Who understands severance tax?

Hint: It’s not the Denver Post

Who understands severance tax? Municipalities around the state understand severance tax.

The Denver Post – based on the editorial in this past Sunday’s newspaper – most definitely does not understand severance tax, as evidenced by its promotion of a dangerous proposal for the state to eliminate energy impact grants to municipalities and counties.

Many communities around the state, whether they have active drilling or mining occurring within or around them at this moment, have experienced the impacts of natural resource extraction from within or around their borders. They understand that even when the truck traffic thins out, the employees leave the restaurants and community centers, and the wells are shut in that the impacts do not go away. They know that communities suffer and some all but disappear.

Municipal leaders understand energy impacts. Municipal leaders understand state statutes that express legislative intent that the state be compensated for the depletion of natural resources from Colorado, and that impacted communities should receive a designated portion of that money to help mitigate the impacts. They understand that roads, bridges, water and wastewater infrastructure, public safety, and economic development potential are all part of the impacts.

In fact, the Post only suggests that money be diverted away from energy impacted communities and toward the General Assembly to “set aside for infrastructure,” even while acknowledging the fact that the state has diverted nearly $400 million in severance tax for local governments to backfill the state’s own budget and never to be seen again. Those diverted local government severance tax dollars were transferred from a fund that is actually set aside for infrastructure. Had the legislature left those dollars alone, the impact of the money would have been over $1 billion in infrastructure projects and accompanying wages right in the midst of the Great Recession.

It is as if the Denver Post thinks that mayors sit in town hall waiting for a golden goose from Denver to deliver a wad of cash so that they can “snip the ribbons on new recreation centers.” It will no doubt be quite a party in Salida when the water treatment upgrades are finished, just like the blowout they will have in Rangely when the wastewater treatment plant work is complete. Every project gets significant scrutiny from the Energy Impact Advisory Committee and, ultimately, Department of Local Affairs (DOLA) Director Irv Halter. Matching requirements ensure every applicant has skin in the game. I encourage the Denver Post – or anyone who wants to see how DOLA’s impressive program is administered – to get more details from DOLA’s website.

Sadly, the Post misses the point entirely. Colorado Oil & Gas Association President & CEO Dan Haley actually said it best in a recent blog that the problem lies in the collective unwillingness at the Statehouse to “take on the complex Gordian knot of amendments such as TABOR, Gallagher and 23, that have tied up the state’s budget and stressed out lawmakers for decades.” The League wholeheartedly agrees. Regardless of who one agrees with at the capitol on what is to blame, the State of Colorado and its leaders must get the state’s fiscal house in order. The myopic, year-to-year approach to adopting a balanced budget creates a new bogeyman every year. (Two years ago – severance tax. Last year – hospital provider fee. This year – the Gallagher Amendment) Like some sort of modern-day Sisyphus, we will do it all again this year, as even more of the severance tax is proposed to backfill the state’s general fund.

The state’s budget constraints are a far larger matter. Regarding severance taxes, the right thing to do is to protect them and ensure they continue to be used for statewide infrastructure, just like the Post calls for. For now, the Colorado Municipal League will work with House and Senate leaders on a better approach – one that ensures that severance taxes reach their intended recipients (which, by the way, also include critical state water and environmental programs in the Department of Natural Resources.)

Legislators from rural Colorado, where most of the impacts occurred or are still occurring, will be asked to be part of the solution to protect communities that support and rely on a healthy, well-balanced economy. Legislators from more populated areas of the state will be asked to do their part to ensure that the needs of all Colorado’s communities are met and that we do not abandon those towns that help contribute so much to Colorado’s  diverse economy and rich history.

central-city

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