published Tuesday, May 13th, 2014

Chattanooga contests Hamilton County school system's liquor taxes lawsuit

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    The entrance to the offices of the Hamilton County Department of Education headquarters.
    Photo by John Rawlston.
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After agreeing to pony up almost $12 million in past due taxes, Chattanooga has filed a motion claiming the Hamilton County school system doesn't have the right to file a lawsuit to recover the liquor-by-the-drink taxes.

The city's motion, filed Monday in Hamilton County Chancery Court, claims the taxes are the state's property and the state should have to join with the county to recover the money.

"The school board has ignored the state's prior interest in the outcome of this matter and its exclusive right to bring it," the lawsuit states. "The school board doesn't have a standing as a result."

Board of Education attorney Scott Bennett said he believes the claim is a tactic the city is using to delay its response to the allegations.

"What they're essentially saying is we would have to get the [state] Department of Revenue involved to make the city do what they should've done in the first place," Bennett said. "I don't think that's right."

Department of Revenue officials declined to comment, stating the department doesn't comment on ongoing litigation.

The school system filed a lawsuit in April after it said talks with Mayor Andy Berke's administration over more than $11.7 million in past due taxes were getting nowhere. Berke then offered to pay nearly $12 million over the next five years with multiple conditions. The administration later balked when the school system asked for a deal that acknowledged back taxes spanning more than three decades.

Since the lawsuit was filed, talks have continued with the city, Bennett said. But officials appear to be at an impasse over the time frame the city wants to pay back the money and the fact that the city won't acknowledge the $3.6 million that school officials say is owed from 1980, Bennett said.

City Attorney Phil Noblett said city officials still hope to resolve the discrepancy outside of court.

A court hearing is slated for May 27.

Contact staff writer Joy Lukachick at or 423-757-6659.

about Joy Lukachick Smith...

Joy Lukachick Smith is the city government reporter for the Chattanooga Times Free Press. Since 2009, she's covered crime and court systems in North Georgia and rural Tennessee, landed an exclusive in-prison interview with a former cop convicted of killing his wife, exposed impropriety in an FBI-led, child-sex online sting and exposed corruption in government agencies. Earlier this year, Smith won the Malcolm Law Memorial Award for Investigative Reporting. She also won first place in ...

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