Valdosta Daily Times

Local News

October 13, 2013

LOST faces uncertain future following ruling

VALDOSTA — An estimated 21 counties and the cities located within are facing an uncertain future in light of the Georgia Supreme Court’s ruling on Oct. 7, 2013 declaring the unconstitutionality of an amendment to the Local Option Sales Tax (LOST) Act in 2010. The amendment allowed Superior Court judges to decide the division of the one cent sales tax proceeds between cities and counties who could not decide on their own.

The recent decision marks the fourth time the constitutionality of all or part of the Local Option Sales Tax Act has come before the state Supreme Court. In 1978, the Court declared the entire act to be unconstitutional, leading to a new version passed by the General Assembly in 1979.

Whether or not the state’s legislators will again step into the legal and political fallout from the Court’s decision in the upcoming 2014 session remains to be seen. In the meantime, the potential ramifications from the ruling are in the hands of the state’s Attorney General’s office. State tax laws are administered by the state’s Revenue Department, a client of the AG’s office as are all state departments.

Warren Calvert, senior assistant attorney general, has been tasked with interpreting how the Court’s ruling will affect the local governments caught in legal limbo. His office will provide advice and guidance to the Department of Revenue, which will in turn enforce the LOST Act accordingly.

“There are a lot of issues and parties involved. It’s a complicated matter,” said Calvert. “This isn’t the first time this office has been involved in the constitutionality of the LOST Act, and we were very involved in 1979 when the entire Act was declared unconstitutional.”

Calvert said there are more questions than answers at this point, including whether or not the Court’s ruling will affect current LOST collections.

“It’s not yet known to what extent the ruling may affect the Act retroactively,” he said, adding that he couldn’t comment on details regarding the issue, including the amount of time it may take for the AG’s office to complete its review.

For Lowndes County and the five municipalities, LOST revenues are an essential component of their operating and general funds. There are no restrictions on how LOST collections are used, while SPLOST collections have to be specifically designated for capital projects.

Under the current division of funds between the entities, Lowndes receives around $12 million per year, Valdosta $8 million, Hahira $300,000, Dasher $160,000, Lake Park $105,000 and Remerton $160,000.

After the governments could not reach an agreement on the future division of the one cent sales tax proceeds, the cities filed a lawsuit against the county in Sept. 2012 under the amendment which allowed for a Superior Court judge to make the decision.

 With that avenue now closed, and with no agreement filed before the Dec. 30, 2012 deadline with the state, the collections that have been ongoing since Jan. 1, 2013 in anticipation of the judge’s ruling may have to stop. If collections cease, according to the original Act, the matter must be presented again to the voters on a referendum, and all governments involved will be without those funds for an extended period.

LOST is tied directly to the collection of property taxes, with each government required to roll back property taxes annually based on prior year collections. No LOST dollars would mean no rollback and property taxes would increase accordingly.

Or the AG’s review may lead to an understanding of the Court’s ruling that would allow for the LOST collections in the affected counties to continue pending arbitration, with any number of scenarios possible between the two extremes.

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