April 15, 2009

Prices, legislation impact County’s oil tax revenue

By Tina Foreman
Farmer Staff Writer

A drop in oil prices and change in legislation could mean less oil tax revenue for McKenzie County and the potential for higher property taxes.
“McKenzie County puts its oil tax revenue into the general fund,” says Frances Olson, McKenzie County auditor. “From there it is used to fund community projects and the general government of McKenzie County.”
Even though oil taxes aren’t the only revenue making up the general fund, it is the fund’s largest source of revenue. Other sources of funding include interest, fees for various services and royalties.
“Last year the county received $3.6 million in oil tax revenues,” adds Olson. “But, we spent $4.450 million from the general fund during the year.”
McKenzie County is aware that the amount of oil tax revenue it receives is dependent on the price of oil and the amount of production during the year, and because this amount fluctuates from year to year it is hard to plan for an average amount of revenue each year.
“If our oil tax revenues go down substantially, to the point that we can’t fund the general fund,” says Olson, “we would be forced to raise property taxes in an effort to make up the difference.”
With the decrease in oil prices, the county is aware that the coming revenues will likely be down from previous years, but with the legislature in session, prices aren’t the only concern this year.
“There are still three bills that address the distribution of impact dollars and every day they change,” says David Drovdal, District 39 representative. We won’t know the final result until the gavel drops.”
In an effort to attract and keep oil companies drilling through tough economic times, the state of North Dakota offers tax breaks for newly drilled wells when the price of crude oil is below a certain point.
Although, these tax breaks cause counties to see less money, most lawmakers see it as a good thing because as long as there are new wells being drilled, then oil taxes will continue to be collected.
 “According to the printout that I am receiving there are more dollars coming to the taxpayers of McKenzie County than before,” adds Drovdal. “So right now I am encouraged about the outcome of the oil bills and their effect on McKenzie County.”
According to Drovdal, there is one bill, HB 1304 that has language which could result in less money going to the city of Watford City.
“HB 1304 has language that would allow only $750,000 to a city like Watford. Any additional dollars that they would have received, but didn’t because of the cap, would go to the county, adds Drovdal. “This and several other items in the bill will be negotiated in conference committee before the wording is finalized.”
According to Olson, even if lower oil tax revenues come, the County will do it’s best to hold the line on tax increases.
“The bills that are going through the legislature are designed to add revenue to cities, counties and schools,” comments Drovdal. “And even though there is wording in some of those bills that could lower revenue for McKenzie County, I am confident that in the end the oil tax bill that is passed will benefit McKenzie County and Watford City.”