Archive for Sunday, October 25, 2015

Lower oil, gas prices hit some Kansas county budgets hard

October 25, 2015

— Lower energy prices benefiting consumers at gasoline pumps have hit oil- and natural gas-producing counties in western Kansas hard, forcing them to cut spending or increase property tax levies just as the state is ending an aid program meant to insulate them from industry downturns.

The value of oil and gas property, which is tied to prices at the beginning of the year, declined an average of 52 percent, according to the state Department of Revenue. Sixteen energy-producing counties in western Kansas saw their total property values decrease by more than 20 percent, hurting their ability to raise local tax revenues.

Energy producers have experienced boom-and-bust cycles before, and Kansas created a special trust fund a decade ago, setting aside taxes collected from oil and gas production for counties to tap when the industry experiences a bad downturn. But legislators halted the program in 2014 and the state made its last payments to counties earlier this month.

Ness County, which saw the biggest decline in total property values, at nearly 34 percent, is using trust fund money to keep the increase in its property tax levies to about 4 percent next year. County employees won't get raises, and they'll have to pay more for their health care. County Commission Chairwoman Sandra Rupp said she worries that in the near future, the county won't be able to upgrade aging equipment.

"It's going to be really tough," said Rupp, who does the book-keeping for her husband's oil well monitoring and maintenance company in Ness City.

In each of the hardest-hit counties, oil and gas property accounted for at least 45 percent of total property values, according to the state's figures.

The figure in Haskell County, in southwest Kansas, was 71 percent, which was the state's highest. The county's property tax levies are expected to rise 7 percent next year and employees will forgo pay raises. County Commission Chairman Randy Froelich said he's anticipating an election by year's end on a special tax to keep two senior citizens centers open.

"Everybody's taxes are going to go up," he said. "That's just a given."

Legislators in 2005 recognized such potential problems for energy-producing counties and set up the special trust fund for them. Starting in 2009, the state set aside nearly $83 million of its revenues from oil and gas taxes to help those counties.

The trust fund law initially required counties to see huge drops in the value of oil and gas property for two consecutive years to tap into the funds. Area lawmakers said the accumulation of money was an inviting target as the Legislature wrestled with the state's own budget problems.

"My fear was that we weren't going to be able to safeguard it," said state Rep. Kyle Hoffman, a Republican from Coldwater, the seat of Comanche County in southwest Kansas, where property values dropped 31 percent this year.

Hoffman and other western Kansas legislators agreed on a compromise in 2014 — when oil prices were high — that abolished the trust fund as of 2016, allowed counties to spend the money as they saw fit and set aside oil and gas tax revenues going forward for their local schools instead. Hoffman's home county earlier this month received its last transfer from the trust fund, about $359,000.

But Comanche County Commission Chairman Larry Harvey said it isn't planning to spend any trust fund money next year because of concerns about the future. The county won't replace leaky windows in its courthouse and will delay road-paving projects to keep property tax levies in check, he said.

"We're going to hold it in case next year is a lot worse," he said.


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