Severance tax check comes up short, Rifle officials say | PostIndependent.com
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Severance tax check comes up short, Rifle officials say

Heidi RiceWestern Garfield County Staff

RIFLE – If the area is experiencing an energy boom, then why was Rifle’s severance tax check for this year so much less?That’s what city officials are grappling with after receiving a severance tax check from the state on Wednesday for a little more than $440,000.Last year’s check was for $1.67 million.”We’re very disappointed in the decision that was made and the method used to account for the numbers,” said city manager John Hier.The severance tax is calculated by the Department of Revenue using the number of full-time workers reported by local energy companies and then distributed to the affected communities to help offset the impacts felt from energy development.Last year, Rifle was reported to have more than 560 full-time workers living in the city. This year, that number was cut back to 91, accounting for more than a $1.2 million reduction in the severance tax check.”You can’t tell me that we lost that many (energy-related) employees,” said Mayor Keith Lambert. “Somewhere the numbers have been juggled – that’s where the problem lies.”Hier agreed, saying that with energy production on the increase, a 74 percent decrease in the severance tax amount didn’t make sense.In the past, the formula for counting energy employees was determined by their mailing addresses, which may have increased the numbers because of employees that have mailing addresses in the city, but who actually live outside city limits, resulting in those employees being counted twice.This year, the Department of Revenue interpreted the law to exclude energy-related workers who did not work full-time for one single company.Jim Evans, executive director of the Associated Governments of Northwest Colorado, pointed out that Halliburton Energy employees – many of who do contract work for both the two local major oil and gas producers, EnCana Oil & Gas and Williams Production – were not counted because their time was split between the two companies.”That’s more than 200 workers that were disallowed by the Department of Revenue,” Evans said. “They acknowledge that they are full-time workers, but they have contracts with both EnCana and Williams.”But even if the numbers last year were higher and a little off, Rifle city officials say the calculations this year were also wrong.”Last year was an aberration,” Hier said. “It was wrong in the way they did it and (the numbers were) inordinately high. But they can’t tell us that number went down from 475 people to 91, even if last year was a huge mistake.”Rifle isn’t the only municipality suffering. Mesa County also reportedly lost 262 oil and gas employees in 2005, and the town of DeBeque in Mesa County received absolutely nothing this year. Last year, the town was reported with 21 oil and gas employees and received a $62,000 check. This year they were reported with no energy employees at all.DeBeque Mayor Don Cramer went door to door asking if people worked for the oil and gas industry to verify that number.”He found 36 oil and gas workers who all said they worked full-time for the industry and owned their own homes,” Evans said. “And that didn’t include nine homes where people weren’t there.”Luckily for Rifle, City Council – knowing that the severance tax amount is volatile and can fluctuate from year to year – only budgeted $250,000 in income from severance tax funds for 2005.However, the city is in dire need of a new water treatment plant and wastewater treatment facility to handle the growth – much of which comes from oil and gas industry employees, Lambert pointed out. The severance tax money would have helped pay for some of that.But for this year, the checks are final. According to state statute, the amounts of the severance tax checks cannot be disputed or appealed.In response, a regional task force is expected to be formed to help change the legislation to more adequately reflect the number of energy-related workers throughout the state.”We’re scrambling to see what to do,” Evans said. “I think this will spur the need for new legislation. A task force will be formed with other government entities in the area to see what we can do and make sure the severance tax flows back to the areas that are affected.


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