Fifteen cities and Fulton County begin mediation on Friday over the distribution of a projected $3 billion in Local Option Sales Tax (LOST) revenues over the next 10 years.
Negotiations began July 1 as set by state law. So far, an agreement has not been reached, so they will switch to mediation under the schedule that the law sets. This begins two days after eight Fulton County mayors and one Fulton County Commissioner took part in a town hall meeting in Roswell on Sept. 21 to update North Fulton residents on what is at stake.
Sandy Springs Mayor Rusty Paul said that LOST is a 1% sales tax activated by a local referendum established to give property tax relief so millage rates could be rolled back. The legislation creating LOST requires renegotiation of tax distributions after every Census by the cities and the county. It will lapse on Dec. 31 if they fail to reach a successful negotiation.
“LOST is one of the most significant sources of revenue you’ve heard for municipal governments in Georgia second, only to property tax,” Paul said. “In Sandy Springs it’s about 27% of our total budget. We pay for police officers we pay for parks, we pay for fire.”
Paul said the cities have a lot to lose even if there is a significant change from the current distribution, where Fulton County gets just under 5% of the tax revenues and the 15 cities share the rest based on respective populations.
Before the formation of South Fulton, the county received 14% of the sales tax revenue. The rate was set at just under 5% after the city was created.
New cities were formed because residents in each of those areas wanted better services than the county provided, several residents and the mayors said.
Many of the cities took on bond referendums that existing LOST revenue helped repay. Rating agencies will look negatively at the lost revenue. A loss of tax revenue or a severe drop in the distribution would force the cities to either raise millage rates or cut services to residents.
Sandy Springs and four other cities can’t raise their millage rates without approval by voters through a referendum on the ballot.
Fulton County Commissioner Liz Hausmann said she appreciate the chance to listen to what the mayors had to say. She is not part of the county’s negotiating team. She said the county’s initial request for 35% of the LOST revenue started the negotiations off in a bad place.
“I’m going to apologize on behalf of Fulton County for starting off on the wrong foot. But we’re not at the 35% offer and that was withdrawn a month ago,” she said.
The mayors on the cities’ negotiating team said county officials appeared willing to let LOST lapse because it makes up so little of the county’s budget. LOST makes up 2% of its budget, while for the cities it is between 20 and 40% of their budgets.
Hausmann said the majority of commissioners do not want to see LOST go away, which Alpharetta Mayor Jim Gilvin said gave him some hope for the negotiations.
Gilvin said the cities are trying to negotiate in good faith.
“We’re actually projecting an 83% increase in Fulton County revenues over the next 10 years. 83% increase. That’s pretty substantial,” he said.
The county’s lowest offer so far was for a 21.9% share, which is more than a 400% increase. That shows how far apart the two sides are, he said.
Paul told residents attending the town hall they need to contact their city councils, mayors and county commissioners to tell them what they want them to do.
Members of the North Fulton state legislative delegation are ready to make changes to the law that gives Fulton County veto power over LOST.
“Here’s my message to Fulton County: Either you work this out, or I’m going to work it out for you, we’re going to do it in the legislature,” Sen. John Albers (R-Roswell), said.
Rep. John McLaurin (D-Sandy Springs) said he thinks members of both parties would be interested in fixing this issue in Fulton County. He said a point that resonated is that Fulton County is different from other counties in that it is fully municipalized. Town Hall attendees distrust how Fulton spends its money.
“I would absolutely be open to some sort of bipartisan fix to the LOST statute to decrease the amount of leverage that Fulton County in particular has over the budgeting process because I agree with a lot of the comments that were made tonight,” he said. “And it’s completely unacceptable that a government that is willing, basically, to give all this money away, gets to control such a sizable chunk of the city’s budgets, because the cities do rely so heavily on the LOST.”