Board considers liquor tax options
by CHRISTY ARMSTRONG Banner Staff Writer
Jan 26, 2014 | 1335 views | 0 0 comments | 14 14 recommendations | email to a friend | print
BRADLEY COUNTY Board of Education members listen as attorney James Logan Jr. shares his perspective as part of an ongoing discussion about the distribution of previously collected liquor tax revenues. Banner photo, CHRISTY ARMSTRONG 
BRADLEY COUNTY Board of Education members listen as attorney James Logan Jr. shares his perspective as part of an ongoing discussion about the distribution of previously collected liquor tax revenues. Banner photo, CHRISTY ARMSTRONG 
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As part of an ongoing discussion about previously collected liquor taxes, the Bradley County Board of Education has voted to officially enter into a contract with a local law firm in case a dispute with the City of Cleveland cannot be resolved outside of court.

Board members made the decision during a special called meeting on Saturday morning, amid reports the board was unsuccessful in scheduling a meeting to discuss the issue with city officials.

The issue was whether or not revenue from a state tax was distributed correctly once the money went from the state governments to the local ones that were supposed to distribute the funds.

After local attorney James Logan Jr. addressed the school board, the members discussed the course of action to proceed.

Tennessee state law requires a 15 percent tax be charged on 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.

Tennessee Code Annotated 57-4-306, which concerns the “consumption of alcoholic beverages on premises,” dictates how such taxes are supposed to be distributed.

“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,” it reads.

However, counties that had 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.” 

According to the state law, the “collections of gross receipts collected in unincorporated areas” are to be given “to the county general fund,” and 50 percent of gross receipt taxes are to be given “to local political subdivisions by subdivision.”

The phrase “municipalities which do not operate their own school systems” has been the centerpiece of the city’s opinion they do not owe the county school system any portion of those tax funds.

Logan told the school board Saturday he saw the law as being pretty clear about what is expected of a city, namely the city of Cleveland. He believed the city owed the county school system thousands of dollars.

However, he said the law has been interpreted differently in counties throughout the state since the issue was raised elsewhere after a state comptroller audit revealed the tax revenues had not been distributed correctly by some local governments.

After Logan and the board discussed how the liquor-by-the-drink tax distribution matter had been handled McMinn and Hamilton counties, board member Chris Turner said there seemed to be no legal precedence concerning a county like Bradley which has a local municipality that runs a separate school system. Even schools in Chattanooga are run by Hamilton County, he said.

“They are not apples to apples comparisons,” Turner said. “I can’t support marching into litigation without having done our homework.” 

Logan said he would continue looking at what other counties throughout the state were doing so he could see whether or not legal precedents were available to bolster a potential legal case.

He also said he believed the school board had options when trying to decide what kind of litigation to pursue.

One option would be to go to court to get a declaratory judgment, which could offer the school board an official legal opinion on the dispute between it and the city. The school board could then pursue further litigation, if it wanted to do so.

However, Logan said a meeting with the city would be helpful in deciding what to do next.

During the school board’s Dec. 18 meeting, it voted to pursue a conversation with the city of Cleveland. The board voted to pursue that meeting in a resolution which stated their belief the city still owed tax revenue to the school system.

The December resolution said the 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.” 

Logan also spoke at that meeting, alleging the city owed the county school system over $700,000.

At the same time, the school board also voted to send a letter to City Manager Janice Casteel to request an in-person meeting between it and the City Council.

The Cleveland City Council responded to the board at its Dec. 23 meeting by voting to send a response saying it believed the city had done nothing wrong.

“I make a motion we respectfully request the Bradley County Commission and the Bradley County school board put out a press release that clears up the misconception that the city of Cleveland owes anything,” City Councilman Richard Banks said during that meeting.

Meanwhile, both Bradley County Director of Schools Johnny McDaniel and Board Chair Vicki Beaty said the school board’s request for a meeting was never granted.

“We were never invited to come over for a City Council meeting,” McDaniel said.

Board member Rodney Dillard said the city government “took a hard stance” on the issue before the county school board had the chance to discuss the matter with them. That “kind of perturbs” me, he added.

Beaty said she thought the school board still needed to meet with the city to work through the issue before considering taking legal action. With the first meeting request having not been met, she asked Logan what he thought.

“Do we simply request again?” she asked.

He affirmed that the school board should request to meet with the city again so they could at least say they tried to settle the issue outside court on two separate occasions, instead of just one.

Board member Troy Weathers said he liked the idea of a declaratory judgment because it would be “a way of getting an impartial answer.” 

He then made a motion to accept the contract with the Logan-Thompson law firm in Cleveland, which would allow Logan to officially get started on a case if one is to be pursued.

After that, board member Nicholas Lillios proposed a substitute motion to drop the matter of past tax issues and only champion legislative changes that would keep matters like that from happening in the future.

Multiple board members expressed an opinion reflecting the attitude of not simply letting bygones be bygones.

Lillios’ motion died for lack of a second, and the first resolution passed unanimously.

Beaty said the board’s executive committee would again request a meeting with the City Council, and a decision on what legal action — if any — would be decided later.

Though Saturday’s meeting was a voting session, the board decided to postpone its final vote on the liquor tax issue to its Feb. 6 voting session. Beaty said this would give board members the chance to meet with city officials if possible and Logan the chance to prepare more information to piece together information for a potential legal case.