Amendment 58 battle focuses on history, definitions

Opposing sides in an election advertising campaign aren’t letting the facts get in the way of their arguments.

Opponents of proposed Amendment 58 – which would eliminate a provision in the state’s severance tax law that allows oil and gas companies to deduct an ad valorem property tax paid to local governments from their state tax bill – say Gov. Bill Ritter is falsely calling the deduction a “subsidy.” They say eliminating the deduction would actually be a tax increase.

They also say Ritter and A Smarter Colorado – the group promoting Amendment 58 – are trying to rewrite history when they claim the deduction was provided to help the oil and gas industry get established in Colorado.

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“They (drillers) were already here, although obviously not as big as today,´ said Steve Durham of Colorado Springs, a Republican who served in the state legislature in 1977 when the severance tax bill was adopted. “What the legislature did was enact a severance tax and then provided a credit against local property tax paid.”

Durham is one of nine former state legislators who signed a letter that ran in newspapers across the state in the first part of September accusing Ritter of dishonesty in A Smarter Colorado’s campaign materials. That same message is being carried in statewide television ads.

“Calling a massive tax hike a subsidy? That’s the real scandal,” the ad says.

Ritter’s office has not publicly responded to the ads and did not respond to a Business Report request for comment.

But George Merritt, spokesman for A Smarter Colorado, said the ads are an attempt to mislead voters. “That’s the whole point,” he said. “They’ve launched a campaign to confuse and distract voters.”

Merritt said the ads have been viewed by A Smarter Colorado as “silly” but relentless in their effort to paint Ritter as untruthful about the tax deduction.

“Frankly, none of it is true,” Merritt said. “We’re up against an industry that has a great amount of money to mislead and unfortunately they’ve been able to do that with some voters across the state.”

A group called Coloradans for a Stable Economy, which opposes Amendment 58, has received millions from oil and gas companies, with nearly $10 million collected as of Sept. 15, the latest filing deadline.

A Smarter Colorado has collected about $2 million so far, with the biggest contributions coming from The Nature Conservancy, based in Arlington, Va.

History lesson?

Duane Woodward, another former Republican legislator from 1977 who signed the open letter to Ritter, agrees with Durham that the oil and gas industry was well established in Colorado by the time the severance bill was passed.

“The oil and gas industry had been well established in Colorado for years, since the 1920s,” he said.

Woodward, who now serves on the Arvada planning commission, said the ad valorem property tax provision was added not as a subsidy to the oil and gas industry but as a way of making sure oil-and-gas-impacted counties – and taxing districts within them – would get extra money to deal with those impacts to roads, schools and other services.

“It was an inducement to provide benefits to the impacted mineral-production counties,” he said.

The 1977 Severance Tax Act contains a subsection that states: “With respect to crude oil, natural gas, and oil and gas, there shall be allowed, as a credit against the (severance) tax computed in accordance with subsection (1) of this section, an amount equal to eighty-seven and one-half percent of all ad valorem taxes assessed during the taxable year…”

So while the oil and gas industry was being taxed at the highest rate in Colorado for its local property tax, the Severance Tax Act allowed the industry to deduct that local tax payment from its overall state severance tax bill.

But is that a subsidy?

Dan Hopkins, spokesman for the anti-Amendment 58 group, said A Smarter Colorado is not being truthful when it refers to the severance tax deduction as a “subsidy.”

“I think they looked at the best way to sell it and came up with the idea of a subsidy rather than a tax increase,” he said.

But A Smarter Colorado’s Merritt said calling elimination of the tax credit portion of the severance tax act a “tax increase” is a false claim.

“It is not a tax increase, it’s the elimination of a tax credit – period,” he said.

Confusion reigns

Several organizations and political entities – including the Weld County board of commissioners – have gone on record opposing Amendment 58, fearing that its passage would reduce the amount of tax dollars the county receives.

Club 20, a Grand Junction-based lobbying organization that represents the interests of some of the biggest oil-and-gas-producing counties on the Western Slope, has also expressed its opposition to the measure.

“The primary reason we’re opposed to it is, if you run the numbers with the new (Amendment 58) formula, over the last seven years locally impacted counties would have lost money six out of seven of those years,´ said Reeves Brown, Club 20’s executive director.

Supporters of Amendment 58 claim their oil and gas tax revenue allocation formula will create a bigger pie for all to share, but Brown said Western Slope counties in particular have “too much at stake” to bet that will happen.

Weld County is one of the state’s biggest beneficiaries of the oil and gas industry, last year receiving more than $93.5 million in severance tax.

“It exceeds the value of what we collect in all of our residential taxes,´ said John Lefebvre, Weld County treasurer. “It’s just under one-third of all the tax we get.”

Lefebvre said tax collected from the oil and gas industry is also divided among 300 underlying taxing districts, including school districts, fire protection districts, water and sewer districts and 36 towns and cities.

But even Lefebvre admits he finds Amendment 58’s potential impact hard to understand, particularly the ad valorem property tax paid directly to the county by the oil and gas industry.

“I think it continues but there’s an offset against it,” he said. “It’s very confusing.”