Gas tax income for state forecast
Posted on Friday, May 16, 2008
URL: http://www.nwanews.com/adg/News/225836/
The natural gas severance tax increase enacted last month is projected to raise $ 20 million in fiscal 2009, which starts July 1. The increase, which takes effect Jan. 1, goes to road improvements.
Lawmakers were told Thursday the increase is projected to raise $ 73. 6 million in fiscal 2010, rise to $ 101. 5 million in fiscal 2015, then decline to $ 100. 9 million in fiscal 2016, and $ 96. 9 million in fiscal 2017.
The $ 20 million 2009 figure reflects that the tax starts in the middle of the fiscal year and a lag is expected “when the monies actually start coming into state coffers,” Kim Arnall, assistant director of fiscal services for the Bureau of Legislative Research, told the House and Senate transportation committees.
Arkansas’ tax currently is three-tenths of 1 cent per 1, 000 cubic feet. That’s been the rate since 1957. The tax currently raises about $ 600, 000 a year.
Of the first-year money, the Highway Department will get $ 12. 93 million, Arnall said. Cities will share about $ 2. 77 million and counties also $ 2. 77 million. The other $ 1. 57 million will go to general state government operations, he said.
In fiscal 2010, the department would receive $ 47. 4 million, cities $ 10. 1 million and counties also $ 10. 1 million, he said. In 2015, the shares would be $ 65. 5 million to the department, $ 14. 038 million for cities and another $ 14. 038 million for counties.
Starting Jan. 1, the base tax rate will be 5 percent on the proceeds that production companies get on the sale of the gas, “less the actual cost to the producer of dehydrating, treating, compressing, and delivering the gas.” There also will be a 36-month reduced rate of 1. 5 percent for high-cost new wells with a possible extension of 12 months, a 24-month reduced rate of 1. 5 percent for all other new wells, and another reduced rate of 1. 25 percent would be possible indefinitely for lowproducing wells, new or old.
Gov. Mike Beebe proposed the severance tax increase as part of a deal with the major natural gas producers in Arkansas to head off a proposed ballot measure by former natural gas utility executive and former GOP gubernatorial nominee Sheffield Nelson of Little Rock, who had proposed a 7 percent rate.
Arnall also provided information showing how much each city and county will receive.
“Up in our neck of the woods, we are having some rather heated political races,” said Sen. Kim Hendren, R-Gravette. “Folks say, “ Well, those people who voted for this severance tax increase really did a disservice to the state. ’ There are candidates today saying, ‘Hey, we would never vote for a tax increase. We’d never vote for that.’
“ But I think when they do that they need to let their cities and counties evaluate what the returns are on this and obviously nobody likes to tax,” said Hendren, who voted for the increase.
Rep. Robbie Wills, D-Conway, who is chairman of the House Public Transportation Committee, said the information handed out by Arnall is good to discuss with county judges and mayors.
Here are some examples of its projection for counties: Benton County is to receive $ 98, 217 in fiscal 2009, $ 360, 363 in fiscal 2010, growing through the years to $ 497, 283 in fiscal 2015. Pulaski County is to receive $ 172, 965 in fiscal 2009, $ 634, 619 in fiscal 2010, growing to $ 875, 742 in fiscal 2015. Jefferson County is to get $ 57, 023 in fiscal 2009, $ 209, 219 in fiscal 2010, climbing to $ 288, 711 in fiscal 2015.
Among cities, some of the figures were: Little Rock $ 290, 139 in fiscal 2009, $ 1. 06 million in fiscal 2010, up to $ 1. 46 million in fiscal 2015; Conway $ 83, 065 in fiscal 2009, $ 304, 770 in fiscal 2010, up to $ 420, 568 in fiscal 2015; Rogers $ 77, 102 in fiscal 2009, $ 282, 891 in fiscal 2010, reaching $ 390, 375 in fiscal 2015.
Rep. Ray Kidd, D-Jonesboro, said the gas producers are relieved and satisfied by the increase and “all indications are that they are drilling at breakneck speed and more than likely we are going to have an abundance over these projections.”
Wills said the increase will help improve roads, but “by no means solves the transportation funding shortfall.”