On September 23, 2011, Superior Court Judge David Barrett entered a 58-page final order in the three-year-old Service Delivery Strategy (SDS) litigation between Gwinnett County and the fifteen cities in the county. Gwinnett County subsequently appealed the decision to the Georgia Supreme Court. The parties, however, continued to negotiate in an attempt to settle the case and formulate a Service Delivery Strategy that would serve all of the citizens of the county. A few months later, on February 8, 2012, Superior Court Judge David Barrett entered a 52-page final consent order in the litigation between Gwinnett County and the cities.
Gwinnett County sought to create an unincorporated special tax district in order to reduce the property tax millage rate for unincorporated tax payers with cable franchise fees, development fees, alcoholic beverage license fees, hotel-motel taxes, and other revenue sources derived from the unincorporated area.
Purpose of SDS
SDS was designed to require that local governments take a careful look at the services they provide in order to identify overlap or gaps in service provision and develop a more rational approach to allocating delivery and funding of these services among the various local governments in each county. The central purpose of the Service Delivery Strategy Act was to create a framework for negotiation between cities and counties. There are often legitimate disagreements about what may or may not be a county-wide service and a service that is provided primarily for the benefit of the unincorporated area.
The essence of Judge Barrett’s September ruling was that city residents do not have to pay for services that primarily benefit unincorporated Gwinnett property owners and residents. The September order follows up on an order issued by the court on October 28, 2009 concluding that property taxes, insurance premiums taxes, assessment or user fees are the only sources of funding for the provision of SDS services within special service districts. In that order the court rejected the county’s argument that it could use occupation taxes, cable franchise fees, financial institution taxes, hotel-motel excise taxes, and alcoholic beverage license fees and excise taxes, development fees and zoning fees collected within the special unincorporated area service district to reduce the ad valorem millage rate that unincorporated area taxpayers would pay for SDS services.
The court held that for the county to have an enforceable right to provide an SDS Service and collect payment for that service from city taxpayers there must be a valid intergovernmental agreement between the city and the county under which the city has conveyed to the county its legal responsibility to provide the service and levy taxes to pay for it. The court also rejected the county’s contention that the county’s insurance premium tax proceeds could only be used to pay for service provided solely to the unincorporated area.
However, the court did find that the county road system is not provided primarily for the benefit of the unincorporated area and that general revenues of the county should be used to pay for this road system. The court ordered the county to establish a special service district to reflect the cost of this service and the revenues used to pay for it. The court also ordered the county to create a special service district consisting of all of the incorporated and unincorporated areas of the county for the provision of enumerated “other services” and ordered the county to apply any revenues derived from the provision of these services to the cost of these services and then to apply property taxes, insurance premiums taxes, assessments or user fees levied and collected within the special district to pay for those services.
The court ordered the county to establish separate special service districts for the provision of police services, fire services, EMS services, bus transit services, the county road system, solid waste services, county administration, and county planning, zoning, licensing, permitting and code enforcement. The court rejected the county’s attempts to require cities with utility systems which serve unincorporated areas to establish special service districts. The court noted that municipal electric and gas utilities are not governed by the SDS Act but by other state law. Additionally, the court held that water and sewer services were not subject to the SDS Act except with respect to the regulation of fees for extraterritorial services. As a result, the February 8, 2012 final consent order was negotiated and entered into by the cities and the county to address the court ordered need for separate special service districts.