AG: Cities must pay off all liquor money owed to school systems — but can work out an installment plan

Cities across Tennessee need to start paying school districts millions of dollars in unpaid mixed-drink taxes, the state attorney general says, reports the Chattanooga TFP.

Local school officials say the opinion released this week by Attorney General Robert Cooper means Chattanooga officials must pay the $11 million-plus it owes to Hamilton County Schools and can’t negotiate a lesser settlement or use land to offset the debt. (Note: The opinion is HERE)

“It’s wonderful news. It’s the best news since Santa Claus,” said school board member David Testerman. “Our school system is in desperate need of funds.”
But Mayor Andy Berke’s spokeswoman, Lacie Stone, said the city is still reviewing the opinion to decide what it means for Chattanooga.

While it may help answer a nearly $12 million question here, the attorney general’s opinion has implications for school districts and municipalities across the state.

Cities owe millions of dollars to county school systems after failing for years to send the required mixed-drink taxes to support local schools. The state-imposed taxes are shared with municipalities, which are required to give half the receipts to county school systems.

There was widespread confusion over the liquor tax issue — aside from Chattanooga, at least 15 other cities including Knoxville, Cleveland, South Pittsburg, Jasper and Manchester owe money.

Officials noticed last year that the payments had been inadvertently overlooked, said Gary Hayes, government consultant with the University of Tennessee’s County Technical Assistance Service. After Hamilton County Schools officials discovered the shortfall, they asked state Rep. Gerald McCormick, R-Chattanooga, to request the attorney general opinion. The nonbinding opinions are the attorney general’s effort to interpret legal issues that have not been decided in court.

..The attorney general’s opinion found that county school boards can’t waive any past-due fees. Cooper said there is no statute of limitations on the fees and municipalities can’t offset the costs with local-option sales tax revenue. But, Cooper wrote, municipalities don’t have to pay it back all at once — they may agree on a payment plan.