If billion dollar sales tax is not renewed Chatham County would suffer 'colossal failure'

Correction: Total LOST proceeds are projected to generate a total of $1.4 billion, not $1.4 million, over ten years.

On Thursday morning, municipal leaders from all eight cities gathered in front of the Chatham County Court House to implore the county government to come back to the bargaining table and negotiate the distribution of the billion-dollar local option sales tax (LOST).

The press conference, which gathered a bevy of local civic and business leaders including the Tourism Leadership Council and Savannah Area Chamber of Commerce, comes after Wednesday morning's failed discussions on splitting $1.4 billion in LOST funds generated over a 10-year period. The 1% sales tax levied on most goods and services within the county is a major source of revenue for the county government and its eight individual municipal governments, and is used to offset property taxes.

More:Chatham County walks away from latest offer in LOST negotiations

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

The county government and the municipalities — which have worked as one unit led by the largest cities of Savannah and Pooler ― have exchanged proposals on their preferred tax breakdowns since July. With only 23 days left until the end of the year, the deadline to renew the 10-year tax certificate, a consensus between the two parties is growing more urgent.

Without an agreement, the county loses the ability to collect millions in annual funds, and property taxes will most likely skyrocket, according to local leaders. To bring back the tax levy, a referendum will have to be voted on by residents.

"We either raise revenue, cut services or raise property taxes ... These are real citiziens' lives that could be affected," said Savannah Mayor Van Johnson. "(If no agreement is reached), Chatham County would suffer the most colossal failure...we would have failed to protect our citizens."

Primer:Lost when it comes to LOST? What you need to know about the Local Option Sales Tax

If LOST lapses, 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.

For the last four decades that LOST has been collected in the county, the county government received an average of 19% of the total LOST funds, and the municipalities received about 81%. The eight cities split their share amongst themselves largely based on population. A state-mandated formula determines the overall split and takes into account the population, where the tax is generated, ability to pay off debts and more. The distribution is renegotiated once every decade.

Over the years, the population in this region of Southeast Georgia has increased; thus, so has the tax digest. However, costs for services that county and local governments provide have also risen. LOST proceeds, which are also funded by increased tourism anchored by Savannah and Tybee Island, have been crucial in paying for government functions on which residents rely.

More:Here's how property taxpayers could be affected with proposed sales tax distribution

At the beginning of negotiations in July, the county and municipalities proposed widely different breakdowns for the new LOST certificate. At that time, the county came to the table asking for a 50-50 split with the municipalities, while the municipalities requested an 84% share (the county would receive 14%).

"In the very beginning, the cities offered a ridiculously low amount and the county offered a ridiculously high amount," said District 7 County Commissioner Dean Kicklighter.

Though Kicklighter is not part of the county negotiating team, he proposed that the local governments settle the matter through binding arbitration to prevent LOST from lapsing.

More:Chatham County and its cities have yet to agree on LOST. What's next for LOST negotiations?

The round of public negotiations in the summer ended at an impasse, with neither side budging more than a few percent. Closed-door mediation sessions this fall have brought the two parties closer to a consensus, but stalled again after Wednesday's failed mediation.

According to city officials, Chatham County Commission Chairman Chester Ellis "walked out" of a proposed deal "due to a $16 million difference."

The City of Savannah proposed that Chatham County begin with a share of 24% and increase incrementally to 31% by the fifth year. According to the city's accounting, that would have netted the county an additional $102 million over the 10-year cycle, which could be used to pay for the new courthouse, expand jail services and improve the 911 service.

The deal, which increases the County share, meanwhile would have resulted in an overall loss for municipalities. The numbers, according to the City of Savannah, are as follows:

Loss over a 10-year period if Chatham County begins with 24% and increases to 31% by 2028:

• Savannah: -$76 million

• Pooler: -$13.2 million

• Port Wentworth: -$5.6 million

• Garden City: -$5.3 million

• Bloomingdale: -1.4 million

• Thunderbolt: -$1.3 million

• Vernonburg: -$71,698

However, the county insisted that their share needs to reach 31% sooner. Ellis said he proposed starting at 26% and increasing to 31% by 2025. The county's main argument for pushing for a larger share is an increase in costs to provide countywide services. Over the last decade, Ellis said essential services such as the court system and emergency services have increased by $54 million annually.

"The County is required to provide legally mandated services to all Chatham County residents at a cost of $163 million a year. The offers from the municipalities did not come close to covering those costs," wrote Ellis in a Dec. 8 press release.

Ellis also cited another roadblock: the city added a condition that Chatham County provide Tybee Island an additional $300,000 per year for beach renourishment to cover the local funding match for the project.

"Since neither party could agree on the offers as presented, the County delegation felt no further progress could be made today and left the mediation," said Ellis.

Nancy Guan is the general assignment reporter for Savannah Morning News. You can reach her at NGuan@gannett.com.

The difference between the cities' proposal and the county's counterproposal was around $16 million, about 1% of the total $1.4 billion LOST pot, said city officials.

"They (the county) not only walked away from the municipalities, but they walked away from the taxpayers," said Michael Owens, President and CEO of the Tourism Leadership Council.

Savannah Mayor Van Johnson added that most of the business, traffic and, therefore, revenue is generated within municipalities: 82% of the daytime population comes from these municipalities, 94% of convention trade shows, 74% of jobs, 84% of service delivery responsibilities and 80% of sales tax generation occurs in the eight cities.

"The pressure is on the municipalities and that is where most of us work and most of us live," added Bill Hubbard, President and CEO of the Savannah Chamber of Commerce.

Kicklighter, while not present at the city-organized press conference, had more barbs to trade, calling the event a "publicity stunt" and "sh*tshow".

"I believe that the city of Savannah and mayor are masters of manipulating the media and, in my opinion, that was a stunt this morning," Kicklighter told the Savannah Morning News.

Kicklighter had previously published a letter online that has since been made private, calling for binding arbitration as a "safety net". That mechanism would require local governments to sign a resolution allowing for a mediator to issue the compromise if the county and cities cannot come to an agreement by the end of the year.

"This is not the ideal solution but it would certainly be better for an unbiased third party to force the split of the sales tax revenues between the local governments than the alternative, which would ... force tax-paying citizens to fund fixing the financial disaster," wrote Kicklighter.

"In my opinion, there is still room for compromise," said Kicklighter.

This article originally appeared on Savannah Morning News: Municipalities call for Chatham County to renegotiate LOST funding