The power to offer tax breaks has long been used by governments at all levels to stimulate local businesses and create jobs. They’ve been used to help struggling firms survive or lure new factories.
But now there’s a questionable Michigan Senate proposal cosponsored by state Sen. Darwin Booher that would exempt some costs associated with drilling wells from local tax rolls. While there is some dispute over whether the newly exempt costs were ever assessed, some local officials are worried.
County officials across the region say its not fair to force cash-strapped counties to give up tax revenue to an industry that is doing just fine.
Brad Heikkila, who heads up Kalkaska County’s equalization department, thought an oil and gas boom represented by five deep wells and another 30 pending permits would bring revenue to the county.
Heikkila said it isn’t yet clear what would be exempted if the bill passes. Grand Traverse and Kalkaska County commissioners have unanimously voted to oppose the proposed cuts.
“Our opposition to this bill is not that they’re reducing taxes, it’s that they’re reducing tax revenue for local governments,” said David Benda, Grand Traverse County’s administrator.
If state officials like Booher think personal property taxes on the oil and gas industry are too high, they should be willing to eat the difference at the state level, not take it out on mostly rural counties floating in red ink. Grand Traverse Commissioners recently tapped the county’s fund balance to the tune of more than $1 million to make up a budget shortfall.
Local officials also said the reductions would hurt small communities, townships and schools.
Just how much — if anything — this could cost counties is unclear. Grand Traverse County equalization Director Jim Baker said he was unsure how the county could be affected because oil and gas companies don’t itemize their assets and costs when they report them.
The new rule is in response to a 2012 State Tax Commission bulletin that spelled out how to assess the taxable value of oil and gas companies. Heikkila said oil and gas companies historically under reported their assessed value.
But if counties demand a true accounting, as they should, taxes could rise.
If Booher and others think it’s unfair to hold the oil and gas industry to the same standards many other businesses face, let them underwrite the difference from state coffers and hold the locals harmless.