Appalachian Basin

Growing Upstate New York or Sustaining Atrophy; The Choice

Upstate New York faces a choice between a future of growth and one of atrophy.  Dick Downey reflects on how an unusually cold Spring yields frustration on top of frustration for landowners, residents and taxpayers — all of whom would benefit from responsible natural gas development.  

Winter is over but Spring is breaking bad. It’s still cold. The Yankees are playing on Jeter’s legs. The Red Sox are … well, the Red Sox: sooner or later, they’ll break your heart. The Tax Man has come and gone with our money. And for our local schools, it’s Budget Time. Definitely breaking bad for the local schools.

At the Unatego School District, the final budget shortfall, after all the dust from Albany settled, was $625,000. The school board — cut to the bone — lucked out with a loosening of some state regulations, closed the gap, and pulled off another year without having to close Otego Elementary. But next year’s state budget brings next year’s problems.

With ten percent of the housing in the Village of Otego empty, the Village is mowing lawns on several of the properties to keep up appearances. Not quite Detroit, but definitely sub-optimal. Take a walk and you can trip over the FOR SALE signs. They’re not doing much good. There’s not enough sales in Otego to do the comparables necessary for a town revaluation. Building permits? Very quiet, we’re told. Heck, even the good news has a tinge of grayness about it. There is talk of Dollar General coming to town. Certainly welcome — but the emphasis in Dollar General is on the “Dollar.”

Fifteen years ago there were 1,450 students in the Unatego District. Today — 1,030. Unatego is not unique. Over the last 10 years there has been a 20 percent decline in the Delaware-Chenango-Madison- Otsego Board of Cooperative Educational Services schools. Richard Deitz of the Second Federal Reserves reports that if Central New York were to be considered a state, the in-migration of the young, child-bearing population would rank us 49th out of the 50 states. Nobody is coming to our area to replace the normal population drift of the young adults. And why should they? There are no jobs and our wage levels are losing ground (see Deitz chart below).

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It doesn’t have to be this way. North Dakota, Texas, Ohio, and Pennsylvania are booming, adding good paying jobs to local economies, reviving the Rust Belt, and building hope for the future. They are developing their shale resources and, in so doing, taking our nation from energy dependence to energy independence, reducing energy costs for consumers and driving our CO2 emissions to a 20-year low. A win/win situation all the way. While Governor Cuomo fingers his worry beads over his ideological base, other states are forging ahead to fight back against the low-growth recession we’re in.

And, these other states don’t have the rural multiplier that New York has – the ad valorem tax.

In New York, tax revenues from oil and gas activities go directly to localities through the ad valorem tax. In most other states, severance taxes accrue to the state itself, which then must redistribute the revenue. In 1981, our state legislators traded home rule in all matters dealing with oil and gas (except roads and taxes) for localized revenue. Yes, the home rule issue is in the courts, muddied up by a another law dealing with gravel pits that has a similar preamble, but the trade-off was this: Towns lose home rule but Towns get direct revenues. No stopover in Albany, where the money disappears into the General Fund and ends up repairing off-ramps in Buffalo or subsidizing who knows what. The money stays home, going directly to the towns, the local school district (see picture of Oteo Elementary School below – spared the axe this year), the local highways, the emergency service providers, and the libraries.


Each gas well is a separate taxable entity with its own tax code number. It has an assessed value and is taxed according to production, at a price “leveled” using a five-year rolling average.  These taxable entities aren’t just another building. Each well is assessed in the millions of dollars. One well added to the tax rolls, producing at current Marcellus rates, could be the equivalent of 20 high-end stick built units. In Pennsylvania the estimates on the duration of the Marcellus range from 60 to 100 years. There will be a peak and a decline but these are decades away. That’s a lot of prosperity for a long time to come.

There’s no immediate rush to develop in our area, though. After the courts and the lawsuits (and the plea deal by the guy who chains himself to rigs), there will be a slow rollout along the Pennsylvania border. That rollout will move north and someday come to Otsego County. There will be well-paying jobs in the industry and in servicing the industry. With the influx of money, other opportunities will arise. People will come for the jobs. They will need places to live and buy houses. They will fix them up. They will mow the lawns themselves. Their children will attend Otego Elementary School, if we can keep it open.

That’s the way it works. That’s how we grow Otsego County instead of sustaining atrophy — if only our esteemed Governor will allow it to happen.



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