Garfield County would like to take this opportunity to address the Post Independent editorial on the oil and gas industry that appeared on Feb. 27. We believe further clarification is required on the flow of funds into public agencies.
It is true that valuations for gas production could increase substantially in 2004 due to the high gas prices that prevailed during 2003. These revenues (which flow primarily into the county as property taxes and result from increased oil and gas property valuations) will not be realized until the year 2005. This is similar to property taxation for your home or business, in that the property taxes due this year are based on the 2003 valuation.
Oil and gas property taxes, like all other property taxes, are distributed to all of the traditional taxing entities. Typically schools receive 50 percent of the funds. Garfield County receives 24 percent. The remaining 26 percent is divided between fire, water, hospital and other special districts, Colorado Mountain College and municipalities.
Overall, property tax assessments were flat in 2003, and this has adversely impacted the 2004 budget.
Flat property-tax revenues have been a direct result of the general economic condition of the Colorado and of the United States as a whole, in the aftermath of Sept. 11, 2001.
The impact of flat property-tax revenues has also been amplified by substantial cuts in both federal and state funding for a variety of services provided through the county. These state and federal cuts are particularly prevalent in the general fund (a $3 million impact), from which a majority of services are provided to the public.
In the near term, the county will be able to absorb the revenue shortfalls in the general fund based on the fund balances built up over the past five years. However, if the county has another year of diminished state and federal funding in 2005, the general fund balance could be seriously affected.
Should the county (including all entities that rely on these taxes) realize a $12 million increase in property tax revenue from increased oil and gas activity, the resulting revenues to county government would only amount to approximately $2.8 million. This amount would not even cover the $3 million shortfall currently experienced in the general fund.
Of the 24 percent of property taxes that flow to the county, the following distribution is in the 2004 budget: 74.8 percent general fund, 10.2 percent social services, 8.2 percent capital fund, 3.6 percent road and bridge fund, 2.9 percent retirement fund, and 0.3 percent to the refund and abatements fund.
These percentage distributions can change slightly on an annual basis based on budgetary need. However, the voter-approved mill levy of 13.655 mills cannot change without the approval of county voters. The county is under another constraint from “TABOR” in that any increase in property tax revenues from one year to the next, in excess of 5.5 percent, can only be spent on capital improvements.
If the $12 million in increased revenue were a reality, the resulting $2.8 million that would accrue to the county would be an increase of 22.2 percent over revenues expected in 2004. This would exceed the 5.5 percent allowed under TABOR and state statute.
The result would be that most of the additional revenue (approximately $2.1 million) would be restricted to capital expenditures only, and could not be used for maintaining other county services.
The county needs to invest in key infrastructure improvements over the next couple of years.
These include replacing the Taughenbaugh Building in Rifle, remodeling or replacing the state court building in Rifle (the county is required under state statute to provide space to the state court system) and funding the county’s portion of the runway-improvement project (10 percent of the total costs) at the Garfield County Airport.
Although the additional property tax revenues would not fully mitigate the general fund shortfall, their assignment to the capital fund would be extremely beneficial to the county at this time.
As you can see, the possible impact of the increased oil and gas activity and resulting property tax revenue increases are necessary to reduce the shortfall in annual operating expenses of the county and to assist in the required capital projects over the next two to five years.
Unfortunately, the potential increase in property tax revenues would not result in an immediate windfall of excess revenues.
” Dale Hancock of Glenwood Springs is the operations director for Garfield County government.
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