October 13, 2015

Oil slowdown hits city, county taxable sales

By Neal A. Shipman
Farmer Editor

The impact of low oil prices and the slowdown of drilling activity in western North Dakota is being felt not only in the state’s oil patch, but across North Dakota as well. And the latest taxable sales and purchases report by the North Dakota State Tax Commissioner reflects the economic impact of the slowdown.
“The state has experienced a decline in oil exploration activity due to the low oil prices,” stated Ryan Rauschenberger, North Dakota Tax commissioner. “We anticipated that the second quarter taxable sales and purchases would be reflective of the decrease in activity.”
Statewide, according to Rauschenberger, taxable sales and purchases were $5.901 billion for April, May and June of 2015, a drop of 16.07 percent over those months in 2014.
For McKenzie County and Watford City, which are at the epicenter of the oil development, the drop in taxable sales and purchases during the second quarter of 2015 compared to last year’s figures was significant.
After seeing sales grow in double digits for the past several quarters, Watford City saw its first significant decline in sales in the past six years.
During the second quarter of 2015, sales in Watford City were $54,750,411, a decline 23.69 percent from last year’s sales of $71,748,687, during the same three-month period.
McKenzie County’s sales declined from $85,373,193 in the second quarter of 2014, to $67,450,133 in 2015.
“Obviously, we expected to see less sales as a result of the slowdown in oil drilling,” stated Brent Sanford, Watford City mayor. “With one-third of the rigs drilling in McKenzie County from last year, you know that sales are going to reflect that decline in drilling activity. There are a lot of sales that are associated with drilling activity.”
But, according to Sanford, while the state’s sales and purchases figures show a decline for Watford City, the collection of city sales tax has remained steady.
“I don’t know where the state’s taxable sales and purchases numbers come from,” stated Sanford. “Our collection of city sales taxes has remained pretty constant for the past six months when compared to last year.”
Rauschenberger went on to point out that taxable sales and purchases are still strong and reflect a significant amount of economic activity in the state. North Dakota has experienced exponential growth in taxable sales and purchases for the past several years. When viewed with a longer-term perspective, second quarter 2015 taxable sales and purchases are still over 70 percent higher than the second quarter of 2010.
Ever since the rush to develop the Bakken began in western North Dakota, taxable sales in Watford City and McKenzie County have skyrocketed.
In the second quarter of 2010, the city’s taxable sales totalled $17,153,105. Sales grew to $28,615,642 in 2011, $50,282,767 in 2012, and $51,347,106 in 2013, before peaking at $71,748,687 in 2014.
Likewise, the county’s taxable sales saw similar growth. In the second quarter of 2010, McKenzie County had sales of $19,125,207, before growing to $31,643,263 in 2011, $56,312,294 in 2012, $57,566,949 in 2013, and to $60,381,711 in 2014.
Elsewhere around the state’s oil patch, cities and counties were experiencing similar drops in sales as was being experienced in Watford City and McKenzie County.
Williston saw its sales drop 35.89 percent, while sales in Stanley and Tioga were down 42.06 and 38.68 percent, respectively.
According to Rauschenberger, six of the state’s 15 major industry sectors reported taxable sales and purchases gains when compared to the second quarter a year ago, with the most notable decline in the mining and oil extraction sector, which experienced a 31.43 percent decrease.
“Although taxable sales and purchases for the second quarter are down overall, it is encouraging to see that three of our four most populated cities saw an increase,” added Rauschenberger.  
Of the most populated cities, Grand Forks, Minot and Fargo all saw increases in second quarter taxable sales and purchases, with Bismarck decreasing by about two percent.