Natural Gas Counties Reaping Property Tax Gains
West Virginia's booming natural gas production has led to more than just drilling jobs and severance taxes, it has also increased the state's property tax base. Since 2005, the total assessed value of property in the state has increased from $57.9 billion to $86.6 billion, an increase of 49.5%. And while the growth has been seen throughout the state, a handful of counties have seen even higher growth.
Wetzel, Doddridge, and Marshall County have all seen their total property assessments more than double since 2005. And what do those counties have in common? They have all seen a substantial increase in natural gas production over that same time period.
In fact, of the top 10 counties with the biggest growth in assessed property values, four of them are also in the top 10 for the biggest growth in natural gas production. But it is not the production value of natural gas alone that is fueling the growth in these counties.
The natural gas industry contributes to property taxes in two ways. First, property that is producing natural gas is assessed and taxed based on the gas's value, determined by yield capitalization models, while the drilling equipment, trucks, pipelines and other industrial property are also assessed and taxed as personal property.
With that in mind, take a look at Wetzel County's property tax assessments broken down by class and type. Wetzel County had the biggest increase in total property assessments of all the counties, with total assessments increasing by over 150% between 2005 and 2013, while having the 4th highest increase in natural gas production. But the growth in Wetzel County varied greatly by the different classes of property.
Class II, residential property, grew at only 11%, far below the overall growth rate of 151%. Class III and IV real property, which would include business real estate, grew faster at 88%, but still below the overall rate of 151%. Instead, Wetzel County's property value growth was fueled by growth in Class III & IV personal property assessments. This class is primarily made up of business personal property, and would include drilling equipment, trucks, and all the other aspects of natural gas production.
According to these figures, nearly all of the growth in property assessments in West Virginia's gas-producing counties can be attributed to natural gas production. And that growth has had a real effect on property tax revenue in these counties. In Wetzel County, revenue from the county's regular levy increased from $2.2 million in 2005 to $6.3 million in 2013, even as the county reduced levy rates from 28.58 to 27.72 cents per $100 of assessed value for Class I and 57.16 to 55.44 cents for Class II.
With so much of the natural gas growth in revenue coming from the "business personal property" side of the ledger, it is increasingly important for the state to keep it's property tax base broad and resist calls to exempt large chunks of the base from taxation. Not only will this allow the counties that are producing the gas to enjoy some of the benefit, but it will also keep property taxes low for the state's residents.