Cities' new strategy on LOST: Start at 23% share for county, increase incrementally to 31%

With less than a month left until the expiration of the Local Option Sales Tax agreement between Chatham County and the county's eight municipalities, negotiations on how to distribute millions in sales tax revenues resume Wednesday behind closed doors.

The ability to continue collecting the 1% levy on goods and services in the county -- projected to generate $1 billion in a 10-year cycle -- hinges on an agreement between the county government and its eight municipalities before the end of the year. 

Previous story:New LOST proposal: Mayors propose share range for cities, county in negotiations

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According to a Dec. 5 letter penned by Savannah Mayor Van Johnson addressed to Chatham County Commissioners, the two sides will meet for a closed-door mediation session at 11 a.m. at the offices of Oliver Maner LLP in Savannah to hash out the tax breakdown. 

The letter outlines the cities’ latest proposal to the county and offers two options: the county takes 26% of the funding, an immediate 3% increase from their current share, and the cities’ take 74%. Or, the county start with their current share (23%) with incremental increases to 31% throughout the 10-year funding cycle. 

“The Municipalities cannot agree to anything other than a gradual increase to 31%. The choice between these options is yours to make,” writes Johnson. 

More:City leaders balk at 'absolutely ridiculous' proposal to increase Chatham share of sales tax

What effect is the deadline having on negotiations?

LOST funding is used by local governments to pay for services and, therefore, offset property taxes. Around $100 million in annual funds are collected and split between the county and cities, based on a state-outlined funding formula that takes into consideration population, where the tax is generated, ability to pay off debts and more. To let the certificate expire without a mutual agreement would likely lead to exorbitant property tax hikes for property owners across the county.  

With 24 days left until deadline, the pressure to compromise has mounted. LOST negotiations reentered the spotlight in the last two weeks, with the county and cities exchanging proposals and counterproposals outlining their preferred tax shares. On Nov. 22, the county rejected the municipalities’ Nov. 17 proposal to keep the breakdown at its current status: 23% for the county and 77% for municipalities. Cities further distribute the funds amongst themselves, largely based on population. 

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Instead, Chatham Chairman Chester Ellis proposed a 31/69 divide with the county share growing 2% annually during the decade-long cycle, eventually resulting in a 49% share for the county, which was close to the 50/50 split initially suggested during public negotiation sessions in July. Ellis cited the growing cost of county-funded essential services such as the court system and emergency services for the increase in funding. 

Savannah's Mayor Johnson called the proposal “absolutely ridiculous,” pointing out that the “county’s poorest neighborhoods” will bear the brunt of a tax increase. He, along with other city officials, stated that increased funds for the county would come at a cost to the municipalities -- where about 70% of the county population lives. 

City officials lobbed another argument -- that economic data shows 78% of jobs and about 86% of annual daily revenue traffic take place in incorporated cities rather than the county’s unincorporated area. 

A week later, the mayors of eight municipalities sent a new proposal, stating that they would be willing to negotiate up to a 31%-69% divide, in order to avoid property takes hikes for incorporated city residents. 

During a Dec. 2 Chatham Commission meeting, commissioners voted to support a 31/69 divide. The current Dec. 5 letter is the latest formal response in the midst of negotiations. 

How long have officials been squabbling?

LOST has been the subject of a hairy round of negotiations between the county government and its eight municipalities that began in July. County and cities failed to come to an agreement after three meetings, which lead to closed-door mediation sessions in September. 

If the LOST certificate is not renewed, residents in some municipalities could see as much as a 200% increase in annual property taxes. Bloomingdale and Vernonburg, some of Chatham County’s smallest municipalities, would likely have to implement a property tax.

The Chatham Commission has one scheduled meeting remaining — Dec. 16 — prior to the renewal deadline. However, the county could schedule a special-called meeting to vote on the split provided the session meets public notice standards under the Georgia Open Meetings Act.

Nancy Guan is the general assignment reporter covering Chatham County municipalities. Reach her at nguan@gannett.com or on Twitter @nancyguann.