SHERIDAN — The Legislature’s Joint Revenue Committee will consider reforms to how the state administers ad valorem mineral taxes, which have seen a rise in delinquency in recent years resulting in more than $50 million being owed to Wyoming counties, when it convenes for its interim meeting in Buffalo next week.
Earlier this year, the Powder River Basin Resource Council published a report that showed 12 counties were owed a total of $42 million in delinquent taxes by coal, oil and gas firms.
In late August, the PRBRC updated that report to show nearly $55 million in delinquent taxes, an increase that is mostly explained by more counties reporting outstanding debts; Carbon County, for instance, was not included in the first report but revealed it is owed more than $10 million in delinquent taxes in the latest report.
PRBRC organizer Hesid Brandow, who wrote the bulk of the two reports, said the fact that new debts are still being discovered indicates the state still isn’t aware of the full extent of the problem.
“We just don’t know how much is out there, basically,” Brandow said.
Brandow said the PRBRC compiled the report by working with county treasurers from around the state.
Campbell County has the largest outstanding balance in the report with more than $32 million, though the county was able to strike a deal to collect about $20 million of that debt from a defunct firm earlier this year; it remains on the books, though, until the county receives its final payment.
Carbon County has the second highest debt total and Sheridan County has the third-highest deficit with just under $7.46 million.
Counties use revenues from ad valorum taxes to fund a number of services, most notably education.
Sheridan County’s deficit has cost school districts throughout the county a chunk of their funding. According to the Sheridan County Treasurer’s Office, Sheridan County School District 2 is owed about $1.65 million from mineral tax revenue, SCSD3 is owed about $750,000, Sheridan College is owed about $430,000 and SCSD1 is owed roughly $120,000.
Collecting back taxes, many of which are owed by companies that have gone out of business, will require counties to hire bankruptcy attorneys and engage in lengthy, and costly, legal battles.
The joint Revenue Committee will look at ways to improve future collections of mineral taxes to ensure the problem does not get worse. The PRBRC report makes several policy recommendations but Brandow said changing the collection schedule, so that counties collect taxes monthly, would be the most effective reform.
Counties currently collect ad valorem taxes bi-annually in November and May and the taxes are assessed to companies based on their production from 18 months prior. In the intervening 18 months, however, companies may have relocated, merged with another company, sold property or declared bankruptcy.
The state collects severance taxes from mineral firms on a monthly schedule and has been paid 99.977 percent of assessed severance taxes; in total, the state is owed less than $3 million in delinquent severance taxes.
Rep. Mike Madden, R-Buffalo, who is the House chair of the Joint Revenue Committee, said he pulled a bill in 2016 that would have collected taxes on a monthly basis because coal firms were facing major financial challenges due to an industry downturn and insisted they would not have been able to afford additional collections.
“The coal industry was going through some unprecedented stress and they said [that change] would just about tip over every coal company,” Madden said.
If the change was implemented, companies would have still had to make the bi-annual payments they already owed that year in addition to the new monthly payments.
Before the downturn hit, though, Madden said the industry was largely open to changing the collection schedule. Now that coal companies are in better financial shape, Madden said the change will be easier to implement. The state will still have to figure out a way to ease companies into the new payment schedule, which will require them to double tax payments in the first year.
“I think we need to come up with some kind of a compromise for that transition period,” Madden said.
He suggested the state could cut what companies owe by around 5 percent to incentivize them to adopt the new payment schedule but said the particulars will have to be worked out by the Revenue Committee as a whole.
The PRBRC report suggests several other reforms to the administration of mineral taxes and Madden said he has considered additional measures, such as giving counties lien priority over creditors on mineral properties, but the initial focus will be on streamlining future collections to prevent the deficits from growing worse.