the school board’s attention Wednesday. Logan said this amount — more than $700,000 — was what city government still owed the county school system. The tax revenues that he feels should have been distributed span the years dating all the way back to 1981, he said.
Logan cited an opinion on a court case that had been decided in Maryville that said there was no statute of limitations that would apply if legal action were to be taken.
“There is no statute of limitations between governing bodies,” Logan said.
The school board considered a resolution that stated their position on the matter, saying that its members believed that money was still owed to the local school system.
The resolution included a line that said the school board “does hereby respectfully request the city of Cleveland to pay over unto the Bradley County School System all funds received by the city of Cleveland and which have not been distributed to the Bradley County School System as provided in [Tennessee Code Annotated] 57-4-306.”
Board members reviewed what they believe are a couple of options for the city in paying the tax revenue to the county schools, including forgiving part of an existing debt.
School board member Chris Turner said he did not like the way the resolution was worded, asking fellow members if they thought that asking the city to “pay over” the funds might make the board “run the risk of picking a fight.”
“All we’re doing is making a claim that, basically, we believe we have a legal claim,” board member Troy Weathers said. “This is not an attack on the city. This is a business issue.”
Still, the board ultimately voted to approve the resolution after softening some of its wording.
Board members approved the resolution on a 5-1 vote. Nicholas Lillios was absent, and Turner voted against the measure. He said he wanted the resolution revisions to be made before the board’s vote.
Board members, as well as Bradley County Director of Schools Johnny McDaniel, said they wanted to discuss the tax collections issue with Cleveland City Manager Janice Casteel and members of the Cleveland City Council before taking any legal action.
While stopping short of initiating litigation at this time, the board agreed the approved resolution will help to substantiate the county school system’s case.
“This will make it very clear where we stand,” said school board member Christy Critchfield.
Logan said he had not yet discussed the tax revenue distribution with Casteel, but he cited a newspaper article in which the city manager was quoted as saying she believed there was no wrongdoing by the city.
In a separate news account published in Wednesday’s edition of the Cleveland Daily Banner, Casteel said the city of Cleveland had distributed taxes from liquor sold by the drink in accordance with the state’s requirements. She said she researched the issue with state officials to ensure the city had acted in compliance after attending a Tennessee Municipal League conference in which the matter was discussed.