Rio Arriba County lawmakers rejected a proposal that could help prevent taxpayers from getting cheated by one of the state’s leading industries.
County Commissioners dismissed a presentation, Jan. 26, that some believe would increase the revenue generated from taxes levied on the equipment that energy companies use to collect and transport oil and gas.
Rio Arriba County Economic Development Director Christopher Madrid and Jerry Wisdom, of Oklahoma-based Total Assessments Solution Corporation, attempted to sell the commission on the importance of the company’s services. Those services include finding and cataloging oil industry equipment that may have either been inadvertently or purposely left off the state’s property tax rolls.
Madrid said the services are needed to ensure industry officials are contributing their fair share to the County’s coffers. The state Taxation and Revenue Department determines the tax oil companies pay based on the dollar value of the equipment, such as the meters, pipelines and pumps, which they operate within a County’s borders.
“I think it was Ronald Reagan that said, ‘Trust but verify,’ which is the standard we apply to our own people,” Madrid said. “Anyone who owns a house, they tell us how much they pay for that house. Then our assessor goes out and assesses the property. We don’t allow them to mail in their property’s value.”
But the oil and gas industry does not have to endure the same scrutiny area property owners face.
“Conversely, the oil/gas industry is simply based on trust,” Madrid said. “They tell us how much they pay and what the value is. Let’s go out and assess this with professionals.”
Oil and gas industry companies operate some 8,885 wells in the County, 7,941 of those are natural gas. Equipment for those wells, such as compressors, can cost anywhere from $25,000 to $2 million.
Wisdom said his company’s work would not result in energy companies paying new taxes, but instead what they should have been paying all along.
“We aren’t asking to raise taxes,” he said. “If a company is reporting all of their assets, there is no fear, whatsoever, of their taxes going up. But it is inequitable for those who are reporting their taxes accurately, not to go check the others.”
Wisdom maintains it is a nationwide problem and pointed to several examples of how oil companies omit information that could increase their tax obligations. For example, an energy producer in Johnson, Ark., listed the value of two natural gas compressors at $7,920, which generated a tax for the government entity, of about $73. However, his crews physically inspected the site and learned the actual value for the two compressors was about $328,794 which generated $3,024 in taxes, for a total increase of $2,951.
His company also uncovered an instance where the energy company under-reported the value of 169 miles of pipeline in Johnson, Ark. The undisclosed company reported the value at $2.2 million, but the actual value was somewhere in the $20 million range. Wisdom said that finding netted Johnson officials about $169,760 in taxes.
Past success
This is the second time Wisdom has appeared before the County commission, attempting to sell his services. While working for Oklahoma-based Visual Lease Services, he presented a similar proposal to the commission in March 2011.
At the time of the first presentation, Wisdom said his company did work on at least 50 projects in five different states — Texas, Oklahoma, Colorado, Louisiana, Nebraska and New Mexico — and was in the middle of working with Harding County.
Former Harding County deputy assessor and current Assessor Peter Callahan said his company used Wisdom’s services twice, in 2011, for about $75,000. That amount netted the company some $75 million in untaxed oil and gas equipment, Callahan told the Rio Grande SUN.
Wisdom said he has appeared as an expert witness in several cases, spanning decades, and learned the oil companies can be quite deceptive when it comes to making sure information gets in the right hands.
“I had cases in the past, where the tax rep was told not to turn the compressor in until after the assessor found it,” he said. “That was actually in a deposition.”
No guarantee
Although both County commissioners, Danny Garcia and Alex Naranjo, acknowledged the need for such an audit, neither was willing to support the project.
Naranjo rejected the idea because he believed it would cost taxpayers too much, without any assurances that it would increase the tax rolls. Instead, he said he would support the measure if Wisdom and his team worked on commission.
“Right now, oil and gas in Rio Arriba County is about $4 million and it used to be $8, $9, $10 million,” he said. “Can you guarantee that we will see this kind of inventory at the end of the day?”
Wisdom wouldn’t guarantee his company could expand the County’s tax revenue. However, he did say that if he wasn’t confident that his services would benefit Rio Arriba County, he wouldn’t have attempted to sell them.
Madrid quickly countered the commission-based compensation suggestion by pointing out it would taint any testimony the County would need to compel energy companies to pay what they rightfully owe.
“If we were to go in that direction, it would be through the Request for Proposals process,” he said. “I understand a commission basis wouldn’t work because if they had to come on as an expert witnesses, they wouldn’t be viewed as objective.”
Madrid said the Proposal would include provisions that allow County officials to back out if they don’t see immediate results.
Garcia expressed concern that such a project would prompt oil and gas companies to take their business elsewhere.
“Right now, oil and gas production is at the lowest level ever, and my district is where all the wells are,” he said. “I would hate to see the oil and gas industry coming in and shutting down any more production than what is out there.”
Assessor Levi Valdez said he and his staff have compared what is being taxed to what is actually in the field and immediately discovered discrepancies.
“We have been doing pipeline comparisons and we see a difference in values,” Valdez said. “We are talking to the property tax division about these issues.”