Budget Breakdown – Local Impact Grants

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4min 50sec

In communities near oil and gas drilling, industry taxes pay for all sorts of stuff -- roads, parks, water treatment plants. But that money doesn’t go to towns directly -- it has to flow through the state. And for several years now, Colorado’s decided to keep that money for itself. So far, communities aren't happy, but they are making due.

Find earlier stories in our series here


Rifle, Colorado, is known for two things: elk hunting, and gas drilling. The elk connection is easy to see; there’s a big statue of one at the entrance to town. The gas drilling is a little harder. Sure, there are drill rigs and well-heads dotting the hills all around here. But on the streets there’s little to celebrate the industry. There is however plenty here that owes its existence to energy production, just ask Rifle’s long-time mayor, Keith Lambert.

LAMBERT: "Just about anywhere you drive in Rifle you can point to a facility or a project that has been funded in some part by the Department of Local Affairs energy impact funds."

Those energy impact funds are how the state sends oil and gas taxes back to local communities. The money serves two purposes -- to pay for the added burden on government services when the gas fields are booming, and to help communities prepare for the day when the wells dry up and the industry goes away. Some of the money comes to towns directly, but most of it towns have to win through competitive grants. Mayor Lambert’s not kidding about how important this money is to places like Rifle. As we cruise the streets he points to building after building -- the new police station and courthouse, the fire department, schools, even the city maintenance building.

And then we arrive at a road to nowhere -- a brand new strip of asphalt through what the city hopes will someday be an industrial park. Right now though, it’s just a field of dirt.

LAMBERT: "We need to put in some more roadwork, some more water and sewer lines, to meet all the requirements of any companies that would like to locate here."

The mayor says Rifle was hoping to pay for those improvements with an energy impact grant. That was, until they went to Denver last year to submit their application. City staffer Mike Braaten picks up the story.

BRAATEN: "We had gone in assuming there would be about 20 million dollars to be distributed around the state. And when we actually came down to the hearing, we have to go present the project, it actually came down to only having 5 million dollars to distribute statewide."

Rifle officials came home without a grant that day, and they don’t know when the money will start flowing again. The state is taking more than 200-million dollars out of severance tax funds, if you count what’s proposed for next year. That could leave some major projects in Rifle on hold for quite a while. But mayor Lambert sounds surprisingly resigned.

LAMBERT: "I fully realize the need to balance your budget. And in this case I under the legislature’s need to find funds to do so. What I’m concerned about is that this not become something that they rely on year in and year out."

Legislators who represent oil and gas areas are concerned about that too. They’ve introduced several bills blocking the transfer, although none are likely to pass. Republican Kevin Grantham argued hard on the Senate floor against taking the money.

GRANTHAM: "Communities down in my district, Las Animas county, one of the poorest counties in the state, they do rely on that. We can simply flip a switch and take this money, but they have nowhere to fall back."

HODGE: "I would argue that these funds don’t necessarily belong to local governments."

Democratic Senator Mary Hodge chairs the Joint Budget Committee, which proposed taking the grant money. Severance taxes are supposed to benefit the communities losing the oil and gas -- but she argues those resources belong to the whole state.

HODGE: "When those minerals are severed, they are severed so the entire state of Colorado no longer has them and the entire state of Colorado no longer has that revenue once they’re gone."

That, of course, is not how local communities see it. But tough times are forcing a new level of pragmatism. Kevin Bommer with the Colorado Municipal League says with the budget in such dire straits, they didn’t have any hope of saving this funding. Their goal is just to convince lawmakers that this isn’t a permanent fix.

BOMMER: "I was encouraged that there was at least an acknowledgement by many legislators that, no we shouldn’t be doing that. Followed by, “but this year we have to."

Of course, it’s almost certain that Colorado’s budget will be bad shape again next year, which means severance tax money will once again be in the crosshairs, and advocates for gas-land communities will have to keep walking the line between helping the state budget, and trying to help the projects in their own backyards.