City and county officials ended a 40-year agreement and two years of litigation Monday night. A new 25-year agreement will take its place.
According to the new contract, 4 percent of the local option sales tax given to the county under the original contract will be returned to the city monthly from July 1, 2012 to June 30, 2013. Each year, beginning July 1, the amount returned increases by 4 percent.
The city will retain 100 percent of its local option sales tax at the end of the 25-year agreement in 2037.
Based on projections, the agreement will return roughly $80,000 to the city in the first year, $160,000 the second year, $240,000 the third year, etc. However, as sales tax revenue varies, so will the amount returned.
City officials voted 5-0 to approve the agreement, with Mayor Norman Rone, Vice Mayor Everett Brock and Aldermen Rick Barnes, Clair Cochran and Junior Medley voting in favor of it. Alderman Jimmy Haley abstained, and Alderman Billy Wood was absent due to an illness in the family.
The county voted 22-1 to pass the resolution to accept the agreement. Commissioner Clinton Hill made the sole dissenting vote. Commissioner Gary Prater was absent.
“I’m satisfied with the new agreement,” McMinnville Mayor Norman Rone said. “I don’t think either side is completely happy with it, which usually means it’s a good compromise for both sides.”
Commissioners were handed a copy of the lengthy legal agreement at their meeting Monday night. During the following discussion, Commissioner Wayne Copeland asked county attorneys Rick Stacy and Larry Stanley if they recommended the agreement.
“I understood we had a pretty good case,” Copeland said. “I haven’t had time to study this but is this what we need to do?
“Given all the scenarios we do recommend it,” said Stacy. “We feel like this is a reasonable way to transition out of these agreements. We feel like it gives us some control over the outcome, whereas if a judge decides it, there are a lot of possibilities.”
Stanley addressed the cost of continuing the litigation, which from both city and county combined is estimated around $600,000.
“It’s not anything the taxpayers need to live with, but we can’t help it,” said Stanley. “We’ve got to cut it off because it’s too much money.”
One abstention in the city was not a negative against the agreement. Haley says he was told by the city’s prior legal counsel, James Dempster, to always abstain from voting when situations arose between city and county governments.
“Dempster always said I should abstain,” Haley said. “As a teacher in the Warren County School System, I am a county employee. So, that’s why I abstained.”
Per the new agreement, each party will pay its own legal fees and each party will be responsible to pay 50 percent of any court costs.
Also, Warren County will no longer be required to use its portion of the city’s revenue for educational purposes, as was required under the original agreement. Under the new contract, other than obligations imposed under state law, the county is not subject to restrictions on its use of funds received, nor is it required to provide a "high standard of education" under this agreement.
Some city officials are leaning toward lowering property taxes for city residents as revenue makes its way back into city hands.
“For the last few years, we’ve had to increase property taxes on city residents because we did not have this money,” said Brock. “I’m completely in favor of beginning a process to lower them.”
Rone added, “I’m in favor of that.”
Along with the possibility of lowering property taxes, city administrator David Rutherford says he would like to see projects undertaken that would benefit city residents.
“There several projects we haven’t done because we just didn’t have the money in the budget for them,” Rutherford said. “We could use the money for streets, sidewalks, or renovation of the McMinnville Civic Center. The final decision on what projects will be done is up to the board.”
Even though both the city and county voted to approve the agreement Monday night, that doesn’t mean the litigation is over, according to Stacy.
“Until an order of dismissal is entered by the judge, it’s still pending litigation,” Stacy said, noting the paperwork will be sent to the judge promptly for his signature.
While the new agreement replaced the 1969 and 1985 agreements and ended current litigation, it doesn’t preclude another suit in the future if another Board of Mayor and Aldermen decides to legally challenge this agreement.
“You can’t prevent anybody from filing a lawsuit,” Stacy said at the county meeting. “Now, that doesn’t mean it won’t be kicked out quickly because it doesn’t have merit. We can’t prevent them from filing a lawsuit, but we feel like this agreement would survive any lawsuit.”
While the possibility of future litigation is there, Mayor Rone doubts that will ever happen.
“The city or the county could try and change this agreement in the future,” said Rone. “Speaking on behalf of the city, I think future boards will see this agreement as a good compromise for both sides and leave it alone. This board is satisfied and I have every confidence that future boards will feel the same.”
As Stacy said, the “official” agreement must be accepted by the judge assigned to hear the case, Judge J.B. Cox.
Calculations will be made monthly and using the following methodology:
• Each month, Tennessee Department of Revenue delivers a written notice to the county setting forth the Local Option Revenues collected within the city limits less administrative costs and identifies that amount in a column labeled Net Collections, or City Net Collections.
• Each month during the term of the contract, the City Net Collections as set forth in the TDOR notice will be multiplied by .227272 with the result being referred to as the Preliminary Amount Due the City.
• Each month during the term of the contract, the City Net Collections as set forth in the TDOR Notice will also be multiplied by .272728 with the result being referred to as the Initial Warren County Share.
• The Initial Warren County Share will be multiplied by the then applicable annual reduction percentage (4 percent, 8 percent, 12 percent, etc.) with the result being referred to as the Additional Amount Due the City.
• The Additional Amount Due the City will be added to the Preliminary Amount Due the City with the result being referred to as the Gross Amount Due the City.
• The Gross Amount Due the City will be reduced by 2 percent for the county handling fee with the result being referred to as the Net Amount Due the City.
• The county will deliver the Net Amount Due the City to the city on a monthly basis within five days of the county receipt of funds from TDOR.