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County’s participation in lawsuit may not make a difference

Washington County’s motion to intervene in the school system’s lawsuit against Johnson City was approved during last week’s hearing, but whether its addition as a party will strengthen the case remains to be seen.
“The judge did not rule on the school’s capacity (to sue),” said Erick Herrin, counsel for the City of Johnson City. “He said we need to get our pleadings in order.”
Following the county commission’s vote during its April 27 meeting to pursue becoming a plaintiff in the suit seeking $3.4 million in liquor-by-the-drink tax revenue, Herrin immediately filed a motion to object.
The hearing was held May 5 in Sullivan County Chancery Court with Judge E.G. Moody presiding.
While Herrin’s original motion to dismiss included arguments as to why neither the county nor its school system has any rights by state statute to the distribution of liquor-by-the-drink tax proceeds, due to a lack of authority and an approved referendum respectively, his motion to object focused on the timeline of an amendment to the LBTD statute passed April 17, 2014, by the General Assembly.
The newly enacted law in 2014 created a window of opportunity that authorized school systems to initiate suit only after June 1, and designated a time period to allow cities and counties to determine if a resolution regarding their disputes over LBTD taxes could be reached.
“Both are political subdivisions and children of the state,” Herrin said. “The state doesn’t like siblings fighting, so they gave the boneheads time to work it out.” The deadline to come to an agreement was Dec. 31, 2014.
Because the school system filed suit in May 2014 and the county only voted to come onboard in April 2015, Herrin argues both are time barred from the provisions of the statute.
“The Washington County School System made the choice not to accept the terms of the 2014 amendment and instead filed its complaint on May 2, 2014,” Herrin writes in his response to the county’s motion to intervene.
“Only now is the Washington County School System scrambling to undo that decision with a belated ‘jack-in-the-box,’ ‘rabbit-out-of-the-hat’ effort by having Washington County attempt to participate as a party.”
Herrin said despite noting he has already asserted all his defenses on why the school board does not have the legal authority to sue, Moody instructed him to answer the county’s amended complaint, which attorney James Logan filed with the motion to intervene.
Washington County is not eligible for a share of the taxes, he says, because it has chosen to not allow the consumption of alcoholic beverages on premises in the unincorporated section of the county.
According to Herrin, there is no argument that the passage of a liquor-by-the-drink referendum in 1980 is what led to economic growth and put Johnson City ahead of (cities) in other counties.
However, while Washington County may not be receiving this tax revenue, it also is not dealing with the related consequences such as an increase in alcoholism and more police activity at bars.
“There is a burden that goes with the benefit, and the city is shouldering that burden,” Herrin said.
A date for the next hearing on the lawsuit has not been scheduled.