Counties hear state tax plan
ST. CLAIRSVILLE Local representatives heard and expressed dissatisfaction with the state government’s proposed severance tax plan.
Southeast Ohio Regional Liaison Nick Gatz and Joy Padgett, deputy director of the Governor’s Office of Appalachia made a presentation to commissioners and officials representing Belmont, Monroe, Harrison, Noble, Carroll, and Columbiana Counties.
A revision in the plan has been proposed wherein the state would keep a portion of the newly generated severance tax in areas affected by drilling.
The governor’s office proposes a severance tax of 4.5 percent, with 75 percent of that continuing to go to the statewide income tax cut. A total of 25 percent would stay in the region, with 25 percent of that quarter going to local development districts across Appalachia. This contributes to projects such as infrastructure, water, sewer and broadband.
The projected local share during the next five years should be $375 million.
A total of 75 percent of the local share would then go to areas most affected by the drilling as determined by the Ohio Department of Natural Resources drilling permits.
The tax would be 1.5 percent for the first year for cost recovery, and 4.5 percent every year after.
Gatz said the plan would accomplish the governor’s goal of keeping the state competitive while addressing local needs, since Ohio’s tax would remain comparatively low despite the increase. He said the change serves as a modernization of a tax code that still accounts for small vertical wells.
He stressed the potential to build a long-lasting, sustainable legacy.
“The opportunity here is incredible,” Padgett said, adding that she believed if the budget was not passed, the issue would go on a statewide ballot and pass without local funding set aside.
Harrison County Commissioner Don Bethel inquired into how the local funds would be allocated. Padgett said those details were still to be determined after the enabling legislation was passed. Likely a working board of people from the region will work out an allocation system.
There are 13 states in the Appalachia Regional Commission, with 32 counties in Ohio, though not all 32 counties are impacted by the oil and gas industry.
Belmont County Auditor Andrew Sutek asked if it would be possible to adjust the percentages to more favor the locals. He pointed out that the increased revenues of the sales tax is offset by cuts in local government and deregulation.
On a separate subject, Sutek also brought up the ad valorem tax on extraction and a desire to see more of those funds going to counties where the extracting is taking place.
Belmont County Commissioner Ginny Favede reiterated that she had supported the severance tax if a portion was coming back to the impacted counties. She questioned the decision to divert a quarter of the allocated 25 percent to the Appalachian Region. She pointed out the expenses incurred by the counties who host the oil and gas industry and help them do business.
“It is costing us money to host this industry,” she said, pointing out the material, electric and utility expenses, the workload on the recorder’s office, the engineer’s office, new equipment at the probate court, and security needs. “My general fund hasn’t changed in two years, but my costs are increasing.”
Bethel added that if the percentages of local allotments are not open to change, he said there should be no restrictions on the use of the 75 percent that is sent back to the counties.
“All of us here know our counties better than the state knows our counties and how that money should be spent within our counties,” he said.
Padgett said the funds would probably not go directly to the county. She said an independent board with local participation would establish a system of allocation, but would not itself be responsible for individual allocations.
Bethel voiced concerns that even the most impacted counties would compete for the funds.
“You’re going to have a free for all,” said Sutek.
“If it is no directly coming back to the counties and the county commissioners, I would be against a severance tax,” Favede said.
Larry Long, executive director of the County Commissioner Association in Columbus, said their support of the severance tax increase is contingent on the money that is coming back to local governments being run through the counties, not through an undefined state process.
“The 25 percent of the money that would come locally, instead of going to local development districts and port authorities, should come to each board of county commissioners,” he said. “Each board of county commissioner would then determine priorities in their county in terms of not only the county government, but municipalities and townships and schools and county engineer and recorders offices.”
“I’m not against an income tax cut, but I hate to see it on the backs of 12 or 15 counties,” said Commissioner Carl Davis, Monroe County. “I’m not going to be happy with anything less than 50 percent, I’ll tell you the truth, and with some local control. More so than what we’re hearing right now.”
Favede pointed out the local impact of the state level cuts, adding that it was difficult to consider long term plans and legacies when facing urgent needs for infrastructure repairs and maintenance. She recounted instances where communities have had to turn off their street lights at night, to the hazard of elderly drivers and young pedestrians.
“I have unsafe communities as a result of those cuts,” she said, noting the county’s $25 million debt and the annual struggle to come up with the minimum bond payment. “Having that money come back to the counties and allowing us to use it in the way that we think is best allows us to keep our heads above water.”
She added that it might be more efficient to place the 25 percent directly back into the counties general funds.
“It’s our mineral resources coming out of our land,” she said. “I just am a little offended that we’re not trusted to take care of money. We’re fiduciary agents of the county general fund.”
She noted there were too many unknowns.
“You want us to support something blindly,” she said. “Without knowing those details then I am opposed to a severance tax.”
She added that her county could benefit from refusing the severance tax and instead working with the oil and gas companies who will benefit them directly.
DeFrank can be reached at email@example.com