The Montezuma County planning department is considering a county-wide tax to help offset an expected decline in revenue from oil and gas giant Kinder Morgan’s CO2 production, which contributes about 60 percent of county property tax revenue.
The McElmo Dome and Doe Canyon fields are expected to play out in 50 to 75 years, and with it revenues depended on by county government, school districts, emergency and law enforcement, social services, roads and water districts. The county is bracing for a significant drop in CO2 tax revenues as early as 2016 because of the decline in oil prices. The price of CO2 rises and falls with oil prices because it is used for oil recovery from under-performing wells.
“We’re looking for ways to fill the gap when Kinder Morgan can’t fill the coffers,” said county planning director LeeAnn Milligan.
The planning board came up with the sales tax idea after being tasked with exploring economic opportunities including Internet broadband and the Paths to Mesa Verde trail.
A county sales tax of 1 to 3 percent would generate $5 million to $10 million per year, and would be funded in part by tourists and out-of-town visitors, said planning commissioner Bob Clayton.
“Nobody likes taxes, but a sales tax is a way to get some income from tourists instead of having the property owners bear all the burden for county tax revenues,” Clayton said.
Montezuma County Commissioner Larry Don Suckla was skeptical of a new tax, and said voters expect proposals for additional taxes to have a specific purpose.
“The last four failed, and the only one that passed was the hospital sales tax because it was very specific for upgrading the facility,” he said.
Planning commissioner Kelly Belt said past attempts to pass a county sales tax failed by a narrow margin.
“We like the thought of bringing outside money into the county, and it could be specific for the high-speed Internet plan and Paths to Mesa Verde,” he said.
Clayton added that a public campaign explaining how the money would be spent could be the winning factor.
“Being transparent about it could make the difference — presenting to each town and explaining the thinking around it,” he said. “CO2 is a finite resource, and so we need to be prepared for when it runs out.”
The county is betting on high-speed Internet infrastructure to expand the economy and attract new businesses. Private communication companies would compete to provide the Internet service and pay to use county infrastructure.
The build-out price was estimated at $27 million, but the cost would eventually be recouped by fees collected from companies using the county’s telecommunication “road.”
Paths to Mesa Verde is seen as an economic driver similar to the popular Phil’s World bike park. The proposed 17-mile trail would connect Cortez to Mancos, and has the support of Colorado Gov. John Hickenlooper, who listed the project as a top candidate for a share of the $30 million in grants set aside for state recreation projects. A federal planning grant of $500,000 has already been awarded for the trail.
Promoting commercial solar farms and hemp production could also help drive the economy, the planning board said, and lifting the county’s ban on retail marijuana could bring in more tax revenues as well.
The county commission has until July 29 to inform the county clerk that it wants to include an issue on the November ballot.
Suckla said he would be against a sales tax, but might reconsider if it had a specific purpose. Commissioner James Lambert said he needs more time to think about it. Commissioner Keenan Ertel hasn’t weighed in on the issue.
jmimiaga@the-journal.com
KM’s tax contribution hits high in 2015
In 2015, property taxes collected from Kinder Morgan’s vast CO2 operation brought in half of all tax revenues for Montezuma County and its array of special districts.
But in 2016, the county is bracing for a significant drop in CO2 tax revenues due to the fall in oil prices. The price of CO2 rises and falls with oil prices because it is used for oil recovery from under-performing wells.
“We won’t know how much of a decrease until next year,” said county manager Melissa Brunner.
CO2 is not publicly traded, and the price is negotiated privately through individual contracts.
One clue are the CO2 royalty checks collected by the county from Kinder Morgan, which are tied to the price.
“They dropped by more than half,” said county assessor Scott Davis.
In April 2014 a royalty check came in at $36,115, he said. For April 2016 it was $15,334.
According assessor abstracts, since 2005 Kinder Morgan has been the largest contributor of tax revenues to the county. And the amount has steadily increased.
In 2005, oil-and-gas contributed 30 percent of the county revenues or $5 million – of which $4 million was derived from Kinder Morgan’s CO2 production.
In 2008, oil-and-gas contributed 41 percent of county revenues, or 8.9 million – of which $7.2 million was paid by Kinder Morgan.
By 2012, oil-and-gas contributed 54 percent of county revenues, or $17.5 million – of which $14.5 million was paid by Kinder Morgan.
In 2015, oil-and-gas contributed 62 percent of county revenues, or $23 million — of which $18.6 million was paid by Kinder Morgan. Total tax revenues collected for 2015 were 37.1 million.
“Kinder Morgan has been good to us,” Davis said. “They will be difficult to replace, but looking to the future, we have to think about diversifying the economy. Now is the time.”
jmimiaga@the-journal.com
