FY 2019 Budget of DeWitt County, Texas Local Government Code - - PowerPoint PPT Presentation

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FY 2019 Budget of DeWitt County, Texas Local Government Code - - PowerPoint PPT Presentation

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FY 2019 Budget of DeWitt County, Texas Local Government Code Section 111.002. COUNTY JUDGE AS BUDGET OFFICER. The county judge serves as the budget officer for the commissioners court of the county. FY2019 Budget Hearing Presentation

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FY 2019 Budget of DeWitt County, Texas

Local Government Code

Section 111.002. COUNTY JUDGE AS BUDGET OFFICER. “The county judge serves as the budget officer for the commissioners court of the county.”

FY2019 Budget Hearing Presentation

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SLIDE 2

Eagle Ford Shale: the game changer

Online Video Transition of Permit Maps

FY2019 Budget Hearing Presentation

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New W-1 Drilling Permits in DeWitt County

  • 114 approved in 2010
  • 345 approved in 2011
  • 422 approved in 2012
  • 495 approved in 2013
  • 601 approved in 2014
  • 355 approved in 2015
  • 168 approved in 2016
  • 248 approved in 2017

2748 new well permits issued since 2010

FY2019 Budget Hearing Presentation

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Summary of Recent Budget History

  • Current tax rate is lower than 1997 tax rate
  • 28.7 percent tax rate reduction since 2011
  • $280.70 less tax bill on a $100,000 home than in 2011
  • $9,563,391 in Outstanding Debt paid off in 2016
  • $1 million of debt payment redirected to Road and Bridge budget
  • $112 million cumulative road and bridge appropriation since FY 2011
  • Competitive wage scale implemented
  • CETRZ Tax Increment revenue source for road projects was repealed in 2017
  • HB2521 royalty provided $2,117,000 in revenue in the first year of existence.

FY2019 Budget Hearing Presentation

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FY2019 Budget Policy

  • Observe fiscal discipline
  • Focus on long term stability of operations
  • Utilize cash reserve balances (where needed) to maintain a consistent level of public service
  • Maintain road and bridge efforts in all precincts
  • Maintain current level of employees
  • Maintain competitive wage scale with 3 percent COLA
  • Continue 21st Century fiber optic upgrades in County facilities
  • Conduct a Courthouse basement water mitigation project
  • Conduct a County office space and utilization study
  • Conserve cash reserve balances and enhance portfolio yield
  • Prepare for a soft landing
  • Avoid issuing additional debt

FY2019 Budget Hearing Presentation

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Drilling Activity vs. R&B Expenditures

Drilling and production activity leads to… more damages and higher expenditures

FY2019 Budget Hearing Presentation $1.56 $2.25 $3.14 $4.41 $12.37 $23.09 $20.02 $15.47 $15.59 $- $5.00 $10.00 $15.00 $20.00 $25.00 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018

Combined Road and Bridge expenditures

(millions)

R & B Spending 114 345 422 495 601 355 168 232 248 100 200 300 400 500 600 700 2010 2011 2012 2013 2014 2015 2016 2017 2018

Annual W-1 Permits Approved

# of W-1 Permits

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Road and Bridge Expenditures

$6.8 million FY 2005 thru FY 2009 $97.9 million since FY 2010 (Eagle Ford Era)

$- $5,000,000 $10,000,000 $15,000,000 $20,000,000 $25,000,000 FY 2005 FY 2006 FY 2007 FY 2008 FY 2009 FY2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018

Funded by Local Property Tax Revenue and one TIF Grant of $4,957,614 in FY 2015

PCT 1 PCT 2 PCT 3 PCT 4 TIF GRANT CETRZ 1 CETRZ 2 CETRZ 3

Tax increment revenue raised from SB1747, the CETRZ Law, that was repealed in 2017

$16,072,391

FY2019 Budget Hearing Presentation

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Budgeted Appropriations by Category during the Eagle Ford Shale Era

10 20 30 40 50 60 70 80 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019

In Percent of Total Budget

FY2019 Budget Hearing Presentation

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Road and Bridge Budgets by Precinct

$112 million appropriated since FY2011

$- $1.00 $2.00 $3.00 $4.00 $5.00 $6.00 $7.00 $8.00 Precinct 1 Precinct 2 Precinct 3 Precinct 4

In Millions

2011 2012 2013 2014 2015 2016 2017 2018 2019 FY2019 Budget Hearing Presentation

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FY2019 Tax Policy

  • Maintain tax rate of .46937 and achieve 14.4 revenue increase to

continue road projects

  • Minimize the disruptive impact of volatile tax rates on businesses,

landlords, renters, and family budgets

  • Recognize that Mineral Value is volatile and is not a dependable

source of revenue over the long term

  • Recognize that state-sanctioned tax formulas in Chapter 26.04 of the

Tax Code provide abatement of taxes to the energy industry and its beneficiaries because mineral values are not treated like New Improvements (see Line 21 of the Truth In Taxation tax rate worksheet)

FY2019 Budget Hearing Presentation

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FY2019 Budget Hearing Presentation

The Basis of Tax Policy:

Mineral property values are predictable: they decline rapidly

Estimated Ultimate Recovery is > 80% in first 5 years of EFS well

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114 345 422 495 601 355 168 232 248 100 200 300 400 500 600 700 2010 2011 2012 2013 2014 2015 2016 2017 2018

Annual W-1 Permits Approved

# of W-1 Permits

Drilling Activity Impact on Tax Base

$- $1.00 $2.00 $3.00 $4.00 $5.00 $6.00 $7.00 $8.00 $9.00 $10.00 2010 2011 2012 2013 2014 2015 2016 2017 2018

Property Tax Base (Billions)

Real Property Mineral Property

$4.5 $.95

FY2019 Budget Hearing Presentation

$7.1

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Comptroller’s Explanation of Effective Tax Rate from Truth In Taxation: Tax Rate Adoption

  • The effective tax rate is a calculated rate that would provide the taxing unit with about the same amount of

revenue it received in the year before on properties taxed in both years.

  • If property values rise, the effective tax rate goes down and vice versa.
  • Although the actual calculation can become more complicated, a taxing unit’s effective tax rate is a calculated

rate generally equal to the last year’s taxes divided by the current taxable value of properties that were also on the tax roll last year.

  • The resulting tax rate, used for comparison only, shows the relation between the last year’s revenues and the

current year’s values. [Tax Code 26.04 (c)]

FY2019 Budget Hearing Presentation

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Mineral Values Fluctuate Wildly Disrupting Business and Family Budgets

$- $0.10000 $0.20000 $0.30000 $0.40000 $0.50000 $0.60000 $0.70000 $0.80000 $- $0.10000 $0.20000 $0.30000 $0.40000 $0.50000 $0.60000 $0.70000 $0.80000 $0.90000 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Treating New Minerals like New Improvements provides stability in the Tax Rate

Effective Rollback Adopted Tax Rate Down .28 Down .26 Up .22 Up .45

Down .34

FY2019 Budget Hearing Presentation

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2018 Tax Levy

Frozen Values represent the designated homesteads of the Over 65 and Disabled. Taxes are frozen even if tax rates increase. Improvements to the property may increase the appraised value and the tax levied on the property. Reappraisals and changes in the property tax levy may apply to future improvements in the property.

4%

FY2019 Budget Hearing Presentation

Real Property Frozen Homesteads

  • f Age 65, Disabled,

Veterans, and Widows of Veterans Mineral Values 79%

  • $79 of every $100 will be collected from oil and gas interests based on 80:20 O&G Lease
  • $ 4 of every $100 will be collected from the Over 65 and, Disabled Veteran/Widowed

homesteads

  • $17 of every $100 will be collected from all other Real Property

17%

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Tax Base Comparison: Eagle Ford Shale Era 2011

36% 9% 55%

Percentage of taxable property

Real Property (Net) $478,051,780 Frozen Homesteads $123 306,000 Producing Mineral Values $741,046,920

2018

17% 4% 79%

Percentage of taxable property

Real Propertry (Net) $799,660,000 Frozen Homesteads $205,832,023 Producing Mineral Values $3,693,865,690 FY2019 Budget Hearing Presentation

  • $79 of every $100 will be collected from oil and gas interests (split by 80:20 O&G Lease)
  • $ 4 of every $100 will be collected from the Over 65 and Disabled homesteads
  • $17 of every $100 will be collected from all other Real Property
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$0.00 $100.00 $200.00 $300.00 $400.00 $500.00 $600.00 $700.00 $800.00

The CETRZ was the industry solution for stemming the decline of the Effective Tax Rate and enhancing tax revenue to pay for road damages under SB1747. The unconstitutional CETRZ was repealed in 2017 with the blessing of the industry. No replacement reven

TAX AMOUNT on $100,000 Asset in 2019 = $469.37 Hypothetical Effective Tax Rate decline without CETRZ

CETRZ provided $16 million in revenue for road repair before it was repealed.

1997 Tax = $498.20 2013-2018 Tax = $469.37

CETRZ Captured Additional Tax Revenue for Road Projects Alert: SB1305 repealed CETRZ in 2017

FY2019 Budget Hearing Presentation

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Growing trend: Homesteads with a Tax Freeze

$- $50,000,000 $100,000,000 $150,000,000 $200,000,000 $250,000,000 500 1000 1500 2000 2500 3000 2011 2012 2013 2014 2015 2016 2017 2018

$123,306,000 to $205,832,023 in Seven Years

Homesteads Over 65 HS Disabled Widow HS Disabled Disabled Only Widow Over 65 Non HS Disabled Vet DV 100% Freeze Value FY2019 Budget Hearing Presentation

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Proposed Legislative Solutions

86th Texas Legislature

FY2019 Budget Hearing Presentation

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Interim Charges of the 85th Legislature

  • Joint charge of the House Energy Resources and Transportation Committees: “evaluate the impact

energy exploration and production have on state and county roads and make recommendations on how to improve road quality in areas impacted by these activities.”

  • Representative Geanie Morrison is the current chairman of the House Transportation Committee.

She will schedule a hearing on this interim charge in her district or in Austin.

  • The Interim Report of the House Transportation Committee can be found here:

https://lrl.texas.gov/scanned/interim/85/T687.pdf

FY2019 Budget Hearing Presentation

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Legislative Proposals for New Revenue

  • House Bill 4231 (85-R) by Rep. James White would redirect two percent of the state production tax

to a trust fund outside of the appropriation process and return it to the county of origin for road repair and maintenance. If this proposal was the law during 2013 to 2016, DeWitt County would have received about $20 million over four years for road repair and maintenance. This Bill was approved by the House Ways and Means Committee in 2017 and died on the House Calendar.

  • House Bill 3614 (85-R) by Rep. Geanie Morrison would eliminate a tax loophole provided to oil and

gas companies by treating “new minerals” as being equal to “new improvements” in the calculation

  • f the local property tax rate. This Bill was opposed by the Texas Oil and Gas Association (TXOGA) and

died in the House Ways and Means Committee.

  • The Interim Report of the House Transportation Committee contains a section of infrastructure

needs in energy sectors counties and proposes solutions. The report can be found here: https://lrl.texas.gov/scanned/interim/85/T687.pdf

FY2019 Budget Hearing Presentation