Posted 4/28/15 (Tue)
By Neal A. Shipman
The financial help that Watford City and McKenzie County, as well as the other areas of North Dakota’s oil patch were desperately hoping to receive from the state of North Dakota to help meet the demands of increased growth as a result of the oil impacts wasn’t looking good as the State Legislature was moving toward the end of the session last week.
While Watford City had received $32 million, and McKenzie County received $48 million in Surge Funding that was part of Senate Bill 2103, plummeting oil prices had the Legislature scrambling to balance its budget.
As part of the state’s cost-cutting measures, the legislators turned their attention to modifying HB1176, a bill that was supported by Gov. Dalrymple and most legislators. The bill would have provided that 60 percent of the state’s Gross Production Tax be returned to the oil patch counties and cities. But with state funds running out, the final bill that was passed by the Legislature only increased the local share from 20 to 30 percent of the Gross Production Tax.
“The Surge Funding was Watford City’s and McKenzie County’s only chance to build the roads that we needed to construct this summer to meet the traffic demands,” stated Brent Sanford, Watford City mayor. “We couldn’t assess city and county property owners for these road projects.”
While Sanford was grateful for the Surge Funding, which provided for the construction of four city arterial roads, he was disappointed with the change in the GPT formula.
“Even though the Governor and most legislators were in favor of the change in the GPT formula, there just wasn’t enough money left,” stated Sanford. “After the Legislature used the Gross Production Tax funds to fund K-12 education and to provide for statewide property tax relief, all that was left was the 30 percent that would come back to the oil-producing areas of the state.”
While North Dakota’s oil patch counties and cities had struck out on the change in the GPT formula, Sanford says that the Legislature still was able to deliver some good news to places like Watford City and McKenzie County.
“The Legislature put together HB1377 that realigned the State Investment and Improvements Fund (SIIF),” stated Sanford. “As a result of that realignment, when the state’s other obligations to that fund are met, the oil-producing counties will receive 30 percent of what is left.”
And that change, according to Sanford, could make all the difference for heavily-impacted areas like Watford City and McKenzie County.
“The distribution from the SIIF will be based on the amount of oil production in each county,” states Sanford. “And with McKenzie County producing roughly 50 percent of the state’s oil, that means our county will receive 50 percent of those funds.”
The big caveat for McKenzie County and Watford City, as well as the other oil-producing counties will be how fast the SIIF buckets fill.
“How quick the SIIF buckets fill will determine how much money will be available to the oil-producing counties,” states Sanford. “It really will depend on the price of oil over time. The budget is based on $40 per barrel oil, so when oil prices are above that figure, the buckets will fill faster.”
According to Sanford, HB1377 came about as a way for the Legislature to compensate the oil-producing counties for the 30-70 GPT funding split.
“Because of the large amount of oil being produced in McKenzie County, we could actually do very well financially because of HB1137,” stated Sanford. “We could end up better financially than we would have under the 60-40 split.”
And having access to those dollars will mean that Watford City and McKenzie County will be able to continue to build the roads and water and sewer systems needed to meet the area’s growth.
“Watford City has a lot of infrastructure needs,” states Sanford. “Unfortunately, we don’t have much money. This bill will allow us to continue to move forward with needed developments.”