Grand Jury: Tax Oil

New Revenues Needed, Advisory Body Insists

With the oil industry pumping nearly 3.4 million barrels out of the ground in Santa Barbara a year, the county Grand Jury concluded it makes no sense that Santa Barbara County isn’t getting a piece of the action. To that end, the Grand Jury ​— ​made up of citizen volunteers ​— ​urgently advised the Board of Supervisors to put an oil tax on the ballot as soon as possible to let the voters decide.

If the county used the same tax formula adopted in Oklahoma, the Grand Jury estimated Santa Barbara could generate $22 million a year from onshore oil production. If instead the county imposed a more modest one-dollar-a-barrel tax ​— ​as recommended by county CEO Chandra Wallar early last year ​— ​it could reap $3.4 million a year in additional revenues. The Grand Jury concluded the county’s need for additional revenue sources is immediate and profound. The budget just approved three weeks ago by the Board of Supervisors had to paper over a $5 million shortfall between expenses and revenues. But the big picture is much bleaker, the advisory body opined, when spiraling pension costs, deferred road maintenance, and the expense of staffing the proposed new North County jail ​— ​$17 million extra a year ​— ​are included.

“Losing 83.3 percent of the taxes once garnered from oil production was a significant decline in revenue for California counties,” the report stated.

The Grand Jury acknowledged that many of the environmental concerns surrounding oil production ​— ​spills, air pollution, and fracking ​— ​remain the subject of ongoing contention. On those matters, it took pains to take no position. But while such matters are debated, the Grand Jury noted that oil companies have expanded the amount of oil they’re pumping, the number of wells they’re pumping, and the number of acres they’ve brought into production. The only other tax the county collects from oil development, the Grand Jury observed, came from property taxes, roughly $12 million a year. As much as that is, it’s still 83 percent less than it would have been had Prop. 13 ​— ​designed to provide relief from rapidly escalating property taxes ​— ​not been passed by voters in 1978. “Losing 83.3 percent of the taxes once garnered from oil production was a significant decline in revenue for California counties,” the report stated.

In contrast to onshore oil, the Grand Jury found that the county had managed to snag some financial benefit from the offshore oil development taking place in the channel ​— ​$20 million paid to the Coastal Resources Enhancement Fund since 1988. Last spring, the supervisors considered placing an oil tax on the ballot, but the initiative failed. During board deliberations, vehement opposition was expressed by North County business advocates who contended the measure would cost jobs, drive up the price of gas, and unfairly target a specific industry. The Grand Jury expressed unalloyed skepticism that any oil tax the county might impose would ​— ​or could ​— ​have any impact on local jobs or gas prices. It noted that a new oil tax would not fall “on the general populace” as the sales tax does and would definitely increase much-needed revenues.

As politically and financially irresistible as it might seem for the county to soak the oil companies ​— ​now reveling in record profits ​— ​to actually do so is much more complicated. Under state law, it would require four of the five supervisors to place an oil tax on the ballot if the revenues were to feed the general fund. (Given the makeup of the board, it’s exceedingly unlikely that would happen.) The good news is that such an initiative would require only a simple voter majority to pass. By contrast, only three supervisors need approve an oil tax initiative that detailed precisely how the money would be spent. But such a measure would need a two-thirds voter majority for passage. The last time county voters agreed to such a proposition was in 2008 when they approved Measure A, a sales tax increase that would fund freeway widening and road repairs. Another option would be for a citizens committee ​— ​separate from the supervisors ​— ​to collect enough signatures to place a general-fund oil-tax initiative on the ballot. The number of signatures might be daunting ​— ​15 percent of the registered voters in the county ​— ​but for such a measure to pass, only 51 percent of the voters would have to vote yes.


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