Local government officials are negotiating a local option sales tax, which produces funds Chatham County and municipalities use to lower property taxes.
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Chatham County government leaders and those of the eight municipalities within Chatham are negotiating shares of the local option sales tax, also known as LOST. The tax is a 1% levy paid on most goods and services purchased within the county.
LOST is commonly referred to as the “fifth penny” in the seven cents charged on every dollar spent. LOST proceeds are the only sales tax revenue that goes directly to municipalities for general use. Of the other six cents in the tax, four go to the state, one to the county to be spent on designated capital improvement projects (SPLOST) and one to the Savannah-Chatham Public School System for upgrades (ESPLOST).
Here’s what you need to know about LOST and the negotiations.
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What about the timing? Why now?
The LOST agreement is valid for 10 years and expires at the end of the year following the release of the decennial U.S. Census – December 31, 2022, in this case. The expiration date is meant to force local governments to adjust shares of the proceeds based on population changes as reflected in the Census.
How much money are they negotiating over?
The 2023-2032 LOST is projected to generate almost $1 billion over the next 10 years. The stakeholders are working to agree on a percentage split between Chatham government and the municipal government. At this stage, negotiators are focused on the county share and the combined share for the municipalities. Once that agreement is reached, the municipalities work together to divide up their portion.
Under the current LOST, Chatham County received 23% of LOST revenues while the municipalities split 77%. The City of Savannah is the largest municipal recipient at 57%, followed by Pooler at 8.8%.
What are the parameters for dividing the money?
Georgia law lists eight criteria as guidance for determining shares of LOST, with a heavy focus on which government entities are responsible for delivering services. By law, Chatham County has sole responsibility for delivering 31 different services, such as the county jail and most of the county judicial system.
Other criteria include the point of sale that generates LOST proceeds, the effect of LOST funds on government debt and any existing intergovernmental agreements.
What is the impact of LOST on taxpayers?
LOST is a sales tax on goods and services purchased in Chatham County, which means it is paid by residents and visitors alike. As the center of a metro area and a popular tourism destination, a significant amount of LOST pennies come from consumers who live outside the county. Accounting pros say as much as 40% of LOST funds are paid by out-of-county residents.
Because LOST funds can be used at the discretion of the county and municipal governments, the proceeds allow for lower property taxes. Savannah’s current share brings in approximately $55 million annually for a budget that’s close to $480 million. Chatham’s smaller municipalities rely more heavily on LOST — for example, Bloomingdale and Vernonburg do not levy city property taxes on their residents, financing all their government operations via LOST and other revenue sources.
What’s happening now? What happens next?
Stakeholders met for the third negotiating session on Tuesday, with Chatham County Commission Chairman Chester Ellis presenting one proposal and the municipalities, represented by Savannah City Manager Jay Melder and Pooler City Manager Robert Byrd, offering a counterproposal. The two parties remain far apart, with the county asking for a 50% share and the municipalities proposing the county receive just 14%.
No future negotiating sessions are scheduled. Tuesday’s meeting closed with Ellis telling the municipal reps the county would be in touch about entering mediation.
By law, negotiations are to conclude within 60 days of July 1, or Aug. 30. If no agreement is reached, the stakeholders enter a mediation or arbitration phase, which is also limited to 60 days. Agreements reached in mediation or arbitration are non-binding. If an agreement is not signed by all parties by Dec. 30, 2022, the LOST expires and collections would cease on Jan. 1, 2023.
What happens if no agreement is reached and LOST expires?
Property taxes will go up. City of Savannah officials project losing LOST would force a 75% bump in the millage from a little over 12 mills to 21 mills. For context, a property with a taxable value of $150,000 would see a tax bill increase of $600; a $300,000 property would call for an additional $1,200; a $500,000 property by $2,000.
Chatham property taxes would climb as well, by approximately 1.5 mills, meaning taxpayers would see two increases. Using the same valuations as above, the county maintenance and operations tax on a $150,000 property would rise by $90; a $300,000 property by $180; and a $500,000 property by $300.
Can’t a third party, like a judge, decide the split to avoid expiration?
Not anymore. The last time LOST was negotiated, the sides failed to reach agreement and took the matter to Superior Court. A judge heard arguments from both sides and was set to rule but the county and municipalities reached an 11th hour compromise.
A U.S. Supreme Court ruling made in the decade since the last LOST agreement stipulates that judicial action meant to settle legislative disputes is not binding, in essence ending the practice of “baseball arbitration” by the courts in tax matters between government entities.
What else do you need to know?
Chatham County has not issued public notice regarding the negotiating sessions and Tuesday’s meeting was the first attended by residents not employed by Chatham or municipal governments. Three journalists representing two media outlets learned of the meeting through sources and showed up at the Savannah Civic Center ballroom to attend the meeting.
Session invites included instructions about the number of elected officials on the negotiating teams. If half or more of any municipality’s legislative body – a quorum -planned to attend the gatherings, a representative of that city was to notify the county and other municipalities so that all could issue notice to the public of the meeting, in compliance with the Georgia Open Meetings Act.
This led stakeholders to limit their negotiating teams so that the session falls outside the notice provisions in the Georgia Open Meetings Act, which states that a meeting is “The gathering of a quorum of the members of the governing body of an agency at which any official business, policy, or public matter of the agency is formulated, presented, discussed, or voted upon.”
The law further states that the following does not constitute a meeting: “The gathering of a quorum of the members of a governing body or committee for the purpose of attending state-wide, multijurisdictional, or regional meetings to participate in seminars or courses of training on matters related to the purpose of the agency or to receive or discuss information on matters related to the purpose of the agency at which no official action is to be taken by the members.”
Based on this interpretation of the definitions of quorum and meeting, more than two dozen officials from Chatham’s nine governmental jurisdictions — elected and unelected — can gather to negotiate outside the public eye, so long as no official action is taken.