After a three and a half year lapse, Manchester City Schools is considering pursuing $800,000 it and its city government declined to accept from a joint lawsuit with Tullahoma against Coffee County, stemming from a dispute about how sales tax proceeds had been distributed.
According to the Manchester Times, Manchester’s Board of Education has re-examined a motion that had been tabled since 2009 in the debate about whether to accept the settlement from the lawsuit filed in 2006.
The lawsuit goes back to 2006 when Manchester city government, Manchester City Schools, Tullahoma government and its city school system filed a civil suit in the 14th Judicial District Circuit Court against Coffee County that alleged that since 1982 the county had failed to share a portion of the “second half” of the sales tax money, which the county has allocated to the general purpose school fund.
The money was withheld from the city through what some county commissioners had labeled “a gentlemen’s agreement” as a way to help subsidize the county school’s transportation costs.
Tullahoma, Manchester and their school systems filed a lawsuit to collect the money to which Coffee County later agreed to settle out of court. Relief was only sought for the years 1998-2006 due to difficulty finding financial records, the lawsuit said.
In October 2009, the county settled with Tullahoma for $2 million. The City of Manchester then voted that same month not to accept the $800,000 settlement.
The Coffee County Commission warned at that time that the combined payment to Tullahoma and Manchester might cause a 33-cent property tax increase, however, Coffee County later approved a permanent 11-cent property tax increase, intended to pay off Tullahoma’s $2 million settlement in two years with the increase netting about $1 million annually in new revenue.
After the two-year period, the increase was to remain in effect with proceeds going toward bond payments on a new $22 million Coffee County jail, but again Coffee County faced a $700,000 financial shortfall due to an ambulance-service billing problem and used part of the 11-cent property tax increase to go toward that problem.
The county renegotiated its settlement with Tullahoma, extending the payment time frame to 5 years. Tullahoma originally asked for $4.1 million but settled on $2 million in the out of court agreement.
-Thanks to The Manchester Times-