Dismissal denied in Bradley County liquor-by-the-drink tax

photo Attorney James Logan
Arkansas-Ole Miss Live Blog

CLEVELAND, Tenn. - An attempt to dismiss a complaint filed by the Bradley County School System against the city of Cleveland in regard to an estimated $800,000 in disputed liquor tax revenues recently was denied in Chancery Court.

The matter should instead proceed to a final hearing, said Chancellor Jeri S. Bryant in a decision dated Sept. 19 that was filed on Sept. 26.

"We are encouraged by the chancellor's ruling," said James Logan, who is serving as the attorney for Bradley County Schools.

According to a 2013 County Technical Assistance Service review of liquor tax distributions over the last 30 years, the agency determined that Cleveland owed the county school system an estimated $720,000.

That amount is projected to have grown by another $80,000 since the Bradley County Board of Education attempted to resolve the matter with the Cleveland City Council late last fall, said Logan.

"We merely ask that the city of Cleveland follow the law as it is stated," said Johnny McDaniel, director of Bradley County Schools, and Vicki Beaty, then­-chairwoman of the school board, in a joint statement on April 14.

"I'm disappointed that the citizens of Bradley County and Cleveland will incur additional legal fees to have a case to determine the issue," Councilman Richard Banks said previously.

The key factor underlying those disputes is based on interpretations of Tennessee Code Annotated §57­4­306, which governs the distribution of revenues collected for the sales of liquor consumed on premises, Gary Hayes, a CTAS consultant, said previously.

Fifty percent of liquor consumption proceeds allocated to the local government body should be "expended and distributed in the same manner as the county property tax for schools is expended and distributed," according to the code.

On multiple occasions, Banks has challenged the code's application to Cleveland, since it operates its own school system, citing text within the code that mentions municipalities that operate school systems separate from the county.

Bryant's ruling also applies a dispute between McMinn County Schools and the cities of Athens, Etowah and Niota that also involves the allocation of liquor tax revenues. On July 22, their case was consolidated with the Bradley County Schools case.

If the City Council complies with the law, Bradley County Schools will immediately dismiss the complaint, according to the April 14 statement.

The Bradley County Board of Education previously offered to let any liquor tax revenue settlement be applied to any remaining monthly payments that the county school system owes the city as part of a 2012 settlement regarding disputed revenues resulting from a pair of city and county sales tax increases implemented in 2009.

Of the $1.4 million sales tax revenue settlement, the school system now only owes $711,341 to the city, said Rick Smith, business manager for Bradley County Schools.

Paul Leach is based in Cleveland. Contact him at paul.leach.press@gmail.com.

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