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By TJ Jerke,Forum News Service, Published February 28 2013

More oil taxes targeted for oil counties

BISMARCK – A House proposal would change a current state funding formula to give counties affected by oil production a larger share of oil production revenue than the state.

It also creates a funding formula for “hub cities” including Williston, Dickinson and Minot.

House Bill 1358, sponsored by Rep. Bob Skarphol, R-Tioga, will result in the state shelling out more than $742 million to counties over the next biennium – $440 million more than what counties took in the current biennium.

“It’s a billion-dollar bill, and it’s 100 percent property tax relief,” Skarphol said during Thursday’s floor session.

The bill was passed to the Senate by an 82-8 vote.

House Majority Leader Al Carlson, R-Fargo, said the state is addressing the issues western counties are facing due to the heavy increase in population as a result of oil production, and this bill is only adding more to the pot.

He said the state has spent $1.9 billion total on infrastructure over the past two years. Gov. Jack Dalrymple has proposed $3.4 billion for the upcoming biennium for infrastructure needs and Skarphol’s bill add another $565 million on top of that, making the House’s commitment to all counties

$4 billion, he said.

“We have done in this bill what we said we would when we walked in this chamber,” Carlson said. “We’ve addressed the impact oil development has caused.”

By changing the distribution model for the gross production tax, counties would receive $1.1 billion and the state would only see $651 million, Skarphol said.

Skarphol and other western North Dakota legislators drafted the bill in response to political subdivisions not receiving enough from the production tax last year.

He said they didn’t think that was an appropriate amount, pointing out coal-producing counties received 36.3 percent of all state revenue collected from coal taxes.

The bill changes the distribution formula for counties receiving more than

$5 million from the gross production fund. Counties receiving less than $5 million will not see a change.

The current formula distributes 45 percent to counties, 35 percent to schools and 20 percent to cities.

Under the proposed formula, counties would see 60 percent, 20 percent would go to cities, 7.5 percent to organized and unorganized townships in the county and 5 percent to schools.

The bill also responds to hub cities, such as Williston, which was facing a

$30 million revenue shortfall this past year due to their population increase. It provides state dollars based on the number of oil workers in the city.

A definition of hub city is also included in the bill to qualify any city with a population of more than 12,500 people based on the 2010 census and has 1 percent of its workforce in mining, which is the federal job service classification that includes oil workers. For each 1 percent of oil workers, the city would receive $750,000.

Skarphol said Williston’s $30 million deficit was used as a baseline figure when drafting the bill.

With 40 percent of the Williston workforce being oil workers, multiplying $750,000 by 40 fills that $30 million hole. Dickinson, with 17 percent of oil workers, would receive $12.7 million and Minot, with 3.8 percent employment listing, would receive $3 million.

The bill had to address the hub city schools as well. Schools would receive one-third of the amount of money that would be given to the cities. So with Dickinson standing to gain $12.7 million as a hub city, the school district would receive $4.2 million.

But only 25 percent of that, or just over $1 million, would be given as a grant to the school. There would be an application process for specific projects for the remaining three-fourths, Skarphol said.

Another $150 million will go into the oil impact grant fund, which can be distributed based on an application process. The bill seeks to add to a fund that about $130 million available in the current biennium but received about $685 million in funding requests.

He said the money to the three hub cities reduces the competition so smaller communities can receive money from the fund.

Rep. Kenton Onstad, of Parshall, said he would have liked to see the impact grant fund increase more, but “we’re going to get those dollars for western North Dakota that’s really needed.”

Onstad, the House Minority leader, proposed a similar bill to provide 80 percent of oil production tax back to oil-producing counties, which failed shortly after by a 21-65 vote.