Lafourche projects likely on hold with mineral royalties down 35%

In Lafourche Parish, royalties received from oil and gas production on its land help pay for basics such as roads, drainage and even civil defense.

But with the price per barrel of oil the lowest it’s been since 2009, the slice the parish gets is coming from a much smaller pie.

According to Renita Jackson, director of finance for Lafourche Parish, royalties the parish collects are down by more than $1 million – nearly 35 percent – this year compared to collections made this same time in 2014.

What that means for citizens of Lafourche is those dollars that were used to build drainage projects, repair roads and help the animal shelter aren’t as plentiful as they were in years past.

But the hit to mineral royalty shares collected by Lafourche won’t be felt until 2016.

“We’re not going to see an immediate impact only because we already had a decent [mineral royalties] fund balance for [2015] and because the parish president has decided not to [start] additional projects scheduled for 2016,” Jackson said. “We want to still have a decent fund balance [to start those projects].”

Essentially, the parish collects mineral royalties continuously each year, but the money isn’t spent until the following budget cycle. No project, purchase or department’s budget is dependent on mineral royalties because parish officials don’t know for sure how much money they will truly get from mineral royalties each year, Jackson said.

So, with the reduction in mineral royalties, 2016 will have very few construction projects started in the parish.

The only insulated parish offices are the seven recreation departments. They each collect their own taxes and “historically have healthy fund balances,” said Archie Chaisson, administrator for Lafourche Parish.

In 2014, Lafourche Parish collected $5.7 million in revenue from mineral royalties. Jackson presented the parish’s proposed operating budget to the Parish Council last week. It projects that the parish will only collect a little more than $4 million from royalties.

But that money is there to supplement budget shortfalls when they arise. For example, last year, $2.5 million was taken out of the royalty account to pay for drainage projects. More than $1.2 million was also spent on simply supplementing the 2014 budget.

Other parish departments and programs benefitting from mineral royalty dollars include the Lafourche Parish Animal Shelter, the Commission of Women, Road Sales Tax District 2, the Lafourche Parish Library, the South Lafourche Beachfront Development District and even civil defense.

“If we continue to see the downward trend, we’re going to have to start cutting back on spending for some of these programs and projects,” Chaisson said. Various programs don’t have dedicated sources of income, so they will suffer first.

“The mineral royalties fund has historically been kind of a lagniappe fund for us,” Chaisson said. But the reduced mineral royalties Lafourche collects is not nearly as great a concern as the potential reform of the watercraft tax credit offered by the state government, he said.

The Louisiana Senate killed a constitutional amendment that would have exempted offshore vessels from paying property taxes to coastal parishes during this year’s legislative session. The amendment would have freed the state from having to reimburse vessel owners a full tax credit for a parish tax.

The tax, which goes to parishes but then is refunded to vessel owners by the state, was the target of legislators seeking to close a $1.6 billion budget gap.

That credit was left untouched, but several Louisiana lawmakers have said the credit needs to be examined because it essentially uses state money to fund parish governments.

“It’s already come back up in that it’s going to have to be addressed,” Chaisson said. “The Legislature will likely have a special session in the early part of January. That’s our bigger fear because that’s 40 percent of our budget versus just a couple of million dollars of royalty dollars.”

‘If we continue to see the downward trend, we’re going to have to start cutting back on spending for some of these programs and projects.’

ARCHIE CHIASSON

Lafourche Parish Administrator

Lafourche projects likely on hold with mineral royalties down 35%