Fulton County and Its Cities Scramble to Protect Millions in Sales Tax Revenue

In a special-called Atlanta City Council meeting Wednesday night, Mayor Kasim Reed requested express authority to decide whether Atlanta should sign a new sharing plan.

“If we don’t sign, we don’t know what’s going to happen because we’re in uncharted waters. Nobody has been here before,” said Reed.

He didn’t indicate whether he’d support ongoing efforts to renew a plan approved last month by 13 of 15 Fulton jurisdictions but rejected by Atlanta and College Park. That plan’s distribution formula relies heavily on official population size, which Reed says ignores Atlanta’s commuter population and shortchanges the city by millions per year.  

Reed warned council members the state attorney general was recommending unanimous agreement, or “the entire county and its cities could be out of luck.”

But he added if a unanimous agreement couldn’t be reached and Fulton were to lose the ability to collect the tax, Atlanta was “well-positioned from a cash standpoint to withstand that.”

Atlanta’s current share of the tax revenue is about $102 million per year – equal to around a fifth of its total annual operating budget. Under the new arrangement, the city’s share would drop to about $96 million per year.

After breaking away for a lengthy executive session with the mayor, council members unanimously granted the signing authority to Reed.

Meanwhile, local officials outside of Fulton are grappling with Thursday’s deadline, as well. At least sixteen other counties are going through a similar process, according to the Georgia Municipal Association.

Local options sales tax, or LOST, revenues are collected in 134 of the state’s 159 counties. Every ten years, those counties and the cities within them must agree how the money is divvied up.

Under a 2010 state law, local governments unhappy about their LOST share could trigger an appeals process that included a special type of arbitration. If it failed, a Superior Court judge was required to step in and decide how to distribute the funds.

Last Monday, in a decision that took many state and local officials off-guard, the Georgia Supreme Court struck down the 2010 law, ruling local tax authority rested solely with legislators, not judges.

As a result, all prior LOST agreements were deemed potentially invalid because they were reached with the expectation of an appeals process that no longer existed.

Atlanta is a jurisdiction that intended to use the 2010 law to appeal Fulton’s LOST agreement and attempt to gain more favorable terms. According to Mayor Reed, the city was preparing for an appeals hearing in November.

Now, Atlanta is racing to explore its options before Thursday – the final day the Supreme Court ruling can be challenged before going into effect. 

Whatever Atlanta decides, Fulton lead negotiator Emil Runge insisted the county would have an updated agreement by the 4:30 p.m. deadline.

He said despite the state recommending a unanimous agreement, the county is operating under a legal standard that requires only a simple majority of the county population. The current proposal, based on last month’s LOST agreement, has buy-in from Fulton County and 12 of its 14 cities – translating to 51 percent of Fulton’s population.