Despite sharing the 10th floor in Government Plaza, city and county leaders appear to have hit a boiling point and are letting their attorneys settle a disagreement over back rent the city of Mobile of the Mobile County Commission.

Commissioner Connie Hudson says the city owes the county more than $500,000, but while city officials acknowledge their rent hasn’t been paid since February, they say the decision was made in response to losses the city incurred collecting the county’s taxes in recent years.

Mobile County’s Government Plaza.

As Lagniappe previously reported, Mobile has collected sales taxes on the county’s behalf for decades. Based on an agreement signed in 1989, the city keeps 5 percent of those tax proceeds, which it has historically used to pay its rent and expenses in Government Plaza.

The city’s legal staff say the rental agreement worked fine until 2014 when former License Commissioner Kim Hastie “directed county taxpayers” to stop sending sales tax payments to the city and instead use ONESPOT, an online payment program launched by the state of Alabama.

Now nearly 80 percent of the sales taxes the county receives are paid through ONESPOT, which has greatly eroded the revenue the city generates from its 5 percent fee. According to Finance Director Paul Wesch, the city went from receiving $2.4 million in 2013 to just $589,000 last year.

Despite the decline in revenue, the city continued to expend roughly $1.3 million a year for rent, utilities, maintenance and security at Government Plaza — but that stopped in February.

“Just during those three years, the difference in what we received and what we paid is almost $3.7 million. That’s what we lost,” Wesch said. “We didn’t do anything about it, and obviously the county was content not to do anything about it. So, not paying the rent was kind of a way to gain their attention, which it has done.”

Since the payments stopped, Mayor Sandy Stimpson and Commission President Merceria Ludgood have tried to find an “amicable resolution,” but those efforts appear to have hit a rough patch despite pledges of “good faith” from both sides.

On July 13, the county sent a proposal that would amend the agreement to allow the city to pay whatever it generates collecting sales taxes as its rent, with a minimum of “$50,000 per month.” It would also require the city to pay all of its back rent plus take on a greater share of ongoing maintenance and capital improvement costs at Government Plaza.

The city has yet to respond to the proposal, and while Wesch said there are still plans to do so, he also said that “it’s kind of a busy time.”

Mobile County Commission President Connie Hudson.

However, that delay has caught the attention of Hudson, who recently raised concerns about how the city has handled the collection of the county’s taxes and its decision to stop paying rent.

At 125,000 square feet, Hudson said the city’s rent comes out to about “$1 per square foot.” She called that “a good deal,” claiming venues such as Merchants National Bank charge up to “$20 a square foot” for comparable space downtown.

“We’re not a charitable organization. We’re not in the position to be able to give free space away,” she added. “We’ve given this a lot of time hoping we can come to some understanding, but in the meantime — without any phone call or any notice of any sort — the rent stopped.”

The issue has been further complicated by problems the city has with the new software it purchased to collect revenue, a part of the city’s $11.7 million deal with Tyler Technologies.

Wesch said there have been a number of issues implementing the revenue functions of the Tyler system and, as a result, all sales tax revenue the city has collected this year has been turned over to the Mobile County License Commission without the geographical data to properly distribute it.

License Commissioner Nick Matranga said an estimated $4.7 million should have been distributed to local school systems as well as the county and city but, lacking the information necessary to disperse them accurately, those funds have been withheld.

The city has only recently been able to work out some software kinks, which Wesch said required the manual input of sales information from more than 4,800 businesses outside the city limits.

Tyler is expected to automate those processes going forward. Wesch said the county received the data it needed to distribute those sales tax revenues as recently as last Thursday.
“It took a lot longer than what we would have wanted, but we are apologetic to the county that this happened,” Wesch added.

However, Wesch recently told Lagniappe and other media outlets the city has no plans to pay the back rent and hasn’t set aside any funding for that purpose in its upcoming budget — a disclosure that has not sat well with Ludgood.

Mobile County Commission President Merceria Ludgood. (Mobile County)

“Of course, from a legal standpoint, that’s just not something the county can accept,” Ludgood said. “Personally, I think it’s outrageous, and I feel personally betrayed because I was led to believe otherwise.”

On Monday, Ludgood dispatched County Attorney Jay Ross to explore any “legal remedies” available to the county. However, lawyers for both sides are already pointing fingers.

While the county believes the city violated its lease by failing to pay rent, the city is maintaining the county violated its tax collection agreement when Hastie pushed to make ONESTOP the county’s primary tax collection agent.

“The two agreements — the lease and the tax collection — are joined at the hip. I think what we all believe to be true is that they were put together for a single reason, and that was to recruit the city as a tenant,” Wesch said. “Even if they’re not connected, the most that can be said is we each have a complaint with the other. If we’re going to talk about obligations in our rearview mirror, there are two.”