Monday, March 22, 2010

Ga Supreme Court decides DeKalb County V. Perdue in favor of Dunwoody, GA

This appeal stems from a lawsuit by DeKalb County against Gov. Sonny Perdue and the state Revenue Commissioner, challenging as unconstitutional the 2007 amendment to the Homestead Option and Sales Use Tax Act (HOST). The suit was sparked by the incorporation of the City of Dunwoody.

FACTS: Under Official Code of Georgia § 48-8-10, the state legislature established the 1 percent HOST and created 159 special tax districts whose boundaries are the same as Georgia’s 159 counties. Under the law, the tax could not be levied without a local referendum. DeKalb voters approved the 1 percent tax in 1997, with the revenues to go toward “funding capital outlay projects and…replac[ing] revenue lost to an additional homestead exemption of up to 100 percent.” Voters also approved legislation providing for the additional HOST-funded homestead exemption. In response to opposition by DeKalb’s cities, the County entered into a 49-year agreement to make annual disbursements to the cities from the HOST revenues, although a dispute later arose over how those payments were calculated, resulting in ongoing litigation. In 2007, the legislature amended the HOST Act, providing that the state Revenue Commissioner would distribute HOST proceeds both to the county and to any “qualified municipality,” which the statute defines as “a municipality created on or after January 1, 2007...” At the time, only DeKalb and Rockdale counties levied a HOST, and neither contained a “qualified municipality.” The two are still the only counties with a HOST. In 2008, the legislature approved the incorporation of the City of Dunwoody which fit the definition of a “qualified municipality” and is due shortly to begin receiving HOST money that would otherwise go to the County. In 2008, the County sued the State, Gov. Sonny Perdue and the Revenue Commissioner in Fulton County, claiming the amended Act was unconstitutional and could not take effect in DeKalb without a voter referendum. The trial court ruled against the County and it now appeals.

ARGUMENTS: The County’s attorneys argue the trial court made at least six errors, including findings it based on testimony by DeKalb’s Director of Finance. The court determined the amended law would not result in any revenue loss to the County, other than what it would have to pay Dunwoody and the other cities. The court also found there would be no increase in the ad valorem tax millage rate the County levies in unincorporated DeKalb. But those findings are wrong, the attorneys contend. Under the amended statute, the County would have to pay Dunwoody $2.9 million in 2009, and if the agreements with the other cities are invalidated as they are requesting, the County could pay as much as $5.3 million. Taxes in unincorporated DeKalb would be raised by $500,000, violating the state constitution’s requirement that “all taxation shall be uniform.” The trial court also erred by ruling that a change to the HOST distributions could be done without a voters’ referendum. Voters must approve any changes to the HOST statute, just as they had to approve the statute itself. Lawyers for the governor and revenue commissioner argue that the trial court’s findings were not erroneous and besides, the County has abandoned these arguments on appeal. There is nothing in state law or the constitution that requires a referendum before the legislature can make changes to the HOST Act. The HOST is a special district tax, not a county tax. Like the County, the City of Dunwoody will act as an agent for the special tax district in expending a portion of the revenues for capital outlay projects that benefit the special tax district. The amended Act does not create non-uniform tax classifications, the attorneys contend.

Attorney for the Appellant (County): Roy Barnes
Attorneys for the Appellees (Perdue): Thurbert Baker, Attorney General, R.O. Lerer, Dep. A.G., Warren Calvert, Sr. Asst. A.G.

Judgment affirmed. All the Justices concur.


John Heneghan said...

AJC on Host
Court ruling gives cities hope in tax fund fight with DeKalb - AJC

Decatur Metro on Host
What Does the Dunwoody HOST Ruling Mean For DeKalb’s Other Cities?

Statement of DeKalb CEO, Burrell Ellis regarding the Host ruling.

In 1997, the voters of DeKalb County approved by referendum the levy of a 1% Homestead Option Sales Tax (HOST) to be used for a residential property tax credit to homeowners and to fund capital outlay projects. In May 2007, the General Assembly passed legislation modifying that referendum by allocating a portion of the sales tax revenue directly to the new City of Dunwoody.

In July 2008, the county filed suit challenging the State of Georgia's authority to modify the county-wide referendum without approval of DeKalb County voters. Yesterday, the Georgia Supreme Court upheld a ruling in favor of the state.

"We respectfully accept the decision of the Georgia Supreme Court. We are one county and must work in the best interest of our cities and communities in order to constructively meet the needs of all DeKalb citizens," said CEO Burrell Ellis.

In 2009, the county received approximately $ 87.5 million in HOST tax revenue. The impact of this ruling will be that the City of Dunwoody will receive directly from the State approximately $3 million annually of the HOST capital outlay funds.

John Heneghan said...

Crier on Host

DeKalb loses lawsuit over Dunwoody HOST funds

The Georgia Supreme Court ruled unanimously Monday that a house bill allowing Dunwoody to incorporate, containing an amendment to the Homestead Option Sales Tax Act, is not illegal or unconstitutional, and therefore the city deserves its fair share of HOST proceeds.

That could mean up to $600,000 for its coffers, according to estimates from several different sources. ...

In another development that could mean good news for Dunwoody, DeKalb Superior Court Judge Mark Anthony Scott listened to three hours of arguments from both sides in the 10-year old case brought by four cities against DeKalb County regarding distribution of HOST funds.

Decatur, Chamblee, Stone Mountain and Doraville claim DeKalb County has breached an Intergovernmental Agreement the county made in 1998 with the county’s nine cities. The four cities involved in the lawsuit claim the county owes them about $10.1 million from Homestead Option Sales Tax revenue for 1999 through 2008 under the 49-year agreement.

Scott, who did not rule on the case Monday, asked both parties to write “proposed orders,” which lays out the steps that each side thinks should be taken if the ruling goes its way. The proposed orders must be submitted within 10 days. ...

Whichever way Judge Scott rules, his next order on the constitutional issue is expected to be appealed directly to the Georgia Supreme Court, which has already reviewed the case twice