Property Tax Post: Revenue from Keystone XL Pipeline Only XL in a Few States

After this week’s State of the Union address, debate over the Keystone XL Pipeline has already begun to grow. Some pointed out that President Obama didn’t refer to the project by name, instead saying “[L]et’s set our sights higher than a single oil pipeline,” while others noted that Sen. Joni Ernst (R-Iowa), who gave the response to Obama’s address, referred to the pipeline as the “Keystone jobs bill.” While we let the politicians debate the merits of building the pipeline and how many jobs it will create, let’s take a look at the property tax revenue the project will generate if put into place.

For the states that make up the pipeline’s route—Montana, South Dakota, Nebraska and Kansas—there are tens of millions of dollars in property, sales and excise taxes at stake, according to the Fiscal Times.

For the construction portion of the project, eight construction camps would generate an estimated total of $4 million in property tax revenue for seven counties, one of which would contain two of the camps, according to estimates from the U.S. State Department’s Environmental Impact Study. For comparison, the short-term revenue estimated to be generated from sales and use taxes is $66 million.

The property tax revenue during the initial stages would be from county, school district and special district taxes on the taxable construction equipment sited in the taxing jurisdiction. Construction companies would need to accommodate an expected influx of workers needed for the short-term construction portion, notes Liz Malm of the Tax Foundation in a primer on the tax impact of the pipeline.

However, once the pipeline is operational, the estimated property tax revenue jumps significantly to $55.6 million, spread across 27 counties in Montana, Nebraska and South Dakota, according to the State Department study.

Seventeen of those 27 counties would see a spike in property tax revenue of 10 percent or more compared to the amount each county generated from all property in 2010, with some seeing much higher increases. For example, McCone County, Mont., and Harding and Haakon counties in South Dakota would see property tax revenue from the pipeline’s operation of 117 percent, 145 percent, and 110 percent, respectively, compared to their 2010 total property tax revenue.

A handful of counties in those states would see substantial gains of 27 to 85 percent, while another subset of counties, many in Nebraska, would see much more modest gains, of 2 to 14 percent. Further, the study notes that Nebraska’s property tax revenue would be even more modest once the project is completed because nearly all of the property in Nebraska would be classified as personal property and thus be eligible for annual depreciation.

While the revenue gains are significant, those benefits would be limited to a handful of counties in just the few states where the pipeline passes through.

Continue the conversation on Bloomberg BNA’s State Tax Group’s LinkedIn page: How much should property tax revenue estimates affect the political debate on the Keystone XL Pipeline?

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