By Michael Prochaska
Staff Writer

A six-hour mediation Tuesday between Morgan County and the City of Madison on the allocation of Local Option Sales Tax (LOST) revenue resulted in a failure for either governing body to compromise.

Currently, Morgan County receives 73 percent of the one percent sales tax, while the City of Madison receives 22 percent. The City of Rutledge receives a 4 percent share and the Town of Buckhead and Bostwick make up the remaining 1 percent.
According to the Georgia Municipal Association, LOST distribution is based on eight criteria, which includes population served, point-of-sale, intergovernmental agreements and service delivery, among others.

Morgan County Proposal
LOST allocations are subject to change every 10 years based on updated Census data. By law, the county is required to initiate the renegotiation process.
Morgan County has requested to receive 77 percent of the LOST shares, a 5 percent increase, which would bring the City of Madison below 20 percent.

City of Madison Proposal
The City of Madison countered with a proposal of a 51.1 percent share to be earmarked for Madison and other cities or town municipalities. That, in turn, would leave Morgan County with 48.9 percent of the proceeds.
That number was formulated by Michael Brown, a hired consultant of Brown Pelican Consulting, who said that the city meets most of the categories of criteria in assessing the need for a larger share.
Mediation

An initial 60-day deadline for negotiation between the two governing bodies ended last month, resulting in the need for a professional mediation service to assist in negotiating a compromise.
The Carl Vinson Institute of Government out of the University of Georgia agreed to meet with representatives from the county and city Tuesday at the Madison-Morgan Chamber of Commerce.
The role of the mediators, however, was not to influence the negotiation process but to act as neutral middlemen, assisting in the communication between the two governing bodies.
“Your goal is not to persuade us,” said Raytheon M. Rawls of UGA’s Fanning Institute, which worked in partnership with the Carl Vinson Institute. “Your goal is to persuade each other.”
Representing Morgan County was County Commissioner Ellen Warren, County Manager Michael Lamar and County Attorney Christian Henry.

Representing the City of Madison was Madison Mayor Bruce Gilbert, City Councilman Michael Naples and Brown, the hired consultant.
Arguments from Morgan County
“In trying to devise what would be a reasonable percentage of LOST distribution, we looked at multiple formulas based on criteria set forth in the law,” Henry said. “As you know the eight criteria in the law do not at all in any set forth a formula.”
Henry argued that one of the purposes of LOST and other nuances of sales tax, like ones dedicated to education (ELOST) or transportation projects (TSPLOST) is to offset property tax rates.
“It seems that looking at the tax digest would be one of the main indicators to see what is a fair rollback,” Henry said.
About 75 percent of the total tax digest belongs to Morgan County, Henry said, while 22 percent of the tax digest belongs to Madison.
The second part of Henry’s argument was that Madison generates more than 51 percent revenue from other sources outside property taxes, in comparison to the county’s 31 percent. These sources include utilities such water, sewer and gas funds.
“[Madison] has an ability to raise other funds to offset property taxes,” he said. “Unfortunately, the county does not have those kind of services.”

Furthermore, he said, Morgan County has seen a larger population increase than the city of Madison, with the unincorporated parts of the county exceeding double the growth of Madison, which received a population increase of 9.4 percent between the 2000 and 2010 Census.
The county formulated a low and high end of what it should receive in LOST shares. The range is between 74.61 and 81.71, Henry said.
 
Arguments from Madison
 “The city of Madison serves everybody in the county,” Brown said.
Brown stated that the county did not take into account the day time population, which includes people who are employed in the city but are not necessarily residents of the city.
Considering employees of businesses within the city, the total growth is larger than what the county had projected, he said.
Furthermore, Brown said, Madison is the retail and business hub of the county.
Brown said that conventions and trade shows are most common in hotels and motels, and that Madison draws in about 94 percent of the hotel/motel taxes.
About 75 percent of food services are in Madison, as well as 88 percent of commercial tax digest and 51 percent of manufacturing, he said.
Almost all public employment is also in the city of Madison, Brown said.
 
Agree to Disagree
LOST revenue projection totals about $780,000 for the City of Madison in the current fiscal year, which began July 1, according to reports.
Revenue for 2010 LOST for Morgan County was $3.42 million, according to budget reports. Lamar said he expects about $3.7 million this fiscal year.
A 1 percent change in lost is equal to about $37,000 based on this year’s projections, said Lamar, who added that the county offered to negotiate a 75/25 percent deal, in which all municipalities would be included in the 25 percent.
It could not be confirmed as of press time whether city officials turned down the offer for consideration in the future, but they did not accept it Tuesday.
 
Future of LOST
Morgan County and the City of Madison now have less than two months to come to a compromise before the decision falls in the hands of an Ocmulglee Superior Court Judge.
The final step in resolving the dispute is binding arbitration, which is a winner-take-all judgment. The judge will either rule in favor of Madison or Morgan County but cannot negotiate a compromise.
The new distribution formula would then not go into effect until 2013.
Lamar and Henry told the Morgan County Citizen that they are confident in going to court.
Gilbert told the Citizen that he was more optimistic that a negotiation could be reached before final arbitration.
 “We’re still working on it, and I have hopes that we can work something out,” he said. “[Madison representatives] are willing to sit down and continue to meet and negotiate.”
At 9 a.m., while county and city representatives gave opening statements – one of the few times they met together - Henry summed up the expectations of each governing body.
“It’s obvious how these things are,” he said. “Each side wants more.”

Printed in the August 2, 2012 edition.