A 'Beyond the Boom' fix

Lawmakers must seize chance to revamp energy policy

The Rocky

Published December 14, 2007 at 12:05 a.m.

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Photo by Matt McClain

Gov. Bill Ritter speaking here before the annual winter conference of Colorado Counties Inc., will cast a long shadow over how the state deals with the millions coming from the energy boom.

It probably won't happen for 10 years. It may not happen for 20 or 30. But someday, the energy boom in Colorado will slow, stagnate and wither. What will the state have to show for it?

Will Colorado be able to boast that the communities sustaining the brunt of the boom were taken care of?

Will the state's bonanza of severance taxes and federal royalties have funded a durable legacy of infrastructure and capital projects that continue to benefit Coloradans for decades to come?

Will the state point to a large permanent fund that throws off a major stream of investment income even when production shrinks to a fraction of its current volume?

These questions should be foremost in the minds of lawmakers as they converge on the Capitol next month - as important as any item on the legislative agenda. That's because, if legislators don't act, the answer to each question posed above eventually will be "no."

It's hard to believe any lawmaker could read the Rocky Mountain News series "Beyond the Boom" and defend the system under which severance and royalty revenue is now disbursed, or argue that Colorado is leveraging the most benefit for those dollars. The system is worse than broken; it never made much sense to begin with. Now it's become hard to ignore given the rising tide of severance taxes and royalties.

Key members of an interim committee that spent months examining these issues are trying to craft major legislation. We'll weigh in on the specifics when the plan is released; for the time being, we want to focus on the keys to any successful reform.

* Boost aid to impacted communities. Although the energy exploration rush has infused a great deal of welcome income into some counties, it has also stressed out local governments trying to maintain adequate services and decent infrastructure. Under any system that distributes energy taxes, those communities should be first in line.

* Revamp how the state Department of Local Affairs (DOLA) hands out grants to communities. We've been alarmed at signs that lawmakers may want to spare DOLA's grant program from serious reform - presumably because of pressure from county and municipal lobbies. Yet leaving the system intact would amount to a travesty of governance.

Currently, DOLA disburses half of the state's take in severance taxes and a portion of federal royalties - with almost total discretion. Local governments from around the state apply for grants for an astonishing variety of purposes and the agency and its advisory committee pick and choose the winners in their best imitation of a rich uncle showering favors on nieces and nephews according to personal whim.

Fortunately, over the years much of the money has been spent on useful infrastructure, such as road and sewerage projects. But far too much has gone to projects that not only are unrelated to the impacts of energy exploration but have nothing to do with any broader state need. They are simply pet projects that local communities can't or won't finance on their own: a campaign to boost local tourism, a Nordic ski training center, a carousel, a center to teach kids about free enterprise, to mention only four.

* Invest in a crucial infrastructure need that is now badly shortchanged. Higher education officials make a strong case that their paltry capital construction budget qualifies. So far, leading lawmakers appear sympathetic. We only hope that attitude doesn't falter as other interests push for a place at the table.

* Save a steady percentage of the severance bounty in a permanent fund that can't be raided by lawmakers but whose income supports ongoing state needs. As "Beyond the Boom" reported, New Mexico and Wyoming have used their severance income to build permanent funds worth billions of dollars. Colorado should follow suit with a significant investment. Those who say this state can't afford to set aside revenue so long as it underfunds transportation, health care and higher education are well-intentioned but also seriously shortsighted.

* Reach agreement with the energy industry for a reasonable hike in its total state taxes, through a boost in the state's low severance tax rate and/or an adjustment in an extremely lucrative property tax credit. If an agreement isn't forthcoming, refer a measure to the ballot anyway.

Gov. Bill Ritter is understandably concerned that industry opposition could sink any such measure at the polls, citing what happened not long ago in California. But that ballot measure was extreme, and proponents were quickly put on the defensive. Precisely the opposite would occur here: Industry would find itself on the defensive so long as the measure left taxes below those in New Mexico and Wyoming.

As we read and reread "Beyond the Boom," we kept searching for words to describe the use of the state's energy taxes. Here's one: incoherent. The policy achieves no overarching purpose. In fact, there doesn't seem to be any such purpose. For years, lawmakers could plausibly claim ignorance of this state of affairs. No longer. If they don't fix the system soon, Coloradans will rightly blame them - not their predecessors of 30 years ago - for squandering a priceless opportunity.

• December 14, 2007

  2:27 p.m.

  Suggest removal

  Theoldguy writes:

  Tax the oil and rid ourselves of the Colorado Income Tax. Just like Wyoming and how come it is still here since we have gambling like Nevada. Sounds like the politicians are double-fleecing the voters.

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