RENEGOTIATING LOCAL RENEGOTIATING LOCAL OPTION SALES TAX (LOST) ( ) Clint Mueller – ACCG Legislative Director g Jim Grubiak – ACCG General Counsel Phil Sutton – Sutton Consulting President Phil Sutton Sutton Consulting President
History of LOST 1975 – Enactment and 1976 Amendments 1. Revenue split between counties and cities based on population p p 2. Required counties to use their LOST to fund an annual property tax rollback to the unincorporated area of the county 3. Required cities to provide a one time rollback equal to their portion of LOST proceeds 1978 – Differential Rollback Rates Ruled Unconstitutional 1979 – No Authorization to Share County Tax with Cities 1979 No Authorization to Share County Tax with Cities
1979 – New LOST Law Enacted 1. Set-up special taxing districts 2. Joint city/county tax 3. 3 Creation of “qualified cities” C e o o qu ed c es 4. County rollback countywide 5. No required renegotiation 1994 – Amendments 1994 Amendments 1. Required periodic renegotiation 2. Established eight criteria to be considered 3. 3 E t bli h d Established measure for conflict resolution f fli t l ti 2010 – Amendments 1. Binding Arbitration Dispute Resolution Process 2. City/County approval to call for termination of the tax
Purpose of LOST Property Tax Relief Funding Services
Preliminary Renegotiation Issues Who is Eligible to Participate? Absent Municipality Provision p y Scope of the Reneogtiations Putting Together a Negotiating Team g g g g Establishing a commitment to Renegotiate Open Meetings Law Open Meetings Law Resolving Disputes
Timeline For LOST Renegotiation Timeline For LOST Renegotiation July 1, 2012 The DOR Commissioner must be notified in writing by the county governing authority that renegotiation is underway. If the county i h i h i i i d f h governing authority does not issue the call by that date, any eligible city may issue the call and notify the Commissioner 60 Days After If agreement on a renegotiated distribution certificate is not reached, Negotiations Negotiations the parties must submit the dispute to nonbinding arbitration or the parties must submit the dispute to nonbinding arbitration or Start mediation. 60 Days After If agreement on a renegotiated distribution certificate is not reached , Start of any party may submit the dispute to binding arbitration . If arbitration Alternative is not requested within 30 days of the expiration of the alternative Dispute p dispute resolution period the LOST will terminate December 31, 2012. p p , Resolution
Do your Constituents Receive an Equitable Return on Their Sales Tax Dollars? Tax Dollars? $250 $200 Per Capita Benefit $150 $150 $100 $50 $0 $0 Unincorporated City Residents County Residents
Don’t Get Caught in the Don t Get Caught in the “Unincorporated Trap” Unincorporated Countywide Criteria Only Criteria City A City A City B City B
The Eight Criteria g 1. The service delivery responsibilities of each political subdivision y p p to the population served 2. The service delivery responsibilities of each political subdivision to the resident pop lation to the resident population 3. The existence of intergovernmental agreements among and between the political subdivisions betwee t e po t ca subd v s o s 4. The existing service delivery responsibilities of each political subdivision 5. Any coordinated plan of county and municipal service delivery and financing
6. The use by any political subdivision of property taxes y y p p p y and other revenue from some taxpayers to subsidize the cost of services provided to other taxpayers of the levying subdivision y g 7. The effect of a change in sales tax distribution on the ability of each political subdivision to meet its short- t term and long-term debt. d l t d bt 8. The point of sale and use which generates the tax to be apportioned be apportioned
Formulas for Determining New Formulas for Determining New Distribution Percentages Population Ad valorem Tax Collections Ad valorem Tax Collections General Fund Revenue G General Fund Expenditures l F d E di Property Tax Digest Combination
Project Approach j pp • Discuss Legal requirements: • Purpose of LOST O.C.G.A. § 48-8-91 • Distribution methodologies O.C.G.A § 48-8-89(b) Distribution • Examine Service Delivery Demands O.C.G.A § 48-8-89 (d)(1) Examine Service Delivery Demands O.C.G.A § 48 8 89 (d)(1) G id li Guidelines •Test Data scenarios including: Tax Equity scenarios g q y • Population, Employment • Tax Digest & Daytime Population • General Fund Expenses Commercial and Industrial Tax Digest Data Analysis •Prepare various combinations of data for discussion • Prepare supporting arguments for the preferred methodology • Develop an alternative methodologies De elop an alternative methodologies Comprehensive • Prepare Executive summary Report Sutton Consulting LLC
LOST Negotiation Regulations O C G A § 48-8-89 (b) and § 48-8-89 (d) (1) O.C.G.A § 48 8 89 (b) and § 48 8 89 (d) (1) • Population not sole criteria: government services are not always in direct correlation with population are not always in direct correlation with population. • Local service delivery responsibilities: – analyze local service delivery responsibilities, analyze local service delivery responsibilities – existing allocation of proceeds, and – allocation of resources to meet service delivery allocation of resources to meet service delivery responsibilities. O.C.G.A § 48-8-89 (d) (1) • Consider the 8 criteria: distributions shall be “based Consider the 8 criteria: distributions shall be based upon, but not be limited to, the following criteria:” O.C.G.A § 48-8-89 (b) Sutton Consulting LLC
Relevant Reliable and Available Data Relevant, Reliable and Available Data 1. Population – Census 2. General Fund Expenses 3 G 3. Gross Property Tax P T Digest 4 Commercial digest 4. Commercial digest 5. Industrial digest 6 E 6. Employment Data l t D t 7. Daytime Population Sutton Consulting LLC
Calculation of City’s Double Dip City Population = 1000 / Unincorporated County Population = 1000 County-wide Population = 2,000 Because of equal populations the City’s distribution from LOST =50% and the county’s distribution is =50% ’ i i i i 0% Actual ‘benefits of LOST funds’ = 50% city/ 50% county $1,000,000 Amount of LOST revenue is $500,000 Amount of LOST revenue receive by the City Government = 50% $500,000 Amount of LOST revenue receive by the County Government = 50% $500,000 Property Tax Rollback (or benefit) to City residents = in city Tax Rollback $250 000 $250,000 Property Tax Rollback (or benefit) to City residents = in county Tax Rollback Property Tax Rollback (or benefit) to City residents in county Tax Rollback $750,000 Total City Resident’s Rollback $250,000 Property Tax Rollback (or benefit) to Unincorporated County residents = Net result: City Resident’s Disproportionate Share of LOST benefits = 50% of the County LOST portion. Unincorporated Resident’s Disproportionate Contribution of LOST = 50% of the County LOST portion. Sutton Consulting LLC
O.C.G.A. § 48-8-89(b) (1): Central Business District & Unincorporated Disproportionately increases costs: The • (1) The service delivery cities’ central business district with more cities central business district with more responsibilities served ibili i d concentrated activity levels and during normal business disproportionately increases LOST hours, conventions, trade , revenue. revenue. shows, athletic events and ______________________________ the inherent value to a Daytime Population and Employment community of a central community of a central Increased daytime population and Increased daytime population and employment and disproportionately business district and the increase LOST revenue relative to their unincorporated areas population population Industrial and Commercial Tax Digest : Is a proxy measure for Point of Sale Is a proxy measure for Point of Sale Sutton Consulting LLC
O.C.G.A. § 48-8-89(b) (1): Central Business District Business District Employment Employment % Daytime Daytime % Employment: Indicator of robust Daytime Population: CBD in area 2005- distribution Population p Population p distribution CBD and Industrial Development CBD and Industrial Development increases demand for services increases demand for services 2009 Census 2005-2009 Unincorporated Unincorporated County 100,605 66.1% 26,598 26 598 48 4% 48.4% County County City A 4,566 3.0% 1,825 3.3% City A City B 4,950 3.3% 2,567 , 4.7% City B y City C 24,039 15.8% 13,576 24.7% City C City D 18,090 11.9% 10,427 19.0% City D Total County Total County 152 250 152,250 100 0% 100.0% 54,993 100.0% Total County Sutton Consulting LLC
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