Washington County School System By And Through The Washington County Board Of Education v. The City Of Johnson City, Tennessee
E2016-02583-COA-R9-CV
| Tenn. Ct. App. | Dec 27, 2017Background
- Johnson City passed a liquor-by-the-drink referendum in 1980 and has operated its own K–12 school system since at least 1967; it received 50% of the liquor-by-the-drink gross receipts tax and did not remit any to Washington County.
- Washington County had not authorized liquor-by-the-drink sales countywide; it (and its school system) received distributions only from private-club collections in unincorporated areas.
- The County School System sued for declaratory relief seeking remittance of unshared liquor-by-the-drink revenue from the City and prejudgment interest, arguing the pre-2014 version of Tenn. Code Ann. § 57-4-306 required sharing.
- The trial court granted declaratory relief to the County, concluding § 57-4-306(a)(2)(A) (pre-2014) was ambiguous and that equity/public policy required equal school funding; it reserved amount and interest for later hearing.
- The City obtained interlocutory appellate review; the Court of Appeals reviewed statutory construction de novo and concluded the 1982 legislative amendment (codified in § 57-4-306) intended only to require municipalities that do not operate separate school systems to remit funds to the county.
- The Court of Appeals reversed the trial court, granted summary judgment for Johnson City, and dismissed the County’s complaint.
Issues
| Issue | Plaintiff's Argument (County) | Defendant's Argument (City) | Held |
|---|---|---|---|
| Whether pre-2014 Tenn. Code Ann. § 57-4-306(a)(2)(A) required a city operating its own schools to share half of its local liquor-by-the-drink receipts with the county | § 57-4-306(a)(2)(A) should be read to require sharing so county schools receive funds in same manner as property tax distribution | The 1982 proviso applies only to municipalities that do NOT operate separate school systems; a city with its own schools keeps the funds | The statute was ambiguous but legislative history (1980–83 AG opinions and 1982 legislative debate) shows intent to require sharing only by municipalities lacking separate school systems; City wins |
| Whether the ‘‘one-half expended and distributed in the same manner as the county property tax’’ language obligated cities with separate LEAs to remit to county school funds for county-wide apportionment | County: that phrase obligates distribution into county school fund to be apportioned among LEAs, including city LEAs | City: the proviso and legislative history show the obligation was not meant to reach municipalities that run their own school systems | Held for City — distribution in the manner of county property tax does not, as applied, force cities operating their own LEAs to remit to county school fund under the pre-2014 statute |
| Whether Tenn. Code Ann. § 57-4-103 (chapter effectiveness only where jurisdiction authorized sales) barred County from receiving funds because it had no referendum | County: even if chapter’s effectiveness is limited, §57-4-306’s scheme contemplates county distributions when collections originate in county/unincorporated areas | City: Chapter 4 applies only where sales authorized; County had no referendum so it was not entitled to the City’s municipal receipts | Court: Part 3 of Chapter 4 applies in Johnson City (where sales authorized), but that does not change the 1982 amendment’s limited application; does not require City to remit |
| Whether policy/equity or constitutional concerns required a different result | County: equity and equal educational opportunity favor requiring sharing | City: policy arguments are for the legislature; constitutional challenge (Article II, §29) was unnecessary if City prevailed on statutory interpretation | Court: policy/equity arguments insufficient to override statutory text and legislative history; constitutional argument rendered moot by statutory ruling |
Key Cases Cited
- Copper Cellar Corp. v. Jackson, 762 S.W.2d 560 (Tenn. 1988) (describing liquor-by-the-drink tax scheme)
- In re Estate of Tanner, 295 S.W.3d 610 (Tenn. 2009) (statutory construction principles; consult broader scheme and history when statute ambiguous)
- City of Athens Bd. of Educ. v. McMinn Cty., 467 S.W.3d 458 (Tenn. Ct. App. 2014) (interpretation of school-fund apportionment statute and its limits)
- Beacon4, LLC v. I & L Invs., LLC, 514 S.W.3d 153 (Tenn. Ct. App. 2016) (value of Attorney General opinions as persuasive authority)