Attorney James Logan Jr. gave the Bradley County Board of Education an update on where it stood with the issue of previously collected liquor-by-the-drink taxes during its Thursday night meeting.
He brought with him Gary Hayes, a county government consultant with the County Technical Advisory Service, who explained how his organization had worked with other counties on liquor tax disputes throughout the state.
Logan, who is representing the school board on its current dispute, told the board that the Bradley County Commission had at its most recent meeting deferred the decision of whether or not to pursue any legal action to the school board, saying it was “the party of interest.”
Cleveland City Council members were planning to meet with the county school board members on Monday to discuss the issue, which stems from the school board believing the city government owes it money.
State law dictates a 15 percent tax be charged on liquor sold by the drink on the premises of places like restaurants. Tennessee Code Annotated 57-4-306, which concerns the “consumption of alcoholic beverages on premises,” dictates that “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.”
Counties with populations between 27,900 and 27,920, “according to the 1980 federal census or any subsequent federal census, any proceeds expended and distributed to municipalities which do not operate their own school systems separate from the county are required to remit one half of their proceeds of the gross receipts liquor-by-the-drink tax to the county school fund.”
This part of the law has been debated by cities and counties statewide. Hayes said it all started when a consultant with the Municipal Technical Advisory Service was working with a city in Tennessee last fall and found the city had not been properly distributing to the county school system there. Because of that, CTAS began looking into the matter as well.
“That kind of mushroomed into taking a look at all of our counties statewide,” Hayes said.
That led to many local governments finding themselves in the same situation Cleveland and Bradley County are in now.
Hayes said CTAS’s interpretation of the state law means it believes the city of Cleveland owes the Bradley County Schools system tax revenues that date back to 1980. As of the end of the previous fiscal year, which ended in June 2013, he said the amount the city owed the county school system was “right at” $725,000. Because months have passed since that figure was discovered, he added that the amount has continued to increase each month since.
The city of Cleveland has in the past taken issue with that claim because of the part of the state law that says it concerns “municipalities which do not operate their own school systems separate from the county.”
The city does in fact operate its own school system.
Logan said there were various actions the school board could take in terms of negotiating payment or pursuing litigation, but it all depended on what would come from the meeting with the city on Monday.
“I’d love to believe we can get closer to making a resolution,” Logan said.
A resolution reiterating the school board’s belief of its claim to the money was on the agenda for the meeting, but the board voted to postpone the passage of that resolution with the meeting with the city still yet to take place.