Hamilton Co Schools to sue City of Chattanooga for back taxes - WRCBtv.com | Chattanooga News, Weather & Sports

Hamilton Co Schools to sue City of Chattanooga for back taxes

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CHATTANOOGA, TN (WRCB) -

The Hamilton County Board of Education has voted to sue the City of Chattanooga for millions of dollars in back taxes collected from liquor sales. The Tennessee Attorney General recently told school officials that it is within their rights under state law to collect the money.

There's confusion in many counties in Tennessee when it comes to liquor-by-the-drink tax and how it's distributed among local governments and school districts. Hamilton and Bradley counties are dealing with it now as school officials push for back taxes they say they're owed.

The Hamilton County Board of Education voted to file suit against the City of Chattanooga for more than $11 million in unpaid liquor-by-the-drink taxes.

State law requires local governments without their own school system to give half of that tax money for education.

When Chattanooga schools merged with Hamilton County in 1998, they didn't start paying that half to the schools for several years. Now with the supporting opinion of the state attorney general, Hamilton County Schools wants to collect those back taxes.

"If they want to meet to discuss in a meeting room rather than a court room we stand ready to meet with them," Chattanooga City Attorney Wade Hinton said.

Superintendent Rick Smith says he's been trying to work out a resolution with the city for awhile now, possibly setting up a payment plan, but says communication has tapered off and that's why the school board wants to seek legal action.

City officials argue it's Smith that's eluding them. Mayor Berke's chief of staff responded to Smith by letter earlier this month to discuss setting up a meeting. But Smith says he wants a one-on-one meeting with the mayor and that's not been made possible.

"I would simply like to have an opportunity to sit down with the mayor to discuss this. He knows. I sent him a personal letter. I didn't copy anybody. I sent it to Mayor Berke," Superintendent Smith said.

The Hamilton County Schools attorney is getting paperwork together to file suit within the next few days. Hinton says one big issue needs to be addressed is whether the city will get credit for tens of millions of dollars in "voluntary taxes" the previous administration paid to Hamilton County Schools.

Liquor-by-the-drink back taxes also caused confusion in Bradley County. The schools' attorney is still working to resolve the issue with Cleveland, but the county agreed this week to pay the back taxes owed to the county and city schools.

"I really think it's been an inadvertent oversight. It's not the first time we've seen these things happened over the years," Attorney James Logan said.

There is proposed legislation that would change the law on where and how liquor tax is distributed and how back taxes are handled. We'll continue to follow any developments.

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