Last year’s oil and gas downturn means fewer property taxes now

Park County’s schools, cities, fire departments, cemeteries and other tax districts expect to collect nearly $45.5 million in property taxes this year — about $16.5 million (26 percent) less than last year.

Those local governments will collect fewer property taxes because Park County’s assessed valuation, or property tax base, shrank from $869.6 million to $640.1 million.

However, it doesn’t mean local taxpayers are getting a break.

Local governments are still levying the same taxes at roughly the same rates (an average of 71.1 mills). In fact, many property owners are actually likely to see a slight increase in their tax bills, because local home values continue to rise.

The sole reason for the decline was a more than 50 percent drop in the value of the oil and gas produced in Park County: from $475.6 million in 2014 to $232.2 million in 2015.

The local industry took fewer minerals out of the ground last year; data compiled by the Park County Assessor’s Office and dating back to the mid-1970s show it was the worst year on record for both oil and gas production. However, the bigger problem was plummeting prices.

Companies produced nearly 6.57 million barrels of oil in 2015 — almost as much as 2014 — but the average price per barrel dropped to $34, according to the assessor’s office. That’s less than half of the $69 that barrels were fetching in 2014 and the lowest average since 2004.

Meanwhile, the local industry piped out some 7.86 million Mcf of natural gas at an average price of $1.16 per Mcf. That was the worst price for Park County’s gas since 1995.

“It’s a killer,” said Park County Assessor Pat Meyer. “It’s all price, and that’s not going to change yet. When you start paying over $3 (per gallon of gasoline), then you’ll know it’s starting to pick back up.”

Meyer added that, “we knew it wasn’t going to be good for a couple of years.”

For some local governments, property taxes make up a relatively small part of their budgets. They only cover about 1 percent of the city of Powell’s budget, for example; the city actually expects to see a modest increase this year (to about $225,000), because the value of Powell homes and businesses went up between 2014 and 2015.

But it’s a drastically different story for some special districts, which rely almost exclusively on property taxes and specifically on property taxes from oil and gas production.

In Meeteetse, for example, the property tax base for the school, fire, recreation, cemetery, museum and conservation districts shrank by more than 48 percent.

Things were even worse in Clark.

On top of it being a down year for oil and gas, some wells that had been believed to be inside the Clark fire and Bennett Butte Cemetery districts were determined to actually lie just outside their boundaries, Meyer said. It spelled a 58 percent drop in revenue for the two districts.

“That’s a kick to the groin,” acknowledged Clark Fire District Treasurer Dave Hoffert.

Two years ago, the fire district received around $118,100 in property taxes. This year, they expect to receive just $45,600.

Hoffert said that fortunately, the fire district had planned to put around $40,000 in reserves. That provided needed breathing room.

“We’re absolutely bare bones, but it looks like, until something turns around, we’ve got a shot at surviving,” Hoffert said.

The Clark district handles an average of five calls a month. Usually, one call is for a fire and the other four are for medical help (the Clark district’s volunteers provide emergency medical services in addition to fire protection). If things get busier, or fire trucks start breaking down, that could swamp the budget, as annual expenses are typically right around $45,000.

“Everything has to be very typical,” Hoffert said. “If anything gets out of the ordinary, we’re going to be hurting.”

The overall decline in valuation across the county was a more modest 26 percent, but the Park County government still expects to lose about $2.75 million compared to last year. That’s like losing 10 percent of the county budget.

The Powell and Cody areas both fared a little better. For school, fire, hospital and cemetery districts in Powell and Cody, the year-over-year declines ranged between 15 and 21 percent.

Around 60 percent of local property taxes — by far the largest chunk — go to K-12 schools. The amount of taxes paid toward K-12 education this year stands to be around $27.5 million, down from $37.4 million a year ago.

However, that $10 million drop won’t directly affect the Powell, Cody and Meeteetse school districts, as the state guarantees school funding based on enrollment, class sizes, assessed valuation and other factors. It will be up to state legislators to figure out what to do to the funding model now that there’s less money to go around.

Mineral production represents such a substantial chunk of Park County’s tax base because it’s taxed at a substantially higher rate.

When a company pumps out oil and gas, they have to pay taxes on 100 percent of those minerals’ value. A homeowner, meanwhile, is only taxed on 9.5 percent of their residential property’s value.

As a result, it only takes $19,000 worth of oil to generate as many property taxes as a $200,000 home. To look at it another way, owning a $200,000 home in rural Powell would cost you about $1,320 in property taxes this year while producing $200,000 worth of oil would net a $13,875 bill.

The recent drop in production and price has significantly changed Park County’s property tax base.

Oil and natural gas production accounted for at least 53 percent of the county’s tax base over the past decade. This year, that figure is only 36 percent.

Things could still get worse.

Meyer said mineral prices dropped even further in the first quarter of 2016, though, he said, “I don’t think it will go down that much more.”

The largest recipients of the $45.5 million in property taxes that will be collected across Park County include: