Jackson County Board of Education v. City of Commerce Board of Education

• Court: Court of Appeals of Georgia
• Decided: February 13, 2023
• Docket: A22A1664
• Status: Published

Opinion

FIFTH DIVISION MCFADDEN, P. J., GOBEIL and LAND, JJ.

NOTICE: Motions for reconsideration must be physically received in our clerk’s office within ten days of the date of decision to be deemed timely filed. https://www.gaappeals.us/rules

February 13, 2023

In the Court of Appeals of Georgia A22A1664. JACKSON COUNTY BOARD OF EDUCATION v. CITY OF COMMERCE BOARD OF EDUCATION et al.

GOBEIL, Judge.

The Jackson County Board of Education (“Jackson County Board”) filed a

declaratory judgment action, seeking a declaration that a written agreement entered

between it and the City of Commerce Board of Education (“Commerce Board”) was

currently in effect and enforceable. The trial court ultimately granted Commerce

Board’s motion to dismiss and/or for judgment on the pleadings, finding the

agreement to be unenforceable under the Intergovernmental Contracts Clause, found

at Art. XI, Sec. III, Par. I (a) of the Georgia Constitution. Jackson County Board has

appealed, arguing that the trial court erred in granting judgment on the pleadings, as

it alleged facts that could prove that the Agreement was valid as an intergovernmental contract for the provision of services. For the reasons set forth below, we reverse the

trial court’s order.

The record here shows that Jackson County and the City of Commerce operate

two separate school districts, each with its own board of education and its own source

of revenue for funding education services through the collection of ad valorem

property taxes. In 1995, Jackson County Board and Commerce Board, along with the

City of Commerce, entered into a contract (the “Agreement”) concerning students

residing within one district who attend schools in the other district. The Agreement

acknowledges that both Boards already are educating these so-called “crossover”

students, and states explicitly that “it is the desire of the parties to this [Agreement]

to contract with each other for the education of these students” as well as future

crossover students. The Agreement was signed on January 17, 1995, and expressly

expires on December 31, 2045 (a term of 50 years and 11.5 months).

The Agreement states that each Board shall be authorized, but not required to

“provide educational services” to crossover students. Under the Agreement, the two

Boards share tax revenue (specifically ad valorem taxes assessed and levied for the

operation and maintenance of the school systems) based on the comparative “per

pupil tax base” for each Board’s jurisdiction. The Agreement includes formulas to

2 calculate the per pupil tax base and how tax money should flow to either Board

(based on the number of students enrolled in school in each school district and the tax

digest of each jurisdiction).

The parties operated under the Agreement until 2007, when the financial crisis

changed the local economic situation, and the Agreement was suspended.1 In the

ensuing years, the school districts continued educating crossover students, but the

Boards did not exchange tax revenue. In 2020, Jackson County Board requested that

the parties resume performance under the Agreement; but, as relevant here,

Commerce Board took the position that the Agreement was unenforceable.

Accordingly, Jackson County Board filed a lawsuit,2 seeking in pertinent part a

declaratory judgment regarding whether the Agreement was enforceable by either

party.3 Commerce Board filed a motion to dismiss the complaint and for judgment on

1 Commerce Board contends that the parties mutually abandoned the Agreement at this time, but at the motion-to-dismiss stage, the trial court considered as fact only that the parties had not performed under the Agreement since fiscal year 2005-2006. 2 The City of Commerce was also named as a defendant in the suit, but the City is not a party to the instant appeal. 3 Jackson County Board later amended its complaint to seek reformation of the Agreement to change the expiration date of the Agreement to December 31, 2044. Jackson County Board argued that this would reflect the parties’ original intention for

3 the pleadings, arguing that the Agreement violates the Intergovernmental Contract

Clause because it: (1) exceeds the 50-year limit on intergovernmental contracts; and

(2) is not an agreement for the provision of services.4

After a hearing, the trial court granted judgment on the pleadings in Commerce

Board’s favor. The trial court found that the Agreement violated the Georgia

Constitution because it was a revenue-sharing agreement, not a contract for the

provision of services, and thus was prohibited under the Intergovernmental Contracts

Clause of the Georgia Constitution.5 Hence, the trial court dismissed Jackson County

Board’s declaratory judgment claim.

the Agreement to be of a duration of less than 50 years. The trial court ultimately dismissed Jackson County Board’s reformation claim as moot. See infra footnote 5. 4 The amended complaint also raised additional claims - if the Agreement was declared unenforceable, Jackson County Board sought the equitable return of monies paid to Commerce Board under the Agreement. However, those claims were not raised before the parties had oral argument on Commerce Board’s motion to dismiss and/or for judgment on the pleadings, so the trial court did not rule on them and they are not at issue on appeal, as they remain pending below. 5 The trial court also found that the Agreement violated the Intergovernmental Contracts Clause because it was for a term exceeding 50 years. The trial court stated that Jackson County Board’s contract-reformation claim seeking to reform the Agreement to a term of less than 50 years would have survived the motion to dismiss; however, it was moot based on the court’s other findings. Neither of these issues appear in Jackson County Board’s enumerations of error on appeal and the parties agreed at oral argument that these issues are not at issue at this time.

4 Jackson County Board sought and received a certificate of immediate review

and we granted its application for interlocutory review. The appeal originally was

filed in the Supreme Court, which transferred it here, see Case No. S22I0721 (April

7, 2022). In its transfer order, the Supreme Court noted that “the arguments raised by

[Jackson County Board] require the application of well settled constitutional

principles as to the proper manner in which claims concerning the interpretation of

[the Intergovernmental Contracts Clause] should be analyzed.”

On appeal, Jackson County Board argues that the trial court erred in granting

judgment on the pleadings. More specifically, it contends that it alleged facts that

could prove that the Agreement was a contract for the provision of services as

required by the Intergovernmental Contracts Clause. We agree.

“On appeal, we review de novo the trial court’s decision on a motion for

judgment on the pleadings to determine whether the undisputed facts appearing from

the pleadings entitle the movant to judgment as a matter of law.” Arbor Mgmt. Svcs.,

LLC v. Hendrix, 364 Ga. App. 758, 765 (2) (875 SE2d 392) (2022) (citation and

punctuation omitted). “The grant of a motion for judgment on the pleadings under

OCGA § 9-11-12 (c) is proper only where there is a complete failure to state a cause

of action.” Id. (citation and punctuation omitted). For purposes of such a motion, “all

5 well-pleaded material allegations by the nonmovant are taken as true, and all denials

by the movant are taken as false. But the trial court need not adopt a party’s legal

conclusions based on these facts.” BCM Constr. Group, LLC v. Williams, 353 Ga.

App. 811, 811-812 (840 SE2d 51) (2020) (citation and punctuation omitted).

Regarding intergovernmental contracts in Georgia, “the general rule is that a

local government may not enter into a contract that lasts longer than that

government’s term of office.” City of Decatur v. DeKalb County, 289 Ga. 612, 614

(713 SE2d 846) (2011) (citation and punctuation omitted). “The Intergovernmental

Contracts Clause found in Art. IX, Sec. III, Par. I (a) of the 1983 Georgia Constitution

provides an exception to that rule, and allows political subdivisions of the State to

contract with one another or with other public agencies, so long as the term of the

contract does not exceed 50 years.” Id. (citation and punctuation omitted).

As always, our analysis on constitutional issues begins and ends with the State

Constitution. The exact language of the Constitution, as relevant here, is as follows:

The state, or any institution, department, or other agency thereof, and any . . . school district, or other political subdivision of the state may contract for any period not exceeding 50 years with each other . . . for joint services, for the provision of services, or for the joint or separate use of facilities or equipment; but such contracts must deal with

6 activities, services, or facilities which the contracting parties are authorized by law to undertake or provide.

Ga. Const. of 1983, Art. IX, Sec. III, Par. I (a).

As explained by our Supreme Court, “[t]his exception does not give the State

and its institutions and subdivisions the authority to enter into any and every contract

which they might in their discretion deem advisable.” Id. (citation and punctuation

omitted). Rather, relying on the language cited above, the Supreme Court has defined

two requirements with which contracts between governmental entities must comply

to fall under this exception: the contract at issue must (1) “involve the provision of

services, or the joint or separate use of facilities or equipment” and (2) it must “deal

with activities, services, or facilities which the contracting parties are authorized by

law to undertake or provide.” Id. (citation and punctuation omitted).

Thus, the validity of the [Agreement] at issue in this case hinges on whether, in substance, it is for the provision of ‘services’ or ‘the joint or separate use of facilities or equipment’ authorized by law. If the language of the contract is plain, unambiguous, and capable of only one reasonable interpretation, that interpretation must control, and no construction of the contract is required or even permissible.

Id. (emphasis supplied).

7 Relying primarily on City of Decatur, supra, the trial court found that the

Agreement at issue was an impermissible revenue-sharing agreement, as opposed to

a contract for the provision of services. In City of Decatur, DeKalb County and

several cities located within the county entered into a contract wherein they agreed

to distribute funds generated by a special sales tax instituted under the Homestead

Option Sales and Use Tax Act (“HOST”). 289 Ga. at 612. Our Supreme Court

affirmed the trial court’s finding that the contract violated the Intergovernmental

Contracts Clause because the contract consisted solely of an agreement concerning

how to distribute the HOST funds between the entities and how and where the entities

could expend the funds. Id. at 614-615. The Supreme Court held that the contract did

“not involve the joint or separate use of facilities,” and could not “credibly be deemed

an agreement for the provision of authorized ‘services.’” Id. at 615 (citation and

punctuation omitted). Rather, “[t]he focus and clear purpose of the agreement [was]

to provide a formula for the distribution of the HOST revenues; simply, it is a

revenue-sharing agreement.” Id.

Here, the trial court found that the Agreement between Jackson County Board

and Commerce Board was analogous to the revenue-sharing contract in City of

Decatur, and was not a contract for the provision of services. Important to the trial

8 court’s finding was that (1) the Boards already had been educating crossover students

before the Agreement; (2) the Agreement authorized, but did not require either Board

to educate crossover students; and (3) the Boards continued to educate crossover

students while the Agreement was suspended. . The court noted expressly: “The

parties were clearly not providing any services while the Agreement was in effect that

they were not already providing prior to the Agreement or even after the Agreement

was suspended.” The trial court also examined Jackson County Board’s policy as to

crossover students, determining that it likewise showed that Jackson County did not

consider itself obligated to accept a crossover student under the Agreement. These

facts led the trial court to conclude that the Boards’ provision of educational services

to each other’s students was not dependent upon the Agreement; thus the Agreement

“was not truly an agreement for the provision of educational services.”

However, simply because the Agreement was not the sole basis for the services

being provided by the Boards does not demand the conclusive finding that the

Agreement was not one “for” (from the Constitution) or “involving” (from the

Supreme Court’s interpretation of the Constitution) and “dealing with” the provision

of services. The preamble of the Agreement states that it was the “desire of the parties

. . . to contract with each other for the education of these students,” and “therefore,

9 . . . the parties hereby enter into this agreement as follows[.]” Thus, the plain

language of the Agreement confirms that its foundational purpose is to educate these

(crossover) students, an authorized service.6 That language contrasts with the contract

in City of Decatur, which stated its purpose was (as explained by the Supreme Court)

“to equalize the HOST tax reduction benefits to all DeKalb County citizens.” 289 Ga.

at 616 (citation and punctuation omitted). The City of Decatur agreement did not

specify, much less mention any services (or use of facilities or equipment).

Accordingly, we find the instant contract readily distinguishable from the one struck

down in City of Decatur. See J. P. Carey Enterprises, Inc. v. Cuentas, Inc., 361 Ga.

App. 383, 391 (1) (b) (864 SE2d 588) (2021) (“we ascertain the intent of

[contracting] parties by first looking to the language of the contract”) (citation and

punctuation omitted). Additionally, unlike the contract in City of Decatur, the

Agreement here ties the revenue-sharing to the service being provided. Indeed, the

Agreement provides that the taxes levied for the maintenance and operation of the

school systems shall be divided among the Boards based upon the per pupil tax bases

for both Boards. There is one method of dividing tax revenue when the County’s per

6 And, although the Boards may not have been obligated to educate every crossover student, neither party disputes that each Board did educate crossover students throughout the Agreement’s term.

10 pupil tax base is higher, and another formula when the City’s per pupil tax base is

higher. And the per pupil tax base is tied directly to the number of students attending

school in each district.

The trial court discounted such connection, reasoning “[u]nder all formulas in

the Agreement, each Board is independently setting its millage rate and taxes upon

taxable property within that Board’s jurisdiction, and dividing and sharing the taxes

within the ‘shared area,’ regardless of whether either Board has crossover students.”

And the trial court is correct that the per pupil tax base is not tied specifically to the

number of crossover students. However, it is tied to the amount of taxes collected for

the maintenance and operation of schools by each school system and the number of

students attending schools in each district, thus clearly attempting to equalize the

funding for each Board’s schools based on the number of children being educated.

And, as argued by Jackson County Board, the taxes being divided in this case may be

used by the Boards only for the support of public schools.7 Ga. Const. of 1983, Art.

7 We acknowledge that the contract at issue in City of Decatur contained a similar restriction; mandating that the governmental entities sharing tax revenue could use the funds only “for capital outlay projects to be located within the geographical boundaries of DeKalb County and to be owned, operated or both either by the County, one of more Municipalities or any combination thereof.” 289 Ga. at 615 (punctuation omitted). The Supreme Court noted that “[t]he fact that the [contract] requires the Cities to expend the tax proceeds in accordance with the

11 VIII, Sec. 6, Par. 1 (providing that “[s]chool tax funds shall be expended only for the

support and maintenance of public schools, public vocational-technical schools,

public education, and activities necessary or incidental thereto”). These factors add

support to our conclusion that Jackson County Board made a cognizable claim that

the Agreement was one for the provision of services. Compare Frazer v. City of

Albany, 245 Ga. 399, 400-401 (2) (265 SE2d 581) (1980) (contract between city and

inner-city authority to fund the acquisition of a consultant and manager to oversee a

construction project did not violate the Intergovernmental Contracts Clause) with

Greene County Sch. Dist. v. Greene County, 278 Ga. 849, 851 (607 SE2d 881) (2005)

(contract between county and school district to waive the county’s commission on all

taxes collected by the tax commissioner if the school district conveyed a piece of real

estate to the county was not permissible under the Intergovernmental Contracts

Clause; fact that tax collection services were related to the agreement did not covert

mandates of the [HOST Act] does not transform it into either a contract for services or one for the use of facilities.” Id. at 615-616. However, as explained above, that the Boards may use the shared tax revenue only for the operation and maintenance of their respective schools is only one factor we find that supports Jackson County Board’s claim that the Agreement is one for the provision of services. Unlike the agreement in City of Decatur, this Agreement expressly states its purpose is to provide education services and logically links the taxes being shared to the services being provided.

12 the real estate transaction into one for the provision of services). Further, the fact that

both Boards continued to educate crossover students while the Agreement was

suspended further supports Jackson County Board’s argument that the true intent of

the Agreement was to provide the service of educating students rather than share

revenue.

Here, the Agreement involves a service that each contracting party is legally

authorized to provide — the education of students within its public schools. And the

Agreement lays out that, in furtherance of the purpose of providing that service, the

parties will share tax revenue based on the taxes collected by and the number of

students being educated by each respective Board. Accordingly, where the Agreement

itself explicitly states that it is for the purpose of providing educational services to

children who reside outside their school district’s jurisdiction, and where the taxes

being divided are tied to and earmarked by law for such service, we find that Jackson

County Board pleaded facts that could prove that the Agreement is permissible under

the Intergovernmental Contracts Clause, and we reverse the trial court’s order

granting judgment on the pleadings to Commerce Board. See BCM Constr. Group,

353 Ga. App. at 816 (1) (“[j]udgment on the pleadings should be granted only when

“the moving party is clearly entitled to judgment”) (citation and punctuation omitted);

13 CoreVest American Finance Lender LLC v. Stewart Title Guar. Co., 358 Ga. App.

596, 600-601 (1) (854 SE2d 381) (2021) (factual disputes regarding the interpretation

of contract language precluded judgment on the pleadings).

Judgment reversed. McFadden, P. J., and Land, J., concur.