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State Lowballing Pipeline Property Taxes; Time for TransCanada to Help Pay Teachers?

While we Aberdonians have been getting all excited about the dust-up over Brown County IT chief Paul Sivertsen’s questionable activities on the taxpayer dime, Jonathan Ellis notices a Brown County Commission action that has much greater implications for taxpayers statewide:

Two weeks ago, the commission emerged from a closed-door meeting and passed an innocuous sounding resolution authorizing the county to appeal a state decision about how much money a pipeline company is required to pay in property taxes. The appeal to the Hughes County Circuit Court means that Brown County thinks the state isn’t assessing as much money on the pipeline as it should, thus depriving local governments of property tax revenues.

…The appeal could have consequences for other entities that, like NuStar, are valued by the South Dakota Department of Revenue, making NuStar a test case. If it turns out that the state has undervalued NuStar’s pipeline, then it’s possible that other pipelines and industries which are centrally assessed by the state could see their tax bills challenged by local governments [Jonathan Ellis, “County’s Appeal on Pipeline Taxes Could Have Broad Effect,” that Sioux Falls paper, 2015.09.19].

Lowballed assessments from the state have previously been cited as one reason that South Dakota counties aren’t seeing nearly as much tax revenue as TransCanada promised them from the Keystone tar sands pipeline, which just misses Brown County but runs through Marshall and Day to our east. Ellis notes that big projects like Keystone aren’t reducing the total tax burden on homeowners:

Over time, the percentage of total taxes paid by regular homeowners has steadily gone up while the amount paid by large, centrally assessed corporations has gone down. In 2000, owner-occupied properties accounted for 34.6 percent of all property taxes paid in the state, while centrally assessed corporations paid 5.2 percent. Last year, owner-occupied taxpayers paid 39.5 percent of all property taxes while centrally assessed corporations paid 2.4 percent [Ellis, 2015.09.19].

Maybe we need to have a job-swap day: let the county assessors do the central assessments on pipelines and other big corporate installations, and let the state work on owner-occupied assessments. And maybe instead of more regressive sales taxes, the Blue Ribbon K-12 panel should look to those undertaxed centrally assessed projects for some of the revenue they need to save South Dakota from its teacher-pay crisis.

6 Comments

  1. Paul Seamans 2015-09-21 08:57

    For Keystone 1 the counties along the route were promised by TransCanada that they would receive $9.1 million each year. Over the last five years they have received an average of $3.5 million per year. This is 38% of what they were promised. And because of the way that the state aid to education formula is set up these counties will be giving state aid money back to the state because of increased local effort. There will not be much net benefit to the local school districts.

    [CAH 09:02: corrected per Paul’s comment below!]

  2. Paul Seamans 2015-09-21 09:00

    In the previous comment it should have been $3.5 million rather than $3.8 million. These figures came directly from TransCanada.

  3. Deb Geelsdottir 2015-09-21 15:27

    When I lived in Hecla in the late 90s, I was told that Conde was able to keep their school open due to revenues from a pipeline that crosses city boundaries. Although Wikipedia says CHS is closed now, does anyone know if it stayed open so long due to a pipeline?

  4. caheidelberger Post author | 2015-09-21 19:21

    Deb! I looked back and found this comment from MD here that supports that notion. Here’s the KELO-TV report that MD sent:

    The proposed Keystone Pipeline could pay a lot in taxes to 16 South Dakota school districts it would run through. One of the schools along the route is Conde, which already collects taxes from the Northern Border Pipeline.

    That money covers 39 percent of the district’s budget. It also helps students get opportunities they may otherwise not get.

    In grades K-12, the Conde school district has just 46 students.

    …Money from the pipeline that runs through it has helped keep the small district from closing or consolidating.

    “It’s safe to say the Northern Border Pipeline is basically keeping that school open,” [Supt.] Jerry McPartland said.

    And it’s allowed the district to survive with limited funding from the state.

    “The school has received a total of $15,000 in the last 25 years of state aid money,” McPartland said.
    [Erich Schaffhauser, “Pipeline Helps Conde School,” KELO-TV, 2007.12.07].

    TransCanada built the Northern Border Pipeline to carry natural gas in 1982. When the above interview happened, the Legislature had already passed 2007 HB 1082, which forced all non-sparse school districts with enrollment under 100 to consolidate by June 30, 2009.

  5. Deb Geelsdottir 2015-09-21 20:16

    Perfect Cory. Thank you.

    If Trans Canada pays taxes like they should, that could be tremendously helpful for SD’s teachers and schools, top to bottom . That could be one of the best things to happen to SD schools in a very long time. IF Trans Canada Pays Taxes Fairly.

    Of course there is also the issue of TC securing available funds to cover any spills or leaks for as long as the pipeline is in use. And a bunch of other issues.

  6. Paul Seamans 2015-09-21 21:47

    TransCanada has lately been making a big deal of their estimate that the Keystone XL will pay $20 million in taxes to the counties along the KXL route. Knowing the taxes that are paid on the Keystone 1 route it is a simple matter to compare the K1 30″ pipe diameter to the KXL 36″ pipe diameter, and compare the 220 miles of the K1 to the 315 miles of the KXL and come up with a fairly accurate estimate of the taxes that would be paid on the KXL. After doing the mathematical calculations I come up with an estimate of a little over $7 million in taxes paid rather than TransCanada’s estimate of $20 million.

    TransCanada has been making these promises of huge property tax windfalls to sway people to support the KXL. Do not believe the SOB’s.

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