September 12, 2008

Energy Tax Measure Will Backfire, Foes Warn They Say Proposal Would Drive Away Firms, Revenue

By Todd Hartman

A trio of rural officials on Thursday criticized a ballot proposal that would boost state revenues from gas and oil drilling, warning that it could drive energy companies from areas of the state where local property tax rates are higher.

That, in turn, would jeopardize funds for schools, fire districts and roads, they said.

"Local homeowners and businesses in Weld County will be left holding the bag," said Weld Commissioner Bill Jerke. Their "property taxes must automatically increase . . . to make up the difference."

Jerke was joined by State Board of Education Chairwoman Pam Suckla from southwest Colorado and Trinidad Mayor Joe Reorda at a news conference organized by Coloradans for a Stable Economy, the group funded by oil and gas companies that oppose Amendment 58.

Amendment 58, promoted by Gov. Bill Ritter, environmental groups and higher education activists, would end a tax benefit for the energy industry that allows it to deduct most of the property taxes it pays from its state severance tax bill.

Severance taxes are those paid on minerals, such as natural gas, "severed" from the ground in Colorado.

Eliminating the tax break would generate some $321 million for the state.

That money, under Amendment 58, would be directed largely toward college scholarships, but also to alternative energy projects and infrastructure improvements in regions heavily affected by fossil fuel exploration.

Jerke and the others argued that the tax deduction was originally put in place decades ago to account for disparities in local property tax rates.

Its authors wanted to ensure that companies didn't drill only in areas with low property taxes but also would drill in places - such as parts of Weld County - where numerous taxing districts create higher property tax bills.

The deduction has worked, but in a way some critics say creates too much of a tax break for companies. In many Colorado counties, for instance, some drillers have enjoyed years where they paid no severance taxes at all.

But Reorda said Amendment 58 could push out an industry that has played an important role in southern Colorado, including donations to help people who can't pay their utility bills, support of local school sports teams and help with clearing snow from neighborhoods after a 2006 blizzard.

"A lot of people don't know the things they do on the side," Reorda said.

Suckla said drafters of the amendment failed to consult with local school districts across the state or they would understand their fear that companies will "migrate to less expensive (taxing) districts."

George Merritt, a spokesman for A Smarter Colorado, which backs the ballot proposal, called the concerns cited at the news conference "one more distraction from an industry that will say and do anything to keep bilking Colorado taxpayers."

"Amendment 58 will end Colorado's outdated, $300 million subsidy for the richest industry in the world," he said.

Originally published by Todd Hartman, Rocky Mountain News.

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