Millions in Revenues from Shale Development Flood Ohio County Coffers
Tax revenues, thanks to Utica shale development, are flooding county and city coffers and quite literally saving rural Ohio from massive budget deficits. That’s what county auditors are saying in areas where oil and gas development is occurring in Ohio. EID conducted research and spoke with several auditors and elected officials on their recent analysis of their tax collections from 2014. Here’s what we found:
Increase in Bed Tax Revenue
Throughout the past few years, hotels have been popping up all across eastern and southeastern Ohio, and that means an increase in bed tax revenue to local governments. Take look at Cambridge, Ohio where new hotels continue to be built to support the industry. In one year, the bed taxes in Cambridge increased by 60 percent going from $375, 950 to $599,440 year-to-year. Even more astounding, in 2010 Marietta, Ohio had bed taxes that went from $517,580 to $1,128,491. That’s an increase of 118 percent! Back in 2010, many cited hotel construction and economic activity as being a direct impact of shale development to communities that would result in real job creation and tax revenue sources. This has certainly become a reality. As Joe Matthews, Mayor of Marietta explained:
“We are very happy with the increase we see in hotel and motel traffic and bed tax revenues, they have been increasing steady and we believe it will remain for 25-30 years to come, thanks to the oil and gas industry.”
Norm Blanchard of the Cambridge-Guernsey County Community Improvement Corporation had this to say:
“The dramatic rise in the County bed tax reflects the significant numbers of gas/oil workers who fill our restaurants, buy gas, patronize our laundromats, buy groceries, purchase vehicles, and generally make positive contributions to our community. Bed tax revenues have infused vital capital into the civic center and Visitors and Convention Bureau while assisting the City of Cambridge in major upgrades to city streets. The positives have been numerous and the negatives nearly non-existent.”
Sales Tax Revenues: Saving Local Governments
In addition, tax revenues going into the general funds at the county level are also on the rise and are bringing millions to local governments. The county sales tax is a major means of funding for government services and has become necessary as the Local Government Fund from the state General Fund was cut drastically over the past few years. The state budget cuts to Appalachia, and particularly areas where much of the oil and gas development has been occurring in Ohio, would have been devastating to county budgets. However, thanks to economic activity created largely by oil and natural gas development, not only have these government services continued, county budgets have quite literally been saved. Leroy VanHorne, Carroll County Auditor said,
“Five years ago this county was struggling financially we had to reconvene our elected officials to make sure we had enough money to pay our bills and so we wouldn’t finish the year in the red, cuts the Local Government Fund and other cuts from the state, left us with practically nothing. Now, with the gas play, we have sufficient funds to support all necessary government services once again.”
Three counties alone – Carroll, Columbiana, and Harrison – have collectively brought in over $10 million in new taxes just over the past few years. Sales tax revenues are a great indicator of how the oil and gas industry continues to drive overall economic development in Ohio. As Carrol County’s auditor explained, every dollar in sales tax generated in Carrol County produces 5.75 percent to the state in sales tax. So if $10 million in additional sales tax was generated into the coffers of these three counties, then the state of Ohio has received over $50 million in NEW taxes, thanks in large part to oil and gas development. Here’s how that works: a business in Carroll County pays 6.75 percent in sales tax revenue so a $100.00 sale requires $6.75 in sales tax. The business sends that $6.75 to the state of Ohio and the state takes $5.75 and returns $1.00 to the county where the business is operating. In Carroll County, their portion of those revenues has resulted in $3.8 million in 2014.
Columbiana County has experienced record highs in sales tax revenues. Last year was another banner year with tax revenues jumping 40 percent going from $11.7 million in 2010 up to a staggering $16.3 million in 2014. As Mike Halleck, Columbiana County Commissioner and President of the Ohio County Commissioners Association said,
“Our sales tax has exponentially increased as a result of the oil and gas development in Columbiana County over the last 4 years. Since 2009, our sales tax revenues have increased by 40%. Columbiana County has continued to see increases in sales tax revenues year-to-year, and 2014 continued that trend, as revenues reached over $16 million. These numbers are a sign of real economic impact to our region.”
It’s clear that shale development in Ohio is not only creating thousands of jobs; it’s also providing our local governments with millions in tax revenues, which are allowing much-needed government services to continue for our citizens. One this is certain: the outlook of these counties would not be nearly as bright without development in the Utica Shale.