County disputes with school district over tax request

September 12, 2020 7:59:14 PM

Yue Stella Yu - [email protected]


Lowndes County School District is standing by a local property tax request that could hike the tax rate by almost 10 percent. But Lowndes County Board of Supervisors may sue the district to keep that from happening.


The point of conflict, county officials say, is whether property tax collections from expiring fee-in-lieu agreements for some area industries -- which have paid a fee based on one-third of their assessed value for the past 10 years -- can be claimed as taxes on "new property" and added to the base amount of the district's request.


The district has added all $3.5 million in projected collections from those expiring fee-in-lieu agreements to their request to the county. That, along with an additional $116,000 from what newly-built property is expected to bring in taxes and a 4-percent increase it can request each year from last year's collections, would make the tax rate increase by roughly 4.5 mills to 51.1 mills in 2021.



However, supervisors' attorney Tim Hudson said the county is arguing that none of the collections from the expiring fee-in-lieu agreements can be added as "new property," since they have already been assessed. If the county's argument proves correct, it would mean the most the district could increase their local tax request by without voter involvement is roughly $772,000 for FY 2021. Since the value of a mill (the amount of revenue 1 mill will generate) is expected to increase by $67,000 from last year, that would force the district to lower the property tax rate by about 3 mills.


Property taxes are measured in mills, which represents a certain percentage of a person's real and personal property value. For a residence assessed at $100,000 without a Homestead exemption, a 4.5-mill increase would raise the owner's taxes by $45 annually. For a commercial property owner, the new rate would increase taxes by $67.50 per $100,000 in assessed value. If the county gets its way, a 3-mill decrease would lower residential property taxes by $30 and commercial taxes by $45 per $100,000 of assessed value.


Meanwhile, supervisors have until Tuesday to approve the county's FY 2021 budget, and their conversations with the school district were not fruitful, Hudson said. Supervisors Harry Sanders of District 1 and John Holliman of District 3, along with Jackson-based attorney Chris Pace -- whom the board hired Tuesday as legal consultant on the matter -- met with LCSD board members Friday morning but did not reach a consensus.


Failure to resolve the dispute before Tuesday, Hudson said, could lead the board to file a lawsuit against LCSD and leave the issue up to a judge's ruling.


LCSD Superintendent Sam Allison said the district is trying to build up its fund balance -- which has depleted from a high of $17 million in 2014. Claiming revenue from the new properties, he said, would help.


With neither party willing to budge before the Tuesday deadline, Hudson said the board of supervisors has three options: fulfill LCSD's request as is, approve the request but file a "declaratory judgment" -- which he said counts as a lawsuit -- with the Chancery Court, or reject the request while also filing the paperwork with the court.


If the board files a declaratory judgment, a judge would determine if the request is improper and resolve the dispute accordingly, he said. While waiting for the ruling, LCSD could borrow the funds to fulfill the needs first, he said, and if the board loses the lawsuit, it would then allocate the funds per LCSD's request.


"Nobody is asking for money from each other," Hudson said. "Basically, they are just saying, 'Judge, we disagree on the law. Tell us what the law is.'"



Dispute brews


The disagreement came after LCSD submitted a $27.4 million request to the county last month in property tax revenue for Fiscal Year 2021. The request includes $21.1 million in operations, which represents a near-$5 million increase from the $16.4 million it requested last year.


By law, the school district can increase its request for operating funds from the county by up to 4 percent every year without voter approval and up to 7 percent with a "reverse referendum," which requires at least 1,500 voter signatures to revoke the request. If the increase is more than 7 percent from the prior year, three-fifths of district voters need to approve it.


However, collections from "new properties" -- which can include properties that are newly constructed, newly added to the tax roll or have never been assessed -- are exempt from the increase limitation, according to state law.


That means LCSD can request up to 4 percent more than last year's figure for FY 2021 and claim the ad valorem tax revenue collected from new properties without voter approval.


While both parties agree that new properties include newly constructed buildings, the conflict is whether the district can claim taxes from 13 fee-in-lieu contracts that expired in December -- with a total assessed value of $84 million -- as revenue collected on new properties.


Fee-in-lieu agreements grant tax breaks to developments, usually industrial, that are valued at $60 million or more for up to 10 years. Companies under the agreements are assessed at a third of their values and therefore only need to pay a third of the regular property taxes as fees each year. When the agreements expire, they are reassessed at a depreciated value and begin paying full taxes.


"We can tell it was previously assessed, so it's not new property," Hudson said. "You've got to assess the value of the property to know what one-third (of the regular property tax) is."


Allison refuted Hudson's claim, arguing the assessment was necessary to determine the amount of fees the industries should pay for the 10-year period. The annual payments, he said, were fees instead of taxes, and the properties were never placed on the tax roll.


"If we don't claim it as new property, then we don't benefit from it coming off the (agreements)," he said.


However, Hudson said the properties were put on the tax roll and were a part of the county's assessed value. The collections during the 10-year period, he said, are considered as taxes.


"(Tax Assessor) Greg Andrews tells us they were (on the tax roll). They were included in the value of the county," he said. "We assessed them and they paid one-third of the taxes."


Logan Reeves, spokesperson for the state auditor's office, told The Dispatch on Wednesday afternoon Andrews reached out to the agency for advice on the issue. Reeves said his office recommended Andrews request an opinion from the Attorney General's Office, since the matter is about the interpretation of the law instead of accounting practices. Previous Attorney General's opinions on such issues, he said, were "vague."


Representatives with Attorney General Lynn Fitch's office did not respond to The Dispatch's inquiry on the matter by press time. Andrews, Sanders and Holliman also could not be reached for comment.


Yue Stella Yu is the local government reporter for The Dispatch. Reach her at 662-328-2424 (ext 106) or follow her on Twitter @StellaYu_Mizzou