Spurred by concerns over lack of accountability and financial reporting, lawmakers will try again to lower state payments designed to help counties and towns deal with impacts of large industrial developments such as wind farms and power plants.
The Joint Minerals, Business, and Economic Development Committee on Thursday advanced the draft Local impact assistance payments bill. The measure would lower the maximum-allowed percentages of state sales and use taxes that are redirected to communities to help them pay for fire, EMS, police and other local services that are stressed from large industrial construction projects.
The measure passed on a vote of 7-4 with three members excused.
What’s in the bill
So-called “community impact assistance” payments are calculated using a complicated formula that aims to quantify large-scale-project impacts. They are based on local sales and use taxes generated from construction and purchasing related to a qualifying industrial project. Communities may receive up to 2.76% of those sales and use taxes that would otherwise go to the state’s General Fund to help manage “unmitigated impacts” – a determination made by the seven-member, governor-appointed Industrial Siting Council.
Last year, the Senate passed a measure to lower the maximum percentage from 2.76% to 2.25%, but it failed in the House.
The latest measure proposes capping the maximum on a three-tier system: 2.25% for qualifying industrial projects with a total estimated material costs of $350 million or less; 2% for projects between $350 million and $850 million; and 1.5% for projects of $850 million or more.
Both the Wyoming County Commissioners Association and the Wyoming Association of Municipalities support a tiered system and reporting requirements, according to association representatives. They also supported a successful amendment that would allow the ISC to increase the maximum to 2.55% for projects with total material costs of $350 million or less if it determines 2.25% is insufficient.
Each county, city and town that receives a distribution would be required to report to the ISC annually about how they spent the impact assistance payments.
Lowering the maximum percentages and adding reporting requirements will both protect the state’s coffers from major expenditures while building more accountability into the system, Rep. Scott Heiner (R-Green River) said. The lower percentages should still result in significant financial assistance, he added.
For example, the ISC awarded a total $34.8 million in community impact assistance payments to counties, cities and towns in 2018. The proposed lower caps would have resulted in reducing that total by $400,000, Heiner testified to the joint committee. The $33.9 million in payments made in 2019 would have been reduced by $270,000.
“So it’s kind of a token amount,” Heiner said. “What we’re really doing is just sending a message to our Industrial Siting Council that they need to be a little bit more careful when they look at these unmitigated impacts and awarding the money of the state of Wyoming, and vet that a little bit closer.”
Reporting and accountability
The ISC doesn’t have the authority to require a full accounting for how the money was spent, according to Industrial Siting Division Deputy Director Luke Esch, who administers the program. It’s a point of contention for some lawmakers. Instead, the seven-member ISC determines payment levels, but the payments are made through the Department of Revenue.
Joint committee member Rep. Cyrus Western (R-Big Horn) quizzed Esch about the agency’s efforts to glean such information despite its lack of authority.
“So they could be spending this money buying snowplows or buying popcorn machines for all we know?” Western asked Esch.
Esch shrugged in agreement, offering no verbal response.
Proponents for revising payment calculations and reporting worry that too much money is on the line given the current lack of accounting for the program. They also worry that a surge in prospective large industrial projects could squeeze the amount of sales and use taxes that would otherwise go to the state’s General Fund.
A proposed “green hydrogen” project estimated at more than $2 billion in Niobrara County, for example, would bring thousands of workers to the sparsely populated region, Niobrara County Commissioner Pat Wade said. Wind developers continue to target Wyoming for potential construction projects, while the Bill Gates-backed TerraPower plans to build a multi-billion dollar Natrium nuclear power plant in Kemmerer – with a population just shy of 3,000 – requiring about 2,000 construction workers.
But it’s difficult to predict how much impact assistance a community might qualify for – or ultimately receive – given a particular project, Wyoming County Commissioners Association Executive Director Jerimiah Rieman said.
“My calculation shows that under [the] 2.76% threshold for a project of $2.4 billion dollars [the impacted communities] would be eligible for $66.2 million,” Rieman told committee members. “Moving it down to 1.5%, they would be eligible for $36 million.”
Rieman also noted that the ISC regularly awards impact assistance at levels far less than they might qualify. The agency awarded only 62% of the maximum allowable award, or $48 million less, for qualifying projects since 2018, he said.
Industrial Siting Act; tweak or reform?
The impetus for Wyoming’s Industrial Siting Act stems from the boom in coal-fired power plant and coal mine construction in the 1970s.
Although large construction activities generate new revenue in sales and use tax and typically increase other revenues for the local economy, those actual dollars tend to trail the massive demand hike on local services. That’s because those revenues are channeled to the state before they return to the counties, cities and towns where the taxes are collected and industrial projects create a strain on local services.
The Industrial Siting Act speeds up the revenue payments and adds extra from the state’s portion.
This method of addressing the local impacts of industrial construction is unique to Wyoming, according to the Legislative Service Office and others.
“Most states provide means whereby the communities can get some assistance from the industry rather than from the state,” committee member Rep. Heiner said.
Members of the joint committee did not dismiss the need to help local governments deal with the impacts of large-scale industrial construction, nor did they discuss how the state and the federal government – via multiple federal stimulus packages – plan to help Wyoming communities mitigate and restructure local economies as fossil fuel industries decline.
Given the accelerating shift from fossil fuels to cleaner, renewable energy, it may be time for Wyoming to consider a complete reformation of the Industrial Siting Act, Heiner said.
“But I’m not ready to do that today,” Heiner said, adding that he favors current measures to amend the law.
Sen. Chris Rothfuss (D-Laramie) favors total reformation, he said, and voted against advancing the measure.
“I think that we’re at a point where we do need to completely revisit this, rework it and recognize that we’re unique in doing it the way that we do it, and that we don’t do it particularly well,” Rothfuss said. “I feel like this is, you know, baling wire and bubble gum on an old 1980s era piece of legislation.”
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