Taxes on energy extractive sources have made living in Southwest Colorado a lot less expensive than it would be otherwise for residents for almost three decades.
That is at an end.
Montezuma County once received about 30 percent of its taxes on assessed valuation from carbon dioxide extraction, a gas which is piped to Texas to be used to force oil to the surface. That percentage has dropped in half, as oil has been found in other parts of the country and prices have declined. The demand for CO2 has declined.
La Plata County once received as much as 60 percent of its assessed valuation taxes from natural gas production. That has dropped in half as well, to 30 percent, and for the first time in a decade, sales taxes are generating an equal amount of revenue.
At its peak in 2010, taxes from natural gas totaled $29.5 million. For 2017, it could be about $16 million, according to county predictions; for 2018, the amount could drop somewhat further.
La Plata County’s total revenues in 2017 are expected to fall some 14 percent, or $11 million, to $70 million.
In Montezuma County, total revenues are expected to be down 10 percent for 2017. Hiring and wage freezes in both counties will continue in 2017.
At the state level, the governor has proposed a fiscal 2018 budget – the year begins July 1 – which utilizes $32 million in severance taxes. If approved by the Legislature, that is money that will not be available to counties which are negatively affected by extractive industries.
The drop in revenues has both counties thinking about other revenue sources. For La Plata County, it could be a use tax traditionally on autos and building materials, what are referred to as growth taxes, and taxes on wholesale and retail marijuana operations. But La Plata County leaders are mindful that a mill levy dedicated to road and bridge needs was defeated twice, as recently as in November. The margin was small, but the county had tailored and promoted a persuasive argument for the tax, a tax which would have sunset after 10 years.
La Plata County has a 2 percent sales tax (a portion of which is shared with Durango, Bayfield and Ignacio), so there is no new opportunity there.
State severance taxes are what the Department of Local Affairs grants and loans to counties and municipalities outside the metropolitan areas. DOLA funds have been – and are – critical for infrastructure needs. DOLA is helping fund the purchase and remodel of the city of Cortez’s new municipal building, the construction of Montezuma County’s new building and the remodel of the courthouse in Durango.
DOLA has had a record-high amount this year to meet its commitments and to undertake new ones, but that will drop significantly in fiscal 2018. Grants and loans are competitive, and both counties are fortunate to have DOLA involved.
At some point, residents of both Montezuma and La Plata counties will see a reduction in county services as budgets decline. In different ways, people will feel that, for them, county services are falling short. Efficiencies will only go so far, and residents will either adjust to the constrictions or support new taxes.
Energy has had a good run, and taxes on natural gas and CO2 will not completely go away. But, now they are having to be supplemented by other revenue. What that will be, and how enthusiastically it will be embraced, remains to be seen.