The city of Cleveland has filed a motion in Chancery Court asking for dismissal of a complaint filed by the Bradley County Schools for a declaratory judgment and relief regarding liquor by the drink tax revenue.
The revenue comes from taxes on liquor served and consumed at the same location.
“The city of Cleveland continues to believe it has correctly distributed the liquor-by-the-drink tax in accordance with the guidance received from the Tennessee Department of Revenue. There has never been an audit finding by the Comptroller's office that the City of Cleveland or Bradley County has distributed this tax incorrectly,” city manager Janice Casteel said.
The county school system and its attorney, James Logan, maintain that having its own school system does not exempt the city of Cleveland from sharing a portion of the funds with the county school system.
The motion to dismiss filed last week states the complaint for a declaratory judgment does not give clear evidence that the county school system would be entitled to a portion of the liquor by the drink taxes. The motion cites a 1980 attorney general opinion in which it was determined that the Tennessee Code Annotated distribution of the tax “does not apply to counties which have not authorized liquor by the drink” by referendum.
“The plaintiff has failed to plead that it is entitled to any relief under [Tennessee code annotated, Title 57] Chapter 4. In fact, it cannot so plead because Bradley County has never authorized liquor by the drink,” the motion to dismiss states.
A hearing in Chancery Court has been set for July 1.
At the hearing, Chancellor Jerri S. Bryant will decide whether to grant the dismissal.
Attorney Douglas Johnston Jr. of Barrett Johnston, LLC is representing the city in the litigation. BCS is being represented by attorney James Logan of Logan-Thompson P.C.
Logan said he will be filing a response to the motion before the hearing.
“It certainly comes as no surprise and is consistent with the continued position of the city to delay,” Logan said. “We will continue to request that the city enter into negotiations which recognize the simplicity of the words ‘is to be divided in like manner as the county property tax for education.’”
If Bryant agrees with the motion and dismisses the issue, the school would have the option to appeal the decision. If she does not agree with the motion, litigation will continue.
Johnston said at this point the city would have to offer a formal response to the complaint for a declaratory judgment.
“Bradley County has never authorized liquor by the drink. By the plain terms of T.C.A. 57-4-103, Chapter 4, including section 306 governing the distribution of tax proceeds of on-premises alcohol sales, does not apply to Bradley County. Because the statute does not apply to Bradley County, neither Bradley County nor any other county entity has any rights or responsibilities to be declared pursuant to its provisions. The City of Cleveland respectfully requests the court to dismiss the instant action for failure to state a claim on which relief can be granted,” the motion to dismiss states.
The request for a declaratory judgment by BCS was filed in April. The Bradley County Board of Education made the decision to proceed with the request in Chancery Court after a satisfactory agreement was not reached with the Cleveland City Council in joint discussions.
Liquor by the drink tax distribution has become a statewide issue leading the Tennessee state legislature to pass a law giving more specific instructions on how the revenue is to be handled for the 2014-2015 fiscal year.
Bradley and Hamilton counties were exempted in the legislation since both are involved in litigation.
Logan said his firm has also been hired by the Washington County school system, who has filed suit against Johnson City and Jonesboro.