Unofficial Opinion 2012-1

As the City of Roswell’s attorney, you have asked for this office’s opinion about how to calculate the minimum share of local option sales and use tax ("LOST") proceeds to which an absent qualified municipality is entitled under O.C.G.A. §　48-8-89. Your question has been prompted by upcoming, statutorily-mandated negotiations between Fulton County and its qualified municipalities regarding those distributions. See O.C.G.A. §　48-8-89(d)(1) ("A certificate providing for the distribution of [LOST monies] shall expire on December 31 of the second year following the year in which [a] decennial census is conducted. No later than December 30 of [such] second year . . . , a new distribution certificate meeting the requirements for certificates specified by subsection (b) of this Code section shall be filed with . . . the [Revenue] commissioner.") For the reasons discussed below, it is my unofficial opinion that an absent municipality cannot be forced under O.C.G.A. §　48-8-89 to accept a smaller percentage of the LOST proceeds distributed to all the qualified municipalities in the county than the percentage that the absent municipality’s population is of the total population of all such qualified municipalities, regardless of whether that distribution is pursuant to a negotiated certificate or is based instead on an order by a superior court judge when the necessary parties are unable to agree.

The State Revenue Commissioner administers and collects LOSTs, which are levied pursuant to Article 2 of Chapter 8 of Title 48, for the use and benefit of the county and each qualified municipality located wholly or partially therein. O.C.G.A. §　48-8-87. See generally O.C.G.A. §　48-8-80 (defining "qualified municipality"). "One percent of the amount collected [by the Commissioner is] paid into the general fund of the state treasury in order to defray the costs of administration," O.C.G.A. §　48-8-89(a)(1), and "the remaining proceeds . . . [are] distributed to . . . each qualified municipality . . . and . . . the county[.]" O.C.G.A. §　48-8-89(a)(2). The Commissioner makes those distributions "in accordance with a certificate . . . executed [on] behalf of each [affected city and county] . . . and which . . . specif[ies] by percentage that portion of the remaining proceeds . . . each such political subdivision shall receive." O.C.G.A. §　48-8-89(b). However, not every qualified municipality has to agree to a LOST distribution certificate in order for that certificate to be effective.

[I]f the combined total of the populations of all such absent municipalities is less than one-half of the aggregate population of all qualified municipalities . . . , the submitting political subdivisions shall, [on] behalf of the absent municipalities, specify a percentage of that portion of the remaining proceeds which each such municipality shall receive, which percentage shall not be less than that proportion which each absent municipality’s population bears to the total population of all qualified municipalities . . . multiplied by that portion of the remaining proceeds which are received by all qualified municipalities[.]"

O.C.G.A. §　48-8-89(b). See generally City of Winder v. Collins, 259 Ga. 570, 571 (1989) ("[T]he act . . . protects the majority from a possible minority holdout . . . . The act also protects the qualified minority municipalities by guaranteeing them a proportional share of the proceeds of the local taxes which their citizens approved and will be forced to pay even if the minority municipalities cannot reach an agreement with the majority.")

As previously noted, a LOST distribution certificate must be renegotiated by a county and its qualified municipalities following a decennial census. "The eligible political subdivisions shall commence [those] renegotiations at the call of the county governing authority before July 1 of the second year following the year in which the census is conducted." O.C.G.A. §　48-8-89(d)(2). See also id. ("If the county governing authority does not issue the call by that date, any eligible municipality may[.]"). If the respective governing authorities are unable to reach an agreement within 60 days after renegotiations begin, the parties must "submit the dispute to nonbinding arbitration, mediation, or . . . other means of resolving conflicts." O.C.G.A. §　48-8-89(d)(3). Should those efforts not produce an agreement within another 60 days, any party "may file a petition in superior court of the county seeking resolution of the items remaining in dispute." O.C.G.A. §　48-8-89(d)(4)(A). Once in superior court, "the county and qualified municipalities representing at least one-half of the aggregate municipal population of all qualified municipalities . . . shall separately submit to the judge . . . a written best and final offer specifying the distribution of the tax proceeds." O.C.G.A. §　48-8-89(d)(4)(B).1Each such offer "shall take into account the allocation required for any absent municipalities in accordance with subsection (b) of [Code Section 48-8-89]." O.C.G.A. §　48-8-89(d)(4)(D). The judge is required to "adopt the best and final offer of one of the parties," enter a final order containing the new distribution certificate, and transmit a copy of it to the Revenue Commissioner. Id.

Under the statutes cited above, an absent municipality cannot be forced under O.C.G.A. § 48-8-89 to accept a smaller percentage of the LOST proceeds distributed to all the qualified municipalities in the county than the percentage that the absent municipality’s population is of the total population of all such qualified municipalities, regardless of whether that distribution is pursuant to a negotiated certificate or is based instead on an order by a superior court judge when the necessary parties are unable to agree. See generally City of Atlanta v. Collins, 262 Ga. 261, 263-64 (1992) ("[O]nly the portion of a city’s population that resides within the special tax district is included when calculating a municipality’s pro rata share of the local option sales tax proceeds in that district.")

To illustrate how O.C.G.A. §　48-8-89 works in practice, consider the following example, where City A, Absent City B, and Absent City C are all the municipalities in the county in which a LOST is imposed and each is a "qualified municipality":

Because the population of City A is more than 50% of the population of all the qualified municipalities in the county, City A and the county are allowed by O.C.G.A. §　48-8-89 to execute a certificate for distributing LOST proceeds on behalf of all the affected jurisdictions. Assume City A and the county are proposing that the county receive 35% of the proceeds remaining after the Revenue Commissioner subtracts his portion. In that case all the qualified municipalities would share 65% of those remaining LOST proceeds. Absent City B’s population is 18.75% (i.e., 15% ÷ 80%) of the population of all the qualified municipalities, so that city’s percentage of the remaining LOST proceeds cannot be less than 12.1875% (i.e., 18.75% x 65%). Similarly, Absent City C’s percentage of the remaining LOST proceeds must be at least 18.6875% (i.e., [23% ÷ 80%] x 65%). That would leave City A with 34.125% of the remaining LOST proceeds (i.e., 100% - 35% - 12.1875% - 18.6875%, which also equals [42% ÷ 80%] x 65%).

To put dollar amounts with this example, assume that in a particular year there will be $100 million in LOST proceeds remaining after the Revenue Commissioner’s share is taken out.　 If the distribution certificate uses the percentages set out above, Absent City B’s share of the $100 million would be 12.1875%, or $12,187,500. (Looked at differently, Absent City B would be entitled to 18.75% of the $65 million that all the qualified municipalities would share, which also equals $12,187,500.) For their part, City A and Absent City C would receive $34,125,000 and $18,687,500, respectively, and the county would get the rest (i.e., $35 million).

Therefore, it is my unofficial opinion that an absent municipality cannot be forced under O.C.G.A. §　48-8-89 to accept a smaller percentage of the local option sales and use tax proceeds distributed to all qualified municipalities in the county than the percentage the absent municipality’s population is of the total population of all such qualified municipalities.　

Prepared by:　

Warren R. Calvert

Senior Assistant Attorney General