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Impact Fee Vs

Severance Tax Edgar T. Warriner

Outline

• Act 13 Impact Fee – How is it collected – How is it distributed

• Energy Equals Jobs • Competitiveness of Pennsylvania • How the Severance Tax Will Impact You – The

Business Owners

Act 13 Collections

$0.00 - $2.25 $2.26 - $2.99 $3.00 - $4.99 $5.00 - $5.99 $6.00 - $9999.99

Year 1 $40000.00 $45000.00 $50000.00 $55000.00 $60000.00

Year 2 $30000.00 $35000.00 $40000.00 $45000.00 $55000.00

Year 3 $25000.00 $30000.00 $30000.00 $40000.00 $50000.00

Year 4 $10000.00 $15000.00 $20000.00 $20000.00 $20000.00

Year 5 $10000.00 $15000.00 $20000.00 $20000.00 $20000.00

Year 6 $10000.00 $15000.00 $20000.00 $20000.00 $20000.00

Year 7 $10000.00 $15000.00 $20000.00 $20000.00 $20000.00

Year 8 $10000.00 $15000.00 $20000.00 $20000.00 $20000.00

Year 9 $10000.00 $15000.00 $20000.00 $20000.00 $20000.00

Year 10 $10000.00 $15000.00 $20000.00 $20000.00 $20000.00

Year 11 $5000.00 $5000.00 $10000.00 $10000.00 $10000.00

Year 12 $5000.00 $5000.00 $10000.00 $10000.00 $10000.00

Year 13 $5000.00 $5000.00 $10000.00 $10000.00 $10000.00

Year 14 $5000.00 $5000.00 $10000.00 $10000.00 $10000.00

Year 15 $5000.00 $5000.00 $10000.00 $10000.00 $10000.00

The fee begins the year the well is “spud,” which is defined as the year the actual drilling of the unconventional well began. The fee for horizontal wells will be based upon year of well and average price of natural gas as follows (Note: Active Vertical wells are assessed at 20 percent of the horizontal well fee for 10 years):

Act 13 Distributions • 60 percent to the Unconventional Gas Well Fund

– These funds are distributed to counties and municipalities with wells. – These funds must be used for the 13 purposes set forth in Section 2314(g) of

Act 13. – The Unconventional Gas Well Fund Usage Report outlines the purposes for

which counties and municipalities must spend these funds. This form must be submitted to the Commission annually by April 15.

• 40 percent to the Marcellus Legacy Fund – 15 percent of the Marcellus Legacy Fund is distributed by the Commission to

all counties, regardless of whether the county has wells located within its borders, to be used for certain environmental initiatives, as set forth in Section 2315(a.1)(5) of Act 13.

• Counties ARE NOT required to report the expenditure of these funds to the Commission. – Other funds making up the Marcellus Legacy Fund include the Highway Bridge

Improvement Fund and the Environmental Stewardship Fund.

2013 Impact Fees

• $225 million collected in 2013 – $123 million to county and municipal

governments – $82 million through Marcellus Shale Legacy Fund – $17 million to state and county regulation

agencies

2013 Act 13 Distributions Municipality Name Total

BRAINTRIM TOWNSHIP $27,512.96

CLINTON TOWNSHIP $38,244.98

EATON TOWNSHIP $70,456.12

EXETER TOWNSHIP $9,945.33

FACTORYVILLE BOROUGH $25,151.74

FALLS TOWNSHIP $61,339.38

FORKSTON TOWNSHIP $25,692.64

LACEYVILLE BOROUGH $8,283.45

LEMON TOWNSHIP $329,781.48

MEHOOPANY TOWNSHIP $120,050.47

MESHOPPEN BOROUGH $11,155.19

MESHOPPEN TOWNSHIP $188,466.30

MONROE TOWNSHIP $48,075.32

NICHOLSON BOROUGH $15,909.46

NICHOLSON TOWNSHIP $125,688.09

NORTH BRANCH TOWNSHIP $46,974.14

NORTHMORELAND TOWNSHIP $23,991.82

NOXEN TOWNSHIP $27,844.82

OVERFIELD TOWNSHIP $42,578.91

TUNKHANNOCK BOROUGH $37,090.44

TUNKHANNOCK TOWNSHIP $134,411.30

TOTAL Wy Co MUNICIPALITIES $1,418,644.34

TOTAL WYOMING COUNTY $1,176,354.92

TOTAL COUNTY & MUNI'S $2,594,999.26

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County Act 13 Impact Fee Distribution

131-Wyoming County

Total distribution for year 2013 : $1,176,354.92

Distribution Details

Section Description Eligibility/Calculation

Amount

2314(d)(1) Counties with spud unconventional wells County contains 177 of 6550 spud unconventional wells subject to the impact fee statewide

$1,149,403.73

2315(a.1)(5) County - Rehabilitation of Greenways, etc. County population of 28,125 (0.22%) of 12,763,536 total population of the Commonwealth. This amount is adjusted to provide each county a minimum of $25,000

$26,951.19

The following funds are allocated for Municipalities within Wyoming County under section 2314(D)(3) (Click this header to see distributions to the municipalities)

Allocation Total Amount For All Municipalities Within County

Municipalities with qualifying wells within this municipality, a contiguous municipality, or within 5 miles - Amount based on Population

$215,513.20

Municipalities with qualifying wells within this municipality, a contiguous municipality, or within 5 miles - Amount based on Highway Miles

$215,513.20

Municipalities within eligible counties - Amount based on Population $215,513.20

Municipalities within eligible counties - Amount based on Highway Miles $215,513.20

Municipality Act 13 Impact Fee Distribution

77792-TUNKHANNOCK, a Township in Wyoming County

Total distribution: $134,411.30

TUNKHANNOCK Distribution Details

Section Description Eligibility/Calculation

Amount

2314(d)(2) Municipalities with spud unconventional wells Municipality contains 2 of 6550 spud unconventional wells subject to the impact fee statewide

$13,348.37

2314(d)(3)(i)(A) Municipalities with qualifying wells within this municipality, a contiguous municipality, or within 5 miles - Amount based on Population

Municipality is a host to 2 wells that are subject to the Act 13 Impact Fee. Municipality population of 4,324 (16.70%) of 25,898 total population of eligible Municipalities within this County

$35,982.66

2314(d)(3)(i)(B) Municipalities with qualifying wells within this municipality, a contiguous municipality, or within 5 miles - Amount based on Highway Miles

Municipality is a host to 2 wells that are subject to the Act 13 Impact Fee. Municipality highway miles of 44.98 (12.54%) of 358.61 total highway miles of eligible Municipalities within this County

$27,031.54

2314(d)(3)(ii)(A) Municipalities within eligible counties - Amount based on Population

This County contains 177 spud unconventional wells. Calculation is based on municipal population of 4,324 (15.37%) of 28,125 total population of this County

$33,133.47

2314(d)(3)(ii)(B) Municipalities within eligible counties - Amount based on Highway Miles

This County contains 177 spud unconventional wells. Calculation is based on municipal highway miles of 44.98 (11.56%) of 389.07 total highway miles of this County

$24,915.26

Calculations above are based on the available funds allocated for Municipalities within Wyoming County under section 2314(D)(3)

Allocation Total Amount For All Municipalities Within County

Municipalities with qualifying wells within this municipality, a contiguous municipality, or within 5 miles - Amount based on Population

$215,513.20

Municipalities with qualifying wells within this municipality, a contiguous municipality, or within 5 miles - Amount based on Highway Miles

$215,513.20

Municipalities within eligible counties - Amount based on Population $215,513.20

Municipalities within eligible counties - Amount based on Highway Miles $215,513.20

Act 13 Funding Requirements 1. Construction, reconstruction, maintenance and repair of roadways, bridges and public infrastructure.

2. Water, storm water and sewer systems, including construction, reconstruction, maintenance and repair

3. Emergency preparedness and public safety, including law enforcement and fire services, hazardous material response, 911, equipment acquisition and other services

4. Environmental programs, including trails, parks and recreation, open space, flood plain management, conservation districts and agricultural preservation

5. Preservation and reclamation of surface and subsurface waters and water supplies

6. Tax reductions, including homestead exclusions

7. Projects to increase the availability of safe and affordable housing to residents

8. Records management, geographic information systems and information technology

9. The delivery of social services

10. Judicial services

11. Deposit into the municipality’s capital reserve fund if the funds are used solely for a purpose set forth in Act 13 of 2012

12. Career and technical centers for training of workers in the oil and gas industry

13. Local or regional planning initiatives under the act of July 31, 1968 (P.L. 805, No. 247), known as the Pennsylvania Municipalities Planning Code

2013 Natural Gas Production Top 11 in PA

COUNTY GAS QUANTITY (MCF) SUSQUEHANNA 389,723,909 BRADFORD 383,530,426 LYCOMING 220,423,425 GREENE 162,575,176 WASHINGTON 145,161,772 TIOGA 109,046,507 WYOMING 90,939,699 WESTMORELAND 36,540,900 FAYETTE 26,749,464 BUTLER 23,609,115 SULLIVAN 21,887,743

Energy Equals Jobs

Energy Equals Jobs

Pennsylvania Help Wanted Online Active Ads by Industry Sector

Industry Sector Jun-14 Jun-13 Volume Change

Percent Change

Total Ads by Industry Sector 224,454 207,266 17,188 8.30%

Goods Producing Industries 15,560 10,888 4,672 42.90%

Ag, Forestry, Fishing, Hunt. 176 120 56 46.70%

Mining 253 299 -46 -15.40%

Construction 3,134 2,050 1,084 52.90%

Manufacturing 11,997 8,419 3,578 42.50%

Service Providing Industries 105,945 96,389 9,556 9.90%

Unclassified or unavailable 102,949 99,989 2,960 3.00%

Source: www.paworkstats.pa.gov

Pennsylvania Help Wanted Online Active Ads by Industry Sector

Industry Sector Jun-14 Jun-13 Volume Change

Percent Change

Construction 3,134 2,050 1,084 52.90%

Manufacturing 11,997 8,419 3,578 42.50%

Source: www.paworkstats.pa.gov

2013 Selected State Government Tax Collections (000’s)

State Sales Tax Ind Inc Tax Corp Inc Tax

Severance Tax/Impact

fee

Transfer Tax

Total Collections

TX $26,127,421 $0 $0 $4,647,848 $0 $30,775,269

PA $9,243,355 $10,777,334 $2,208,163 $224,500 $395,176 $22,453,352

OH $8,626,426 $9,869,545 $262,226 $12,308 $0 $18,770,505

WV $1,255,377 $1,795,947 $242,429 $608,371 $8,776 $3,910,900

State Population Tax per Person

TX 26,448,193 $1.16

PA 12,773,801 $1.75

OH 11,570,808 $1.62

WV 1,854,304 $2.10

2nd only to Iowa for the Highest Corp Tax Rate in

the US at 9.99%

51% Higher than TX 8% Higher than OH

Where Will They Invest?

Where are They Investing Now?

Revenue Multiplier Effect

Revenue Multiplier Effect

2013 2014 % Chg

Sales Tax $9,166,842 $9,243,355 0.8%

Corp Inc Tax $1,837,374 $2,208,163 20.2%

Impact Fee $202,000 $224,500 11.1%

Ind Inc Tax $10,102,113 $10,777,334 6.7%

Transfer Tax $342,506 $395,176 15.4%

Total Tax $21,650,835 $22,453,352 3.7%

Where They Are Investing

Severance Tax Proposal

New Severance Tax Proposal

Higher Taxes = Uncompetitive

State Sales Tax Ind Inc Tax Corp Inc Tax

Severance Tax

Transfer Tax

Total Collections

TX $26,127,421 $0 $0 $4,647,848 $0 $30,775,269

PA $9,243,355 $10,777,334 $2,208,163 $944,500 $395,176 $23,173,352

OH $8,626,426 $9,869,545 $262,226 $12,308 $0 $18,770,505

WV $1,255,377 $1,795,947 $242,429 $608,371 $8,776 $3,910,900

State Population Tax per Person

TX 26,448,193 $1.16

PA 12,773,801 $1.81

OH 11,570,808 $1.62

WV 1,854,304 $2.10

Severance Tax = O.P.M.

The Bottom Line for YOU

Impact Fee • Competitive • Fair • Investments back to the

communities that generated the wealth

• Stimulates construction & manufacturing

• Generates jobs Locally & Statewide

Severance Tax • Uncompetitive • Discourages growth • Lost into the General Fund • Avoids the real issues • BAD FOR WYOMING &

SURROUNDING COUNTIES! • BAD FOR BUSINESS

OWNERS • BAD FOR LANDOWNERS

Elk Advisors Group Northeast Pennsylvania’s Premier

Business Coaching Firm

Edgar T. Warriner, CAPBC (607) 759-0909 edgar.warriner@elkadvisorsgroup.com

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