Tax revenue falls 5 percent this year
If oil prices continue to fall, St. Charles Parish tax revenue could be significantly affected by 2016 because of the way it’s assessed and how much petroleum is stored.
“We’re beginning to feel it,” said Tab Troxler, the parish’s tax assessor, but added that it was offset by additional gains in the tax roll. “We are down 5 percent this year in petroleum inventory” that he says is due to lower amounts of oil stored and at less value. Some of the recovery was made up in expired industrial tax exemptions.
This year’s projected inventory tax collection is $32.4 million.
Falling oil prices could take a direct hit on the parish’s inventory tax revenue, the point of collection for the parish’s oil-related tax. It could be a considerable one with it being the second largest collection in Louisiana, second to East Baton Rouge Parish that also has a heavy petrochemical base.
“We can’t necessarily predict where oil prices are going to go, but we know we’re in the ninth month of 2015 and we’re seeing oil hovering around $50 a barrel and below so we’ll assume that will further erode value,” Troxler said. “But the biggest story is petroleum products make up 48 percent of the inventory tax here.”
In St. Charles Parish, the inventory tax collection represents 21.5 percent of this year’s parish tax revenue, a number that also has fallen from last year’s 22.7 percent. Troxler attributed the drop to declining oil prices, which started last year and continued into this year to the point of recently falling below $40 a barrel, and less inventory in petroleum products.
Each year’s tax collection is assessed on the previous year’s value, which is why Troxler said the hardest hit from plunging oil prices may not be felt until 2016 because of how the tax is assessed.
“This tax roll we’re in good shape, but looking forward it could affect the value of our assessments and that means lower tax revenue,” he said. “It’s still too early to call with being a year behind, but it will affect next year’s roll.”
But the inventory tax isn’t only getting shaky from cheaper oil, Troxler and others recently lobbied heavily to keep a 100 percent inventory tax credit (the state reimburses businesses that pay this tax).
Faced with a $1 billion budget shortfall, legislators aimed to kill the credit but instead reduced it by 25 percent although businesses can rollover inventory and still get the difference next year. However, more cuts are being discussed.
“Going forward, the bottom line is we have some issues in regards to inventory – being it is 21.7 percent of our tax roll,” Troxler said.
There are three factors affecting the tax roll in inventory: The Legislature reduced the tax credit by 25 percent and that could cause companies to keep less inventory, falling oil prices are making the stored oil less valuable and the tax credit could be gone by 2016-17 when the deepest tax revenue crunch could hit.
The River Parishes, with their petrochemical-heavy economy, have petroleum inventories and have grown dependent on the tax credit revenue. If that revenue was lost, Troxler said he’s concerned about the tax share unfairly shifting onto others like small businesses and homeowners.
St. Charles Parish, as well as the St. Charles Parish Sheriff’s Office and school system, receive the bulk of the inventory tax collection.
Troxler said this year’s inventory tax is projected at $32.4 million, which would have to be made up in some way if the tax credit was lost and would likely be passed on to the businesses that pay the tax.
“It’s a topic and there are a lot of different discussions on making changes there,” he said. “We’re not sitting back and letting it just happen. To pull that credit overnight would create the problem.”
Troxler said he’s been working through the Louisiana Assessors’ Association, testified in the last legislative session, met with other tax assessors, as well as with business and industry representatives about the inventory tax.
“I’m actively involved in this discussion because it is so important to us,” he said. “Our advocacy has been on having a fair tax system that treats all taxpayers equally.”
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