The Alcoa Board of Commissioners gave its city attorney a thumbs up Friday, Nov. 18, to file a lawsuit against Blount County over the a portion of property taxes that goes only to county schools.
The move comes more than six months after Alcoa and Maryville city officials asked the Blount County Commission to change the current school funding formula, and Alcoa officials say they have received no response.
Notes accompanying the agenda for Alcoa’s called meeting Friday say that since 2016 Alcoa and Maryville property owners have paid $9.4 million in property taxes that went only to capital projects for Blount County Schools.
Currently under the county property tax rate of $2.47 per $100 of assessed value, 98 cents is split among the three public school districts and 14 cents is devoted to BCS education capital projects under a portion of the schools’ budget known as Fund 177.
The Alcoa commissioners present voted unanimously and without comment to authorize the lawsuit; Commissioner Vaughn Belcher arrived later to the meeting.
City attorney Stephanie Coleman said it will likely be early next year before any documents are filed in Blount County Circuit Court, and officials declined to discuss the litigation.
While courts previously upheld counties retaining a portion of taxes for education capital projects in a case from McMinn County, documents prepared for the Alcoa meeting said Coleman has developed an alternative claim that she and city officials believe has a higher chance for success in court.
Maryville officials said they have not yet reviewed the proposed lawsuit.
In the city of Athens v. McMinn County case, courts found the state law requiring countywide property taxes to be split among districts based on their attendance numbers doesn’t apply to funding for capital projects. The law refers only to “all school funds for current operation and maintenance purposes.”
The County Technical Assistance Service, based at the University of Tennessee, defines capital projects as “purchases of land, buildings and equipment; construction of buildings, roads and bridges; renovation of buildings; and other such improvements that last for many years.”
Blount County Schools officials have called Fund 177 a “game-changer,” providing funding to repair school roofs and replace heating, ventilation and cooling systems. Blount County started with 4 cents in the property tax rate devoted to BCS capital projects and raised it to 14 cents in 2019.
Some counties have adopted a dual tax formula that requires only property owners outside of city limits to pay the tax devoted to capital improvements in county schools, and Alcoa wants Blount County to do the same.
If Blount County does not want to stop city residents paying into Fund 177, Alcoa is asking it to return to issuing bonds for capital projects. When the county issues bonds for school projects, city schools also get a share of the funding raised, and the debt is repaid through property taxes.
Currently Alcoa City Schools is looking for funding for several projects, including the second phase of an expansion and renovation at its intermediate school. Maryville City Schools is hoping to begin a high school expansion in summer 2023.
Some county officials, including Mayor Ed Mitchell, have said Fund 177 is more cost effective way of paying for some projects than issuing bonds.
This year instead of issuing bonds for construction projects at Eagleton College and Career Academy the county loaned BCS $12 million through a capital outlay note, using funds from the county Debt Service Fund.