Stone Mountain Tax Case Against DeKalb Goes to Supreme Court

Lawyers for Stone Mountain and three other cities are scheduled to appear before the Georgia Supreme Court Tuesday to argue that DeKalb County has stiffed them out of $12 million in sales tax revenue.

It will be third time in seven years that the high court has heard the case.

At issue is the county’s Homestead Option Sales Tax, a voter-approved penny on the dollar levy on all taxable purchases in DeKalb County. 

The primary purpose of a HOST is to reduce homeowner property taxes, Under the law, 80 percent of the sales tax proceeds must be used to cut taxes by raising homestead exemptions. The remaining 20 percent of the sales tax collected from a HOST can be used for government construction projects and other infrastructure improvements.

Decatur, Chamblee, Doraville and Stone Mountain claim the county has shortchanged the city the full amount of infrastructure funding to which it is entitled under a contract between the  two governments.

Stone Mountain’s share of the disputed $12 million sum is comparatively smaller, more than $220,000. But if the cities win the case, the city would not only recover that sum, it could also start collecting a source of future sales tax revenue.

“For over ten years, DeKalb County has attempted to avoid its lawful contractual obligations,” wrote Bryan A. Downs, a partner in the law firm Wilson, Morton & Downs, which is representing the four cities.

DeKalb County maintains that the cities have consistently miscalculated in their favor how much money they are owed from the HOST.

The cities sued the county in 2000. In response, the county discontinued HOST payments to all DeKalb municipalities including those not involved in the lawsuit, until the suit was resolved.

Since then, the case has bounced between DeKalb Superior Court, the Georgia Court of Appeals and the state Supreme Court. Likewise, the total amount of revenue withheld from the cities has grown to more than $12 million, according to the plaintiffs.  Most of that sum belongs to Decatur, the city argues

In April 2010, Superior Court Judge Mark A. Scott ruled that the contracts were unconstitutional. The Georgia Court of Appeals reached the same conclusion in a 2007 ruling. The state Supreme Court has yet to rule on the constitutionality of the contracts.

Under the Georgia Constitution, a local government can only give money to another to provide a specific service. They cannot simply share revenue. The plaintiffs argue that their contracts with the county are not revenue-sharing agreements because the cities can only spend the money on infrastructure improvements.

 The high court will only hear arguments from both sides Tuesday. A ruling isn’t expected for several months.

Both sides have clearly grown weary of the case.

“If the constitutional question gets resolved, I hope that would end the litigation,” said Michael J. Bell, DeKalb County’s former finance director.

Bell is now a professor of public finance at the Andrew Young School of Policy Studies at Georgia State University.