New tax formula means more funds for oil counties
By JILL SCHRAMM, Staff Writer jschramm@minotdailynews.comFact Box
Out with old, in with new
-
Townships will gain access to oil-tax revenue and counties and cities are less likely to reach caps as quickly under changes in the state formula for distributing revenue from an oil and gas gross production tax.
The share to county entities gradually declined after the first $1 million under the old formula. Total receipts were capped at between $3.9 million and $4.6 million, depending on the size of the county.
Under the new formula, county entities get the first $2 million before the graduated rate kicks in. After $14 million in revenue, they would see their share drop from 25 percent to 10 percent.
"It's not nearly going to be what we wanted to get, but it is definitely going to help," said Joan Hollekim, Mountrail County auditor. Oil-producing counties had lobbied to retain 25 percent of revenue.
The new formula eliminates the old caps. The new cap is that cities can't receive more than $750 per capita, which is much higher than the old cap.
Counties and townships also must levy at least 10 mills for roads and bridges to be eligible to capture their maximum share of the tax.
A portion of the money coming into the counties must go into an infrastructure fund. From that fund, 45 percent of the money goes to the county general fund and 20 percent goes to cities. For the first time, townships can share in the oil money by accessing the remainder in the fund.
Schools still will get 35 percent of the money coming to counties, but the new formula distributes that money to schools based on average daily attendance, with some restriction on the total. Some of the revenue also must go into the infrastructure fund.
The new formula is far more complicated, requiring more of the state and county officials responsible for calculating the disbursements.
"It's not so much that the extra work is a problem," said Linda Svihovec, McKenzie County treasurer. "It's making sure that it's being done correctly and that every county is doing it correctly. There are so many opportunities for error."
Changes in the state's distribution of oil and gas taxes could mean more money for road repairs and other capital projects in some of North Dakota's energy counties.
The new formula, adopted by the 2009 Legislature, reduces the state's share of collected taxes and gives more to counties, cities and schools. Mountrail County, which capped out under the old formula last year after receiving only two monthly payments, is expecting a larger, more steady revenue stream this next year.
Mountrail County is optimistic that revenue in the coming year will double the taxes received in the past year, said Joan Hollekim, county auditor.
Last year, total taxes going to Mountrail County, its cities and schools was $5.6 million. In September, the county received $3.6 million in its first payment under the new law. Of that amount, $1.6 million stayed with the county. Schools received $1 million, and seven towns in the county received nearly $722,000.
Another $262,500 went into a new infrastructure fund that will provide money to counties, cities and townships. Because the oil money wasn't available to townships previously, Mountrail County has spent more than $3 million this past year to help out townships affected by oil development, Hollekim said. Townships could have $840,000 to work with through the infrastructure fund in the next year.
"We have allocated a lot of it to townships already," Hollekim said. "We want to be ahead of the game with the money. It will be already allocated by the time it comes in."
Stanley, which stopped receiving tax money after capping at $295,379 last October, hopes to triple that amount in the coming year now that payments have begun under the new formula.
The formula sets a cap for cities at $750 per capita. Beverly Gleave, Stanley auditor, said the city potentially could reach that $960,000 cap.
Stanley has earmarked most of the oil revenue to a street project estimated to cost residents about $500,000 out-of-pocket after grant money. Gleave said there's discussion on reducing the city's base water rate as well. The rate has been high, to pay off the cost of a pipeline from the R & T Water Supply Association. Those costs are coming to an end, but money will be needed to maintain the system, she said.
Parshall, whose oil revenue capped at $226,557 this past year, anticipates reaching the per-capita cap, which amounts to about $750,000.
"It's a major impact and it's a major benefit to us, no question. We are grateful for the change," said Loren Hoffman, city auditor.
The city council plans to use the tax money and money earned from selling water to oil companies to construct a building to house city offices and the library. Currently, city offices are housed in Parshall's Memorial Hall, built about 60 years ago, and the library is in a building more than 40 years old that needs repairs, Hoffman said.
New Town could get more than $1 million if it reaches its per-capita cap, and Mayor Dan Uran believes that is possible. New Town received $315,702 this past year. Uran said the city puts 75 percent of its oil revenue into its general fund and uses the rest for roads.
Hollekim said schools won't see as much difference in their share of the revenue, although the money will flow in throughout the year rather than capping early as it did this past year. Increased enrollments could affect the revenue, though, because the new formula takes student populations into account. Schools also will benefit as counties and townships obtain more money to repair bus-route roads.
McKenzie County entities capped out at $5.1 million under the old formula last May. It is budgeting for similar income rather than an increase in the coming year because of lower oil prices and production uncertainties that figure into tax collections.
Frances Olson, county auditor, said the infrastructure fund also won't have much effect because the county already handles most of the road work for the townships.
Linda Svihovec, McKenzie County treasurer, said about half the state's 17 oil and gas counties won't see much change in their annual revenue. Of the other half, the top producers will reap the largest benefit, she said.
Ward County receives a minimal amount of oil and gas revenue. Devra Smestad, county auditor, said the county is not budgeting for any extra dollars in 2010. Last year, Ward County and its schools received $109,862 and cities received $27,466.
