FY 2019 Budget of DeWitt County, Texas Local Government Code Section 111.002. COUNTY JUDGE AS BUDGET OFFICER. “The county judge serves as the budget officer for the commissioners court of the county.” FY2019 Budget Hearing Presentation
Eagle Ford Shale: the game changer Online Video Transition of Permit Maps FY2019 Budget Hearing Presentation
New W-1 Drilling Permits in DeWitt County • 114 approved in 2010 • 345 approved in 2011 • 422 approved in 2012 • 495 approved in 2013 • 601 approved in 2014 • 355 approved in 2015 • 168 approved in 2016 • 248 approved in 2017 2748 new well permits issued since 2010 FY2019 Budget Hearing Presentation
Summary of Recent Budget History • Current tax rate is lower than 1997 tax rate • 28.7 percent tax rate reduction since 2011 • $280.70 less tax bill on a $100,000 home than in 2011 • $9,563,391 in Outstanding Debt paid off in 2016 • $1 million of debt payment redirected to Road and Bridge budget • $112 million cumulative road and bridge appropriation since FY 2011 • Competitive wage scale implemented • CETRZ Tax Increment revenue source for road projects was repealed in 2017 • HB2521 royalty provided $2,117,000 in revenue in the first year of existence. FY2019 Budget Hearing Presentation
FY2019 Budget Policy • Observe fiscal discipline • Focus on long term stability of operations • Utilize cash reserve balances (where needed) to maintain a consistent level of public service • Maintain road and bridge efforts in all precincts • Maintain current level of employees • Maintain competitive wage scale with 3 percent COLA Continue 21 st Century fiber optic upgrades in County facilities • • Conduct a Courthouse basement water mitigation project • Conduct a County office space and utilization study • Conserve cash reserve balances and enhance portfolio yield • Prepare for a soft landing • Avoid issuing additional debt FY2019 Budget Hearing Presentation
Drilling Activity vs. R&B Expenditures Drilling and production activity leads to… more damages and higher expenditures Annual W-1 Permits Approved Combined Road and Bridge expenditures (millions) 700 $25.00 $23.09 601 600 $20.02 $20.00 495 500 $15.47 $15.59 422 $15.00 400 $12.37 355 345 $10.00 300 248 232 168 200 $4.41 $5.00 $1.56 $2.25 $3.14 114 100 $- 0 FY FY FY FY FY FY FY FY FY 2010 2011 2012 2013 2014 2015 2016 2017 2018 2010 2011 2012 2013 2014 2015 2016 2017 2018 # of W-1 Permits R & B Spending FY2019 Budget Hearing Presentation
Road and Bridge Expenditures $6.8 million FY 2005 thru FY 2009 $97.9 million since FY 2010 (Eagle Ford Era) Funded by Local Property Tax Revenue and one TIF Grant of $4,957,614 in FY 2015 $25,000,000 $16,072,391 Tax increment revenue raised from SB1747, $20,000,000 the CETRZ Law, that was repealed in 2017 $15,000,000 $10,000,000 $5,000,000 $- FY 2005 FY 2006 FY 2007 FY 2008 FY 2009 FY2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 PCT 1 PCT 2 PCT 3 PCT 4 TIF GRANT CETRZ 1 CETRZ 2 CETRZ 3 FY2019 Budget Hearing Presentation
Budgeted Appropriations by Category during the Eagle Ford Shale Era 80 In Percent of Total Budget 70 60 50 40 30 20 10 0 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 FY2019 Budget Hearing Presentation
Road and Bridge Budgets by Precinct $112 million appropriated since FY2011 In Millions $8.00 $7.00 $6.00 $5.00 $4.00 $3.00 $2.00 $1.00 $- Precinct 1 Precinct 2 Precinct 3 Precinct 4 2011 2012 2013 2014 2015 2016 2017 2018 2019 FY2019 Budget Hearing Presentation
FY2019 Tax Policy • Maintain tax rate of .46937 and achieve 14.4 revenue increase to continue road projects • Minimize the disruptive impact of volatile tax rates on businesses, landlords, renters, and family budgets • Recognize that Mineral Value is volatile and is not a dependable source of revenue over the long term • Recognize that state-sanctioned tax formulas in Chapter 26.04 of the Tax Code provide abatement of taxes to the energy industry and its beneficiaries because mineral values are not treated like New Improvements (see Line 21 of the Truth In Taxation tax rate worksheet) FY2019 Budget Hearing Presentation
The Basis of Tax Policy: Mineral property values are predictable: they decline rapidly Estimated Ultimate Recovery is > 80% in first 5 years of EFS well FY2019 Budget Hearing Presentation
Drilling Activity Impact on Tax Base Annual W-1 Permits Approved Property Tax Base (Billions) 700 $10.00 $7.1 601 $9.00 600 $8.00 495 500 $7.00 422 $6.00 400 $4.5 355 345 $5.00 300 $4.00 248 232 $3.00 200 168 114 $2.00 $.95 100 $1.00 0 $- 2010 2011 2012 2013 2014 2015 2016 2017 2018 2010 2011 2012 2013 2014 2015 2016 2017 2018 # of W-1 Permits Real Property Mineral Property FY2019 Budget Hearing Presentation
Comptroller’s Explanation of Effective Tax Rate from Truth In Taxation: Tax Rate Adoption • The effective tax rate is a calculated rate that would provide the taxing unit with about the same amount of revenue it received in the year before on properties taxed in both years . • If property values rise, the effective tax rate goes down and vice versa. • Although the actual calculation can become more complicated, a taxing unit’s effective tax rate is a calculated rate generally equal to the last year’s taxes divided by the current taxable value of properties that were also on the tax roll last year. • The resulting tax rate, used for comparison only, shows the relation between the last year’s revenues and the current year’s values. [Tax Code 26.04 (c)] FY2019 Budget Hearing Presentation
Mineral Values Fluctuate Wildly Disrupting Business and Family Budgets Treating New Minerals like New Improvements provides stability in the Tax Rate $0.90000 $0.80000 Up .22 $0.80000 $0.70000 Down .26 Up .45 $0.70000 Down .34 Down .28 $0.60000 $0.60000 $0.50000 $0.50000 $0.40000 $0.40000 $0.30000 $0.30000 $0.20000 $0.20000 $0.10000 $0.10000 $- $- 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Effective Rollback Adopted Tax Rate FY2019 Budget Hearing Presentation
2018 Tax Levy • $79 of every $100 will be collected from oil and gas interests based on 80:20 O&G Lease • $ 4 of every $100 will be collected from the Over 65 and, Disabled Veteran/Widowed homesteads • $17 of every $100 will be collected from all other Real Property Real Property 17% 4% Frozen Homesteads of Age 65, Disabled, Veterans, and Widows of Veterans 79% Mineral Values Frozen Values represent the designated homesteads of the Over 65 and Disabled. Taxes are frozen even if tax rates increase. Improvements to the property may increase the appraised value and the tax levied on the property. Reappraisals and changes in the property tax levy may apply to future improvements in the property. FY2019 Budget Hearing Presentation
Tax Base Comparison: Eagle Ford Shale Era 2011 2018 Percentage of taxable property Percentage of taxable property 17% Real Propertry (Net) Real Property (Net) 36% $799,660,000 $478,051,780 4% 55% Frozen Homesteads Frozen Homesteads $205,832,023 $123 306,000 9% 79% Producing Mineral Values Producing Mineral Values $3,693,865,690 $741,046,920 • $79 of every $100 will be collected from oil and gas interests (split by 80:20 O&G Lease) • $ 4 of every $100 will be collected from the Over 65 and Disabled homesteads • $17 of every $100 will be collected from all other Real Property FY2019 Budget Hearing Presentation
CETRZ Captured Additional Tax Revenue for Road Projects Alert: SB1305 repealed CETRZ in 2017 The CETRZ was the industry solution for stemming the decline of the Effective Tax Rate and enhancing tax revenue to pay for road damages under SB1747. The unconstitutional CETRZ was repealed in 2017 with the blessing of the industry. No replacement reven $800.00 $700.00 2013-2018 Tax = $469.37 $600.00 $500.00 $400.00 CETRZ provided $16 million in revenue for road repair $300.00 before it was repealed. 1997 Tax = $498.20 $200.00 $100.00 $0.00 TAX AMOUNT on $100,000 Asset in 2019 = $469.37 Hypothetical Effective Tax Rate decline without CETRZ FY2019 Budget Hearing Presentation
Growing trend: Homesteads with a Tax Freeze $123,306,000 to $205,832,023 in Seven Years 3000 $250,000,000 2500 $200,000,000 2000 $150,000,000 1500 $100,000,000 1000 $50,000,000 500 0 $- 2011 2012 2013 2014 2015 2016 2017 2018 Homesteads Over 65 HS Disabled Widow HS Disabled Disabled Only Widow Over 65 Non HS Disabled Vet DV 100% Freeze Value FY2019 Budget Hearing Presentation
Proposed Legislative Solutions 86 th Texas Legislature FY2019 Budget Hearing Presentation
Interim Charges of the 85 th Legislature • Joint charge of the House Energy Resources and Transportation Committees: “ evaluate the impact energy exploration and production have on state and county roads and make recommendations on how to improve road quality in areas impacted by these activities.” • Representative Geanie Morrison is the current chairman of the House Transportation Committee. She will schedule a hearing on this interim charge in her district or in Austin. • The Interim Report of the House Transportation Committee can be found here: https://lrl.texas.gov/scanned/interim/85/T687.pdf FY2019 Budget Hearing Presentation
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