Bradford Tax Bill Is the Missing Voice in Natural Gas Debate
Some folks have been writing reports and issuing fact sheets over the last two years suggesting the economic impact of Marcellus Shale was somehow in doubt, or that other folks might have been left out. They were wrong and the proof is in the tax bill – going down.
Natural gas opponents have been claiming and their leaders have been saying, over and over again, to anyone who will listen, that the economic benefits are illusory, intangible, short-lived, boom-and-bust or otherwise insignificant.
They have repeatedly suggested the taxes fail to compensate for other costs and only the large, and somehow “greedy,” landowners benefit while the rest of the community pays. They have employed shallow, biased and subjective studies from sources who know better to paint a picture of gloom and doom or, at least uncertainty with respect to natural gas economic impacts.
Now along comes a newspaper story of an event destroying, in one fell swoop, every one of those false suppositions.
The Bradford County, Pennsylvania, Board of Commissioners just adopted a new budget for 2013. It includes a 5.9% reduction in property taxes as a result of natural gas development. The Towanda Review carries the story with this headline:
Going down! Commissioners cut property tax rate by 5.9 percent
This piece is so good, we include most of it below. We must point out, though, the contrast with what has heretofore been suggested by others in studies we critiqued at the time. Here, for example, what the Penn State said in a 2011 fact sheet entitled Impacts of Marcellus Shale Development on Municipal Governments in Susquehanna and Washington Counties, which was widely quoted by natural gas opponents and media to bolster the idea development wasn’t doing much for the economy:
…so far Marcellus shale development in Pennsylvania has not had major fiscal impacts on municipal governments.
A subsequent Penn State report entitled Economic Impacts of Marcellus Shale in Pennsylvania: Employment and Income in 2009 extensively quoted by skeptics and media said:
Only 18 percent of the governments experiencing Marcellus development activity said their tax revenues had increased, which indicates that most local governments being affected are not seeing more tax revenue as a result. In comparison, 26 percent of the local governments indicated that their costs had increased, particularly related to road expenses.
Now read what’s really happening in Bradford County courtesy of Act 13, the legislation virtually dismissed in still another superficial Penn State report that got a lot of play (emphasis added):
Going down! Commissioners cut property tax rate by 5.9 percent
BY JAMES LOEWENSTEIN (STAFF WRITER)
Published: December 21, 2012
TOWANDA – The Bradford County commissioners on Thursday passed a $61.2 million county budget for 2013 which includes a 5.9 percent decrease in the county property tax rate.
The millions of dollars in annual revenue that the county has started to receive from the impact fee on gas drilling companies is allowing the county to reduce its property tax rate, county officials said.
“This is a terrific day in Bradford County,” said Doug McLinko, chairman of the Bradford County commissioners.
The Bradford County commissioners on Thursday voted unanimously to eliminate the .65-mil portion of the county property tax bill that is used to pay debt service on bonds issued by the county, which amounts to a 5.9 percent reduction in the overall county property tax rate, said Bradford County Fiscal Director Joan Sanderson.
The debt service portion of the property tax bill has been eliminated until such time as the county starts to take on debt again, which is not expected to occur for at least the next several years, she said.
As a result of the decrease in the property tax rate, the owner of a house assessed at $50,000 will see a $32.50 reduction in his 2013 county property tax bill, Sanderson said. In Bradford County, houses are assessed at half their market value.
Victor Lawson, the former chairman of the grassroots group Bradford County Concerned Citizens, praised the commissioners for passing the tax decrease.
“This is amazing,” Lawson said. “I think it’s great for the property taxpayers. A lot of them can’t afford to pay their property taxes.”
The .65-mil portion of the tax bill that was eliminated was used to pay the debt service on two bonds that had been issued by the county, one to raise money to expand the Bradford County jail in the 2000s, and the other to pay the upfront costs for the county’s guaranteed energy savings project (GESP), which made the county-owned buildings more energy efficient.
Over the next three years, the county will set aside a total of $4.68 million to pay off the two bonds, Sanderson said.
Because the county has to abide by a set schedule for paying off the bonds in the coming years, the county cannot pay off the bonds entirely this year, Sanderson said.
However, the elimination of the entire .65-mil debt service portion of the tax bill is being done now, she said.
Reducing taxes is one of the allowed uses of the Act 13 impact fee. However, under Act 13, Bradford County cannot use revenue from the impact fee to eliminate its debt, Bradford County Commissioner Daryl Miller said.
Therefore, over the next three years, the county will use $4.68 million in impact fee revenue for specific purposes that are allowed under Act 13, while at the same time withdrawing a total of $4.68 million from the county’s General Fund to pay off the bonds, Sanderson said.
In 2013, for example, the county will spend $740,210 in impact fee revenue to help operate the county jail – which is an allowable use of impact fee money under Act 13 – while at the same time withdrawing $740,210 to help pay off the county’s debt, she said.
To finish paying off the county debt, the county will withdraw from the General Fund $1.0 million in 2014 and $2.94 million in 2015, she said.
“The way this was done (using the impact fee money to reduce the county’s property tax rate) complies with the law,” McLinko said. The Pennsylvania Public Utility Commission, which is administering the impact fee law, has approved the method by which the county is using impact fee money to reduce the county debt, McLinko said.
In addition, McLinko and Miller said they recently met with Lt. Gov. Jim Cawley to discuss the way the county is using impact fee money.
“He’s in full support of what we’re doing,” McLinko said.
Cawley had chaired a committee that had been set up by Gov. Tom Corbett to advise him on matters related to Marcellus Shale gas drilling, and it was that committee that had recommended establishing the impact fee.
The commissioners voted unanimously on Thursday to adopt the 2013 budget and set the county property tax rate for 2013 at 10.43 mils. The county property tax rate in 2012 had been 11.08 mils.
Smith, a Democrat, had initially opposed reducing the eliminating the debt service portion of the tax bill. However, at that time, the two Republican county commissioners were advocating using most of the county’s $8.4 million 2012 allotment of impact fee money to eliminate the debt, rather than the current plan of tapping the impact fee money over three years.
Under the current plan, a substantial amount of the $8.4 million allotment can be used to address the impacts of gas drilling on the area, he said.
The 2013 budget includes a plan to spend $1.13 million of the $8.4 million allotment, including $740,210 to help operate the jail, $250,000 to house excess Bradford County inmates in other counties’ jails, and $32,318 to hire another 911 dispatcher, Sanderson said.
The commissioners will be discussing, after Jan. 1, how to use the rest of $8.4 million impact fee allotment, the commissioners said.
The guaranteed energy savings project (GESP) is now saving the county over $300,000 in reduced utility bills, McLinko said. Because the impact fee is allowing the county to pay off the GESP bond, the more than $300,000 in annual savings, which was originally needed to help pay off the GESP bond, can now be used for other purposes, Sanderson said.
Specifically, the savings in utility bills will be used to pay for increased costs that the county will be facing, such as salary increases for its employees.
The county budget includes a 4.5 percent pay raise for the county’s non-union employees. Approximately half of the county’s employees are not unionized. The rest, such as corrections officers, probation officers, and certified nursing assistants, are members of unions, and their pay increases are set under union contracts.
The story speaks for itself. Not only are Bradford County landowners getting royalties and Bradford County workers getting jobs and Bradford County townships getting their roads upgraded, but Bradford County taxpayers are also getting relief during a continuing economic crisis that is driving up taxes nearly everywhere else. Despite all the hand-wringing by Penn State and others, the proof is in the tax bill. It’s going down due to Marcellus Shale. The tax bill, we might say, was the missing voice from all those negative reports.