And these other states don’t have the rural multiplier that New York has — the ad valorem tax.
In New York, tax revenues from oil and gas activities go directly to localities through the ad valorem tax. In most other states, severance taxes accrue to the state itself. In 1981, the state legislators traded home rule in all matters dealing with oil and gas (except roads and taxes) for this local revenue bonanza.
Yes, the home rule issue is in the courts, muddied up by a another law dealing with gravel pits with a similar preamble, but the trade-off was the deal. Towns lose home rule. Towns get direct revenues. No stopover in Albany, where the money disappears into the General Fund and ends up repairing off-ramps in Buffalo. The money stays home, going directly to the towns, the local school district, the local highways, the emergency service providers and the libraries.
Each gas well is a separate taxable entity with its own tax code number. It has an assessed value, and is taxed according to production, at a price “leveled” using a 5 year rolling average.
These taxable entities aren’t just another building. Each well is assessed in the millions of dollars. One well added to the tax rolls, producing at current Marcellus rates, could be the equivalent of 20 high-end stick built units. In Pennsylvania, the estimates on the duration of the Marcellus range from 60 to 100 years. There will be a peak and a decline but these are decades away. That’s a lot of prosperity for a long time to come.
There’s no immediate rush to development in our area. After the courts and the lawsuits (and the plea deal by the guy who chains himself to the rig), there will be a slow rollout along the Pennsylvania border. That rollout will move north and someday come to Otsego County. There will be good paying jobs in the industry and in servicing the industry. With the influx of money, other opportunities will arise. People will come for the jobs. They will need shelter. They will buy houses. They will fix them up. They will mow the lawns themselves. Maybe their children will attend a reopened Otego Elementary School.
That’s the way it works. That’s how we grow Otsego County, instead of sustaining atrophy.
DICK DOWNEY is a member of the Unatego Area Landowners’ Association.