The rate is significantly higher than last year’s rate of 18.7 cents, which was the lowest in the State of Texas.
Karnes County Judge Richard Butler explained that the higher rate will provide more revenue for the county – financial resources that are desperately needed due to the impact on Karnes County by the Eagle Ford Shale oil and gas boom.
According to information from the county auditor’s office, Karnes County’s total taxable property values – often referred to as the county’s “tax base” – for this year are $7.18 billion.
The 30 cent rate, if approved, will generate an estimated $21.55 million in property tax revenue for the county.
To put this in perspective, the estimated property tax revenue paid to the county last year was $5.11 million.
The county has many other sources of revenue in addition to property tax revenue, however, such as sales taxes, fees, permits, etc. and when this was all added to the $5.11 million in property tax revenue, a total of $20.8 million were listed as estimated receipts in last year’s budget.
The 30 cent rate will generate $10.64 million in County Energy Transportation Reinvestment Zone funds, and in addition to that, the road and bridge department will receive $7.7 million in state grant funding for a total of $18.34 million in funding for the county’s road and bridge department which has been struggling to keep county roads in good repair.
As bad as they are, however, roads are not the only need for Karnes County right now, Butler said, as the oil boom has impacted and increased the cost of every part of county government.
The total amount the county plans to spend in the coming fiscal year, however, won’t be known until the budget is made public later this week.
Butler said the proposed county budget will be posted by Aug. 29 and open to public inspection. Hearings will be held on the tax rate Sept. 16 and Sept. 22. On Sept. 26 the court will vote to approve the budget and tax rate.
“This is not an adoption of a tax rate,” Butler said. “We may well adopt a different tax rate. There will be the hearings available for everyone to have the discussion about that tax rate and also the budget.”
Work is continuing on a county budget based on requests from county department heads and anticipated needs for the county in the coming fiscal year, Butler explained. Not every request has been included in the current working version of the budget, he emphasized.
“We think we have hammered out a budget that this county can live with, that will actually move us forward, give us enough personnel and money to function in the way that the people of this county have the right to expect us to function,” he said. “That will all be in the budget that we will see final before the end of this week.”
Butler said that the tax rate in Karnes County before the oil boom was about 48 cents, which was in 2009.
“Due to the way that tax law is structured, that rate has plummeted,” he said. “I studied that law and tried to figure out what happened – how did it happen? Why did they design this law to cause the tax rate to fall precipitously when there is increase in valuations.”
Butler said the law was designed to keep tax revenue proportional to the needs of county governance. The theory was that rapidly expanding mineral values does not cause any increased needs for the county government.
“Well as we have seen, that is not true,” Butler said. “We have much more pressure on law-enforcement agencies, much more need for law-enforcement personnel, our roads are just getting beat up like nobody can believe.”
“Nobody has seen a development in oil and gas like this, with this much intensive traffic,” Butler said. “The rigs, huge equipment being transported – ever in oil and gas exploration activity before.”
“This is unique,” Butler emphasized.
“The way the statute works, we have ended up with these plummeting tax rates and what has happened is it has overwhelmed our ability to keep up with the growth and the needs caused by this expansion.”
“And it has caused a real threat, which is, when the oil and gas business plays out – when there is a slow-down in this economic activity and when those appraisals on the oil and gas and mineral interests and properties start to drop, we will have no way to fix them. We would have to have an astronomical tax rate.”
The tax revenue from oil and gas production activity will be gone by that point, Butler noted.
“The time to strike – to make sure that everybody pays the same fair amount – and takes care of these resources is now,” Butler said. “We have effectively given big tax rebates to oil and gas producers by allowing these tax rates to plummet the way they have.”
Butler said he can remember tax rates as high as 80 cents per $100 valuation to keep the county running.
“We don’t need that now, but there is no reason to let that drop to 12 or 10 cents,” he added.
Butler then made a motion to approve the proposed 30 cent rate, although he cautioned that the rate will be subject to a possible petition for a tax rollback election. He emphasized that it was important for county leaders to convey to the public the need to do this as a way to avoid a possible rollback election.
“Thirty cents per $100 is going to generate a lot more revenue than 17,” County Commissioner James Rosales said.
“Oh yes it will,” Butler responded. “Without that increase, we can’t properly fund the government and then we will be sliding even further down in the years to come and we are going to end up in a situation where we end up a broke county who has no money, our facilities will be dilapidated and destroyed, our roads will be in terrible shape and we will have no way to fix them. When we need to make the capital improvements to this county is now, while we can get 85 percent of the contribution made by the mineral interests... That is the time to get it done or we will be too late.”
County Commissioner Shelby Dupnik seconded Judge Butler’s motion and the court voted unanimously in favor of proposing a 30-cent tax rate.