City of Decatur v. DeKalb County
713 S.E.2d 846, 289 Ga. 612, 2011 Fulton County D. Rep. 2057 (2011)
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Rule of Law:
An intergovernmental agreement that exceeds the term of the current government is only permissible under the Georgia Constitution's Intergovernmental Contracts Clause if it is substantively for the provision of services or the joint or separate use of facilities. A long-term agreement that is fundamentally a revenue-sharing mechanism, even if the funds are designated for public projects, does not meet this constitutional exception and is therefore invalid.
Facts:
- In 1997, DeKalb County's electorate approved a Homestead Option Sales and Use Tax (HOST).
- To secure the support of municipalities within its borders, DeKalb County promised to enter an agreement with them to equalize the tax benefits.
- In January 1998, DeKalb County (County) and several municipalities, including the City of Decatur (Cities), entered into a 49-year Intergovernmental Agreement (IGA) to govern the distribution of HOST tax revenue.
- The IGA established a formula for distributing tax proceeds to the Cities, who in turn agreed to expend the funds solely for capital outlay projects located within DeKalb County.
- A dispute later arose between the County and the Cities over the proper calculation and distribution of funds according to the IGA's formula.
Procedural Posture:
- The Cities sued DeKalb County in the Superior Court of DeKalb County (trial court) for breach of the IGA.
- The superior court granted judgment to the County, finding the IGA violated the HOST statute.
- The Cities, as appellants, appealed to the Georgia Court of Appeals, which affirmed the trial court's ruling.
- The Georgia Supreme Court granted certiorari, reversed the Court of Appeals, and remanded the case for consideration of constitutional issues.
- On remand, the superior court granted summary judgment to the Cities. The County, as appellant, then appealed to the Court of Appeals.
- The Court of Appeals reversed, finding the IGA unconstitutional. The Supreme Court again granted certiorari, vacated the appellate judgment for lack of jurisdiction over the constitutional issue, and remanded with instructions for the trial court to rule on the issue.
- The superior court, on final remand, granted summary judgment to the County, finding the IGA unconstitutional under the Intergovernmental Contracts Clause.
- The Cities, as appellants, then appealed this final judgment to the Supreme Court of Georgia.
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Issue:
Does an intergovernmental agreement that primarily establishes a formula for sharing and distributing tax revenue, rather than contracting for the provision of specific services or the use of facilities, violate the Intergovernmental Contracts Clause of the Georgia Constitution?
Opinions:
Majority - Hines, Justice
Yes. An intergovernmental agreement that is fundamentally a revenue-sharing formula violates the Intergovernmental Contracts Clause of the Georgia Constitution. The Constitution generally prohibits local governments from entering into contracts that bind successor governments, but the Intergovernmental Contracts Clause provides a narrow exception for contracts up to 50 years. This exception applies only to contracts for 'the provision of services, or ... the joint or separate use of facilities or equipment.' The plain language of the IGA in this case reveals its primary purpose is to provide a formula for the distribution of HOST revenues, making it a revenue-sharing agreement. It does not involve the joint use of facilities, nor does it provide for 'services,' which are defined as an intangible commodity of human effort such as labor, skill, or advice. The requirement that the Cities must spend the distributed funds on capital projects does not transform the revenue-sharing agreement into a contract for services. Because the 49-year IGA does not fall within the constitutional exception, it is invalid.
Analysis:
This decision strictly interprets and narrows the scope of the Georgia Constitution's Intergovernmental Contracts Clause, clarifying that its exception for long-term contracts is not a catch-all for any type of inter-governmental financial arrangement. It establishes a firm precedent that pure revenue-sharing agreements cannot be structured as long-term contracts binding future administrations. This holding requires government entities to draft future long-term agreements to ensure their substance is genuinely about the provision of specific, identifiable services or the use of facilities, rather than simply being a mechanism for distributing funds.
