Resilient Routt County tax base likely to carry on through Peabody Energy’s financial crisis
March 31, 2016
Steamboat Springs — The news March 31 that Twentymile Coal Company parent Peabody Energy had laid off 235 employees at its North Antelope Rochelle Mine in Wyoming's Powder River Basin added to uncertainty about the company's future and, by extension, what might take place at Twentymile in western Routt County if Peabody should go into bankruptcy.
Peabody officials indicated to the financial markets last week they might not be able to avoid bankruptcy. And though there is no presumption Twentymile would cease operating under that scenario, economic conditions, including abundant natural gas and an increasingly tight regulatory climate, combine to make its future uncertain.
The layoffs at North Antelope, representing 15 percent of the workforce, were described by Peabody President-Americas Kemal Williams as an effort to match production with customer demand.
Peabody announced in December it planned to sell Twentymile and other assets here, as well as mines in New Mexico, to Kentucky-based Bowie Resource Partners for $358 million, with those funds expected to help Peabody service the interest on its $6.2 billion in debt.
Now, with Peabody's deal with Bowie Resource Partners in doubt due to the difficulty of borrowing money for the acquisition in a depressed coal market, the coal mine's role here is also uncertain.
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Twentymile's impact on the Northwest Colorado economy in terms of salaries that turn over in the economy — not just at the mine, but at the Hayden Station Power plant, Union Pacific Railroad and beyond — are substantial.
Steamboat Today reported in 2013 that entry level miners with no experience earned almost $48,000 per year. And the Colorado Mining Association reported the average pay and benefits combined were $115,354 in 2011.
There are also the mine's purchases and philanthropy to consider. But in terms of property taxes paid by the mine that help fund Routt County government, a closure would not be catastrophic.
The impact of a mine closure on property tax revenues on the South Routt REIII School District, where Twentymile represents 44 percent of total taxes collected, would likely be more impactful, as it might be for the West Routt Fire Protection District and other smaller taxing entities in the county.
Twentymile is Routt County's single largest property taxpayer, County Assessor Gary Peterson confirmed March 31. But if the mine stopped operating, he said, county government could weather the storm.
Though Twentymile is the county's biggest taxpayer, there are others not far behind. The mine's 2014 general fund contribution to the county — $536,669 — is less than 5 percent of the total, Peterson said.
Twentymile's liability to all taxing entities for the same year was $2.98 million on $155.5 million in actual value of taxable property (including agricultural land, which is taxed at a much lower rate).
Absorbing the tax blow
"We would be able to absorb the closing of the mine on a property tax basis," Peterson said, "because we have such diversity and wealth in the county."
He said that if the Routt County Board of Commissioners chose to maintain revenues at current rates, it could decide, as it did during the Great Recession, to use mill levy credits set aside for a "rainy day" as allowed by the Taxpayers Bill of Rights to bolster revenues. During that fiscal emergency, the BOC also cut personnel.
County Finance Director Dan Strnad said the county's 2014 general fund levy of 11.997 mills produced $536,669 in tax revenue from Twentymile's total assessed valuation of $44.73 million. Hypothetically, if that valuation went to zero (which is unlikely), it would take half a mill of property tax to restore the lost revenues.
If county commissioners were to cash in mill levy credits to maintain current revenue levels to absorb the full loss of revenue from Twentymile by raising the general fund levy by .5 mills, Strnad concluded, it would translate into a levy of an additional $4.23 tax dollars per $100,000 of actual or market value of a residential property.
The tax increase per $100,000 of commercial property would be $15.37.
Tax revenues from coal already in decline
The reality, Peterson said, is that property tax revenues generated by the coal mine have been declining fairly steadily since 2010.
Twentymile's property here is taxed in two different categories: personal property (which includes, for example, the mine's office building) and production value, the amount of coal mined in a year and its BTU rating, which influences the price per ton.
According to the assessor, Twentymile's production value for taxes was $72 million in 2010, slipped to $55.3 million in 2012, bounced back to $60.16 million in 2013, but had fallen to $43.2 million in 2015.
The one-year decline in production value from 2014 to 2015 was 19.55 percent, according to a May 20, 2015, email from Peterson to the BOC and County Finance director Dan Strnad.