Chatham County walks away from latest offer in LOST negotiations

In a Tweet, Savannah Mayor Van Johnson stated that Chatham County has, once again, walked away from the cities' latest offer during a contentious round of Local Option Sales Tax (LOST) negotiations that began in July of this year.

Johnson Tweeted shortly after 1 p.m.: "Chatham County walks away from an offer that would net the County an additional $102 million in additional tax revenue. For #Savannah this is not a 'plot or a ploy.' This is real life - involving real dollars & real people. #WeAreAllLOST."

The latest mediation session between the county's eight municipal governments — Savannah, Pooler, Port Wentworth, Garden City, Bloomingdale, Thunderbolt, Tybee Island and Vernonburg — and the county government began at 11 a.m. this morning behind closed doors at the Oliver Maner LLP offices in Savannah.

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

More:Chatham sales tax negotiations stall. Why the breakdown poses a threat to property owners

About three hours later, the mediation ended with still no consensus on how to distribute around $1 billion in tax revenue generated by the 1% tax levy over the next 10 years. If the parties do not reach an agreement by year's end, the LOST certificate will expire and so will the ability to collect millions in annual funds that are used to offset property taxes for residents and business owners throughout the county.

To bring back the tax levy, a referendum will have to be voted on by residents.

The latest offer from the municipalities presented the county with 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 starts with its current share (23%) with incremental increases to 31% throughout the 10-year funding cycle.

The county rejected both offers.

"They want us to wait 10 years to get to 31% and that’s not workable," said Chester A. Ellis, chairman of the Chatham County Commission. "Everybody agrees to the 31. It's just how you get to the 31% — it needs to be there sooner rather than later."

The city of Savannah, which is the lead on negotiations for the municipalities, offered another compromise: that the county share starts at 26% and increases to 31% within five years. The proposal would have netted the county an additional $102 million over ten years compared to their current LOST breakdown (23%).

According to city leaders, Savannah also stipulated that Chatham County give an annual $300,000 stipend for Tybee Island's beach renourishment efforts, a costly project that protects the barrier island's shoreline.

"We’re supposed to be negotiating percentages, not beach renourishment," said Ellis, "They're not negotiating in good faith."

The county's push for a larger cut stems from growing costs to provide 31 essential services to all residents, according to Ellis. Over the last decade, costs to provide services such as the court system and emergency services increased by $54 million, according to the county's accounting.

“When you look at what it’s costing the county to provide those essential services … the prices keep going up,” said Ellis to the Savannah Morning News in a previous article.

Ellis said that the county, instead, proposed that its share start at 26% next year, increase to 28% in 2024 and increase again to 31% in 2025. Municipal leaders rejected the counterproposal.

Public negotiations on how much LOST funding each party deserves began in July of this year. Ellis had requested the county's LOST share increase to 50% (with the eight cities splitting the remaining 50% largely based on population). The proposal was a 27% increase from its current 23% share. According to 2021 numbers, the county received about $22.4 million from LOST funds.

The eight cities collectively received around $75 million in 2021. Some city officials have stated that LOST funding makes up a significant portion of the city's overall budget. For Pooler, the second largest city in the county after Savannah, LOST is the second-largest revenue source that funds basic services in the city, according to Mayor Rebecca Benton.

Municipalities refused the 50/50 offer, citing exorbitant property tax increases should the county suddenly hike its share to half of all LOST proceeds. The parties stalled at an impasse, leading to closed-door mediation sessions that ultimately did not result in an agreement in the fall.

In the last two weeks, news of continuing LOST negotiations re-emerged with the county and cities exchanging proposals and counterproposals, as pressure to reach a consensus mounts with only 23 days left in the year.

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.

Instead, 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.

Johnson countered 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.

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, and to prevent the LOST certificate from expiring without an agreement.

During a Dec. 2 Chatham Commission meeting, commissioners voted to support a 31/69 divide. However, on Dec. 5, Johnson responded with a letter stating that they would only support an incremental increase to 31% for the county, rather than an immediate change.

Wednesday's mediation session was prompted by the letter which offered the county the two options, which was rejected.

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

City officials are planning a press conference Thursday morning at 9 a.m. at Wright Square in downtown Savannah.

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

This article originally appeared on Savannah Morning News: Still no consensus on Chatham County's billion dollar LOST revenue