Ritter plugs tax-credit repeal
June 20, 2008
Steamboat Springs — Gov. Bill Ritter touted Thursday a proposed ballot measure that would repeal a tax credit enjoyed by the oil and gas industry in Colorado but has some local government officials worried about how the resulting tax windfall would be divvied up.
Ritter made his pitch during a luncheon at the 86th annual Colorado Municipal League conference at the Sheraton Steamboat Resort – and earlier Thursday before members of the Steamboat Pilot & Today Editorial Board.
The proposal, which must earn the signatures of 76,000 Colorado voters to be put on the November ballot, would remove a tax credit for the oil and gas industry that allows mineral extractors to deduct up to 87.5 percent of their previous year’s property taxes from their severance taxes. Ritter said the antiquated program was put into place when the industry was struggling and oil was selling for $12 a barrel.
“That’s a changed circumstance for sure,” Ritter said. “Record profits, and we still have a tax credit. From a fairness standpoint, it is important to remove the subsidy oil and gas enjoy.”
According to A Smarter Colorado, the campaign behind the proposed ballot initiative, the credit repeal will raise $250 million to $325 million a year. Sixty percent of those revenues would go toward the proposed Colorado Promise Scholarship Fund. The remaining funds would be split, with 10 percent going toward renewable energy projects, 15 percent to wildlife habitat and 15 percent to local communities for transportation and water projects.
Noting that the credit is unique to Colorado, Ritter said the proposal would not discourage oil and gas development in the state.
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“You look at states with greater tax burdens, and you see the same levels of production,” Ritter said. “This is removing a tax credit from an industry that is doing very well.”
Coupled with changes to how federal mineral lease revenues are distributed, Ritter said, local governments would see their share of the revenues increase if the measure passes, giving them more resources to mitigate the impacts of oil and gas development on roads and other public facilities. But an analysis conducted on behalf of Western Slope lobby Club 20 says the local governments would have lost tens of millions of dollars in recent years if the proposal had been in place, The Associated Press reported.
Reached on his cell phone Thursday afternoon, state Rep. Al White, R-Hayden, said he’s not sure if local governments would lose money, but he thinks the proposal backed by Ritter, a Democrat, should pay more attention to local impacts.
“I don’t think they’d bring in appreciably more,” White said of local governments.
White also described the measure as “ill-timed,” because of Ritter’s simultaneous efforts to overhaul the state’s oil and gas regulations. The Colorado Oil and Gas Conservation Commission will finalize changes in August. White said the industry feels it is “being socked with a double-whammy.” White said Ritter might find more success if he focuses on the regulatory changes now and the tax-rebate repeal in 2009, especially if the governor is correct in his assertions that the regulatory changes won’t be as onerous as the industry suspects.
“I think it’s ill-timed,” White said. I think we’d be better off to do it a year from November. : As it is, they’re going to be at odds in November. : Oil and gas is going to spend a fortune to defeat this.”
Although White stressed that he is in favor of increasing funding for higher education, he said he would rather see the money put toward universities’ operational costs rather than need-based scholarships. White said the increase in financial aid would give schools an excuse to further raise their tuitions.
“Middle-class folks are going to end up paying a higher tuition in the long run,” White said. “That’s who takes a hit.”
Ritter acknowledged to the Editorial Board that the financial aid boost would not be much help to families pulling in about $100,000 a year or more.
While the AP reported that Club 20’s executive committee has voted unanimously to oppose the measure, Ritter’s reception among local officials at the Colorado Municipal League conference was mostly warm. He elicited at least two extended rounds of applause, including one that followed his passionately worded defense of the Colorado Promise scholarship program, which he said is designed for families “at the margin” rather than the middle class.