City leaders balk at 'absolutely ridiculous' proposal to increase Chatham share of sales tax
Editor's note: This story was updated Nov. 23 with comments from the Savannah City Manager, Jay Melder
The Chatham Commission has again rejected a proposal to renew Chatham’s Local Option Sales Tax, instead asking for the county's share to increase to 31% of tax revenue, with a 2% escalation for the next nine years that would result in the county collecting nearly half of the revenue.
Savannah Mayor Van Johnson said Chatham Chairman Chester Ellis's "absolutely ridiculous" proposal presents an unequitable distribution of funds and will result in the "county's poorest neighborhoods" bearing the brunt of a tax increase over the next decade.
"They propose recklessness. It will cost our taxpayers a full $1 billion," Johnson said Wednesday morning. "The reality is this: the county is saying, 'We need the money.' Yet, they reduced the millage rate this year."
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The Chatham Commission on Tuesday rejected the latest proposal from the county’s eight municipalities for distribution of the tax revenue. The money is generated by a 1% levy on most goods and services purchased in Chatham and the distribution must be renegotiated and renewed every 10 years.
The rejected proposal would see Chatham County taking 23% of revenue, with the remaining 77% split amongst the eight cities: Savannah, Thunderbolt, Pooler, Tybee, Garden City, Port Wentworth, Vernonburg and Bloomingdale.
LOST Distrubution - Mayors Joint Letter of Support by Zoe Nicholson on Scribd
Johnson said the municipalities' proposal of a 77-23% county-city split conveyed a "united and unified" message from the eight city mayors.
If a renewal is not approved by the end of the year, the tax would expire. Renewing the Local Option Sales Tax after Jan. 1 would then require a voter referendum. The 1% generates approximately $1 billion for local governments over a decade, money that allows the cities and the county to offset expenses and property tax needs.
What is the cities' latest proposal?
The municipalities sent a plan to the commission on Nov. 17 called for renewal at the current distribution formula: a 77% cities-23% county split. The municipalities had previously proposed an 86%-14% divide.
The commission countered Tuesday with a proposal for a 70% cities-30% county split, albeit with the county’s share growing by 2% annually during the 10-year period. This would mean a 51% cities-49% county divide by the time the LOST is next negotiated in 2032.
“What your proposal fails to consider is the 23% county distribution, while somewhat manageable in 2010, is no longer feasible due to increase in costs of countywide mandated services,” wrote Chatham Chairman Chester Ellis is an official response to the municipalities’ proposal. “Your proposal will place the county in a position where it would have to raise taxes to meet the cost of these services.”
Ellis' request for increased funds comes five months after the commission voted to decrease the millage rate by more than one mill, which will lower property tax bills by approximately $1 for every $1,000 in taxable value. Ellis is expected to hold a press conference on Monday morning to offer comments about his latest proposal.
Savannah City Manager Jay Melder, who is co-leader for the municipalities during LOST negotiations, said the eight cities stand ready to settle the matter wit "reason and accountability" to approve the renewal by years' end.
"Our residents demand that we approach this negotiation with reason and that we are accountable to the purpose of LOST, which is to lower property taxes," Melder said.
How does each side justify its position?
Chatham County supplies 31 countywide services each year, including the courts system and parks and recreation.
The municipalities point to data to justify their call for a large share of LOST funds. According to the 2020 U.S. Census, approximately 69% of county residents live in the municipalities. Economic data shows incorporated areas are home to 78% of the jobs in the county and 86% of annual daily revenue traffic.
LOST negotiations began in July and were terse from the start. Chairman Ellis laid out the county’s initial proposal — a 50-50 split — and did so in a combative manner, according to several who attended the session. Officials met again in late July and remained far apart, prompting the negotiations to enter a mediation phase.
A mediation session was held in September in Richmond Hill. The written proposals submitted in the last week mark the first formal activity in the negotiations since. Municipal leaders are scheduled to meet via teleconference on Nov. 30 to discuss the county’s latest proposal and discuss next steps.
Should the two sides reach agreement on LOST distribution, the split would have to be approved by legislative governing bodies. The Chatham Commission has two scheduled meetings remaining — Dec. 2 and 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.
After voters rejected the latest special purpose local sales tax referendum for transportation projects (TSPLOST) on Election Day, Melder said the message from county constituents is clear: "One lesson we should learn from TSPLOST is that residents and voters are not interested in altering local tax policy right now. We should heed that message and maintain our current LOST allocation," Melder wrote in an email to the Savannah Morning News.
What happens if negotiations ultimately fail?
If LOST expires, residents can expect property taxes to go up.
City of Savannah officials project losing LOST would force a 75% bump in the millage from a little over 12 mills to 21 mills. For context, a property with a taxable value of $150,000 would see a tax bill increase of $600; a $300,000 property would call for an additional $1,200; a $500,000 property by $2,000.
Johnson said the residents living within city limits will bear the brunt for these increases.
"The absolute total and singular purpose of LOST is to stabilize property taxes for municipalities," Johnson said. "It has nothing to do with the unincorporated areas of Chatham County; they have to find another way to do that."
This article originally appeared on Savannah Morning News: Chatham County Savannah and municipalities negotiate LOST sales tax
