La Plata County’s coffers are feeling the pinch of last year’s falling natural-gas prices.
The county will lose more than $920,000 in property-tax revenue because of a 25 percent drop in natural-gas prices last year, County Assessor Craig Larson told county commissioners Tuesday.
The decrease will affect the county’s 2013 revenue collections and budget.
The drop in the county’s assessed value is primarily a product of falling gas prices, Larson said.
The assessed value of oil and gas work in the county changes annually, and it is based on price and production. Though production has stayed relatively steady, the median price of natural gas dropped from $4 per thousand cubic feet in 2010 to $3 per mcf last year, contributing to a $108 million decrease in the county’s assessed value.
The news is quite a turnaround from when a busy 2010 for producers caused a 25 percent increase in gas prices, which provided a helpful bump to the assessed value in the county.
The natural-gas and oil industry is a major player in the county’s revenue equation because compared with other land and buildings, the industry “pays a huge share when it comes to assessed value,” Larson said. That’s because oil and gas work is assessed at much higher rate than other property.
The $920,000 shortfall in revenues Larson predicted for next year represents almost 5 percent of the $17.4 million the county collects in property taxes, Finance Director Karla Distel said. Property taxes account for about a third of the county’s budget.
County officials expected the decline in gas prices to make a dent in its budget, and they will adjust, Distel said.
In addition to the county, the drop in gas prices will affect special districts and school districts, especially those with high concentrations of natural-gas and oil production within their bounds.
“It has a huge trickle down effect,” County Commissioner Kellie Hotter said.
Ignacio School District, for example, has long counted natural-gas and oil production as a major source of property-tax revenue.
But with declining natural-gas prices, total assessed valuation in the district fell from $847 million in 2009 to $561 million in 2011, Finance Director Anne Gundersen said. A drop in property value means the state must increase funding to the district to make up for the loss in local property-tax revenue, Gundersen said.
The natural-gas and oil industry’s contribution to county tax revenue is expected to continue downward. Larson projected that next year the county will see another 20 to 35 percent drop in the value of natural gas.
Real estate, which makes up the second-largest portion of county property-tax revenue, is appraised on two-year cycles, and it will be re-evaluated on a new level of value next year based on sales through June 30. Larson predicted a slight drop those valuations as well.