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State Attorney Gen. sides with Coffee County schools over liquor-by-the-drink money

Posted on Thursday, March 6, 2014 at 3:49 pm

Marian Galbraith, staff writer

According to a recent opinion from Tennessee Attorney General Robert Cooper, Tullahoma must pay $387,488 to the Coffee County School System for past collections of liquor-by-the-drink taxes.

Tullahoma and Manchester are among several cities in Tennessee that have not, for several years, remitted a portion of their mixed-drink tax revenues to the county school system according to requirements in Tenn. Code Ann. section 57-4-301.

Mayor Curlee said in January that his understanding, according to advice from deputy director John Holloway of the Tennessee Municipal League, was that the city did not owe the taxes.

“Assuming Tullahoma has always operated a city school system during the time period liquor by the drink has been allowed,” Holloway stated in an email to city recorder Rosemary Womack, “the city would have no mandate on how to spend the revenues received from the state from the mixed drink tax.”

In addition to Tullahoma, Manchester allegedly owes the county schools $149,154. The claim was brought to light in December by Gary Hayes of the County Technical Advisory Service, who made a presentation to the Coffee County Budget and Finance Committee.

Coffee County Commissioner Bobby Bryan distributed a recent news article on the subject to the Budget and Finance Committee last week which stated that the city of Chattanooga similarly owes more than $11 million to the Hamilton County Schools, but cannot negotiate a lesser settlement or use other assets to offset the debt according to the attorney general’s opinion.

“This clarifies for me that the cities of Manchester and Tullahoma do owe this money to the county schools,” Bryan said.

“Given the county’s existing financial challenges right now, any funds that can be used to help the school system’s budget this year will also indirectly reduce the burden on the county’s general fund budget.”

Tennessee Attorney General Robert Cooper

Tennessee Attorney General Robert Cooper

Director of Schools Dr. LaDonna McFall requested the past due funds in a letter to Mayor Lane Curlee dated Feb. 10.

“In addition,” the letter said, “we request that these funds be dispersed to the school system in the future as required by law.”

Tullahoma administrator Jody Baltz said he met with McFall in response to the letter and assured her the city is working on the matter.

“We’re working with our attorneys right now and doing some legal research first,” Baltz said, “but we are addressing the issue as quickly as possible and Dr. McFall is aware of that.”

According to the attorney general’s opinion, there is no statute of limitations on the debt, which dates back to 1980, and county school boards do not have the authority to waive their right to receive the taxes or any associated late fees.

In addition, the municipalities in question cannot offset the liability by reducing other fees owed to them by the county schools, such as water fees, or with other revenues such as sales taxes.

The opinion does, however, state that the cities may negotiate a payment plan allowing them to repay the past due funds over a period of time.