As a working scientist who was employed in “high tech” for over 30 years, I don’t have much patience for unsupported rhetoric. I strongly support using all available evidence for decision making, so when politicians tell us to “don’t worry, be happy”, my warning antennas go up and I go into “alert mode”.
And, I don’t care what side of the question that you are on. Calling the other side a bunch of names, impugning their heritage, or using any word containing the segment “tard” causes me to doubt the speaker’s depth of thought (at the least…) and raises questions about their motivations.
So, when our Governor tells us that Weld County will be “ok” despite the passage of SB181, and when Ms. Galindo (HD50) parrots the same thing, I immediately wonder whether they have done their homework.
But, the same doubt applies to the references to the “Boulder mafia” that we have heard from our own Weld County Commissioners in recent weeks. In my opinion, it’s a childish and unprofessional effort to throw some “red meat” to the citizens of Weld County, at least partly to distract them from other issues.
So, when the County Assessor, Ms. Brenda Dones, was the featured speaker at the Weld County Council meeting last Monday night (4/15/19), those in attendance listened carefully as she described the process that is currently underway to provide your new property valuation for the next two years. But, in addition, Dones provided specifics on the the role of oil and gas in the finances of Weld County. Unlike some of the other elected officials, Ms. Dones is data-driven and depends completely on the “”facts on the ground” that enable her office to analyze and deliver the property valuation information that our county, cities, towns and taxing districts rely upon to plan their budgets for the next two years.
A recording of her presentation will be available at the Council website, but there were a few key details that are critically important for all Weld County citizens to be aware of, including those politicians who tell us to “don’t worry, be happy”, such as Ms. Galindo, who represents HD 50 (Greeley).
1. The total assessed valuation of all the property in Weld County as of the most recent valuation is about $11.7 billion. This includes agricultural land, commercial, industrial, residential, and oil and gas. Of this amount, $6.8 billion, or 58%, is owned by oil and gas, which includes not only their land (i.e. real property) but also their business personal property (equipment, etc.).
2. The taxes paid by any property owner are based on the relevant “mill levy” for that location, and the “assessed value”. The assessed value is the product of the actual market value of the property and the specific assessment rate that is used for that type of property. In Colorado, most property is assessed at 29% of market value. The two important exceptions are residential property, currently assessed at 7.2%, and oil and gas property, assessed at 87.5%.
So, in general, the property tax is given by (mill levy)*(market value)*(assessment rate). If a residential property with a market value of $100,000 is located in an area where the mill levy is, for example, 50 mills (5.0%), then the tax would be (0.05)*(100,000)*(0.072), or $360.
3. What is the role of the oil and gas industry? Is the concern about the impact of SB181 justified? According to Ms. Dones, the total property tax income to Weld County entities (County, cities, town, school districts, etc.) in 2018 was about $850 million. Of this, the oil and gas industry paid about $493 million.
It’s no surprise then that the property taxes paid by the oil and gas industry are an extremely large share of the income of Weld County. This is based not only the large amount of land holdings, but also the taxes on the business personal property that they use. For example, of the $177 million that Weld County received from property taxes in 2018, $103 million came from the oil and gas industry!
Weld County’s school districts are an even larger beneficiary of property tax revenues. In 2018, they received $343 million from property tax. (Of course, the oil and gas fraction of their valuation base will differ between districts, as will the oil and gas income.) Though it would not be uniformly decreased, a major loss of oil and gas property tax revenue would likely devastate many of our school systems.
Clearly, this revenue is critical to the County and municipalities ability to provide their services. There is simply no alternative in many cases to drastically cut services, or, to increase the property taxes on other property owners.
4. But, some will claim that this loss in revenue will not occur–after all, the oil and gas industry is not going to simply leave our County.
I think that this is the source of a great deal of misunderstanding. As we learned on Monday night, sustaining the oil and gas activity is critical to sustaining the income because about 40% of the tax revenue from that industry comes from NEW DRILLING that occurred during the previous year. The revenue from that drilling activity falls of each year thereafter, but is still significant. So, if there were a moratorium on new drilling that was imposed by the state for even one year (as has been the stated intention of the Governor) the economic cost to Weld County would be devastating due to the compounding effect of that reduction in drilling.
Think about it: if Weld County lost 40% of the nearly $500 million that it currently receives from this industry, it would be a shortfall of about $200 million!
5. Who would be affected? Of course, the County itself would lose about $41 million of its $177 million in property tax revenue. But, everyone in the County would feel additional effects, although some would be affected more than others. Let’s take one example: Aims Community College. The property tax income received is based on the total assessed value within the relevant taxing district. Based on County records, in 2018, that amount was $10.0 billion, and their mill levy was 6.317 (0.006317%), which resulted in revenue of about $63.3 million.
However, County records also show that for this taxing district, oil and gas companies accounted for an enormous share of the assessed value. This table shows only the top 10 assessed values:
With the exception of XCEL, these are all oil and gas operations. These companies alone account for over $5 billion of the assessed valuations within the AIMS taxing district–more than half!! Oil and gas industry property taxes accounted for more than $30M of the AIMS budget. Obviously, not all of these companies are conducting drilling operations, so it’s unlikely that AIMS would lose 40% or $12M. But, a substantial reduction would be anticipated–it appears that as much as $5M could be lost if a drilling moratorium were imposed.
The bottom line is that in fact, SB181 could have a major, negative financial impact on the citizens, schools, cities and towns of Weld County. It’s NOT just rhetoric! While we cannot yet determine how great the impact will be, the very real threat of a moratorium on drilling while the newly composed COGCC decides what the rules are going to be should be a major concern to all Weld County residents, as well as those in other Counties that will be affected. While areas such as Boulder County, where there are minimal oil and gas activities, may not consider it to be important, the entire state of Colorado will be affected.
If you are interested in how all of this affects your particular city, town or other taxing district, you can use this link to see the County report of the top 25 taxpayers for each district:
Report of the top 25 taxpayers
The Assessor’s office has also provided a useful summary of the property assessments and expenditures in this booklet:
Summary of property assessments and expenditures
One of the other eye-opening statistics that Ms. Dones shared is that the total market value of Weld County property is going to increase as a result of the current re-valuation to over $14 billion!! While some of this increase will come from residential properties, in reality the large majority of the increase will come from oil and gas operations, resulting in an even larger financial impact on the operation of the county, cities, towns and taxing districts.
That’s the data, folks. Anything else is malarkey.
NOTE: We are grateful to Weld County Assessor Brenda Dones for her excellent presentation at the County Council meeting and for providing the detailed data at the Assessor’s website.