City, county may go to court over LOST

Published 7:40 pm Tuesday, November 20, 2012

The City of Bainbridge and Decatur County governments may be going to court over how to distribute proceeds from the Local Option Sales Tax.

The Local Option Sales Tax, or LOST, is a one-cent tax added on top of the four-cent state sales tax. Unlike SPLOST, which can only be used to fund special projects decided upon by voters, LOST proceeds can be placed in a local government’s general fund and be used for any purpose the governing body deems fit, including day-to-day operation of city services.

Collected since 1975, LOST is intended to lessen the burden on property tax payers. Every 10 years, local government representatives must negotiate how those tax payments should be doled out. Approximately $4.5 million is collected each year in LOST proceeds.

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The negotiating process began June 28 and the 60-day deadline for reaching a consensus was Aug. 27.

Representatives for Decatur County and the City of Bainbridge attended a mediation meeting on Nov. 8.

Hobby said that Will Sanders, an attorney from Thomasville, Ga., served as the mediator with the consent of both local governments.

However, the two parties were unable to reach an agreement.

“At this point, our only other options are to litigate or continue to try and reach an agreement,” Hobby said.

Hobby said the LOST negotiation process set up by state law denotes certain dates by which different actions should be completed.

One of the next significant dates is Nov. 28, which led Hobby to inform the Bainbridge City Council of the status of negotiations at a special called meeting on Nov. 14.

At that meeting, the council unanimously approved a resolution to obtain special counsel in reference to the LOST agreement.

After the meeting, Bainbridge attorney David Kendrick said the attorneys who would serve as special counsel are Buddy Welch and Andy Welch, of the firm Smith, Welch, Webb and White in McDonough, Ga. Kendrick will still be assisting in the matter, too.

Hobby said the next step for the city government will be to file a petition in Decatur County Superior Court. The city manager said he understood a judge from outside the local judicial circuit will be appointed to hear the petition.

According to Hobby, state law suggests the petition will be handled through “baseball arbitration,” similar to how contract disputes between professional baseball players and teams are handled.

“If baseball arbitration is used, both sides would present their best offer,” Hobby said. “There would be a hearing and the judge would hear testimony from both sides. In the end, he accepts the proposal he thinks is the best. Certainly, I am not precluding the judge from making his decision using another method, but the way the law reads is, ‘the one best proposal.’”

The city manager also left open the possibility that the two sides could reach a mutual agreement outside the courtroom at any time, making any further litigation moot.
County Administrator Gary Breedlove confirmed that the two sides are at a stalemate. He explained that the most recent breakdown of LOST proceeds was 53.45 percent to Decatur County, and 46.55 percent to Bainbridge and other municipalities.

The county’s “final offer” was to request cut of 65.45 percent (or a 12-point increase from the status quo), while the city is requesting 58.55 percent (also a 12-point increase from the status quo), Breedlove said.

“We knew going into mediation that we were 24 points apart,” Breedlove said. “We’ve gotten closer as time’s passed, but we’re not yet to the point that we can agree. There’s nothing personal about this. Everything is polite; there aren’t any antagonistic comments in the petition filings or anything like that. We’re just saying that negotiations have been unsuccessful, to this point.”

Breedlove and county representatives have argued that the county needs more LOST proceeds, because it provides many services to all county residents (even those who live in cities), such as EMS and the county jail. He has also suggested that the county must cover a larger geographical area, which requires more fuel and labor hours.

Hobby’s main arguments have been that the city of Bainbridge has a larger population, and that most of the sales taxes are generated within the Bainbridge city limits.

Breedlove said that if the matter is not resolved by the start of 2013, then the current LOST proceeds breakdown will remain in effect until a resolution is reached.

Managing Editor Justin Schuver contributed to this story.