Up to nearly $2 billion in property taxes from oil and natural gas development is projected over the next decade for a handful of five municipalities along Colorado’s Front Range, according to a new study from the Common Sense Policy Roundtable (CSPR).
The group projected two scenarios where oil and natural gas-related revenues could provide five municipalities studied between $1.39 billion and $1.85 billion in the next ten years, with local school districts receiving the largest chunk of the proceeds, from $822 million to $1.14 billion.
The group describes itself as a free enterprise think tank based in Colorado.
CSPR hopes the study, entitled “Local Revenue Impacts of Near-Term Oil and Gas Development in Colorado Municipalities: New Money For Schools, Roads and Public Services” will help communities determine the extent to which Colorado’s new Senate Bill 181’s expanded authority will impact property tax revenues and critical infrastructure if local governments decide to restrict oil and natural gas development.
“Under state law, the property tax assessment rate for oil and natural gas production is 12 times higher than residential property and three times higher than commercial prop- erty,” said CSPR’s Simon Lomax, the group’s Energy Resources Fellow. “That higher tax rate is a major factor behind these revenue estimates.”
The estimated range for the five Front Range municipalities examined in the study includes Aurora ($709 million-$944 million), Broomfield ($186 million-$248 million), Commerce City ($300 million-$400 million), Erie ($152 million-$202 million), and Johnstown ($39 million-$52 million).
“These revenues would support a wide range of local services, including K-12 public schools, road construction and maintenance, snow removal, police and fire departments, water and sanitation infrastructure and parks and recreation services,” the study says.
Other revenues, like severance taxes, income taxes, and royalties on mineral assets were not included in the estimates, the study’s authors note.
For K-12 public education, the addition of more than $800 million to $1.1 billion from oil and natural gas property taxes would boost per-pupil spending by $560 to $748, and “could be enough revenue to raise average teacher salaries by between $17,800 and $23,700 or 31% to 42% or support the hiring of between 2,438 and 3,244 additional teachers,” according to the study.
“This is not an exhaustive list of municipalities where future energy development may take place, and these revenue estimates are not intended [to] predict future tax revenues down to the very last dollar and cent,” said Chris Brown, CSPR’s Director of Policy and Research. “Instead, we chose these communities to give policymakers and the public a better sense of how oil and gas development can grow a local government’s property tax base once energy production begins.”
For example, CSPR’s analysis of Aurora’s near-term oil and gas development along the city’s eastern borders in both Adams and Arapahoe counties includes the counties’ 2018 production, which placed them fourth and fifth in the state, respectively.
The analysis also included projected operator agreements already approved by the city, along with assessments provided to state regulators, the group said.
The remaining four communities are located across Broomfield (City and County), Boulder, Larimer, and Weld Counties.
The group hopes that public policy discussions will include consideration of future revenue streams, particularly property taxes, that will fund infrastructure, including new facilities, in the years to come.
That includes a “relatively stable regulatory framework for developing new oil and gas facilities” such as the operator agreements already approved by local officials, and a “business as usual” approach from the state’s regulatory body, the Colorado Oil and Gas Conservation Commission.
SB 181, a comprehensive and controversial reform bill, was signed into law in April 2019, expanding the regulatory reach for local communities as well as the agency’s rulemaking process.
