Inside Aera
Oil in Everyday Life May 19, 2020

County of Kern prepares for a financial hit from low oil prices

The county’s fiscal health largely depends on a healthy oil industry. Tax Assessor Jonathon Lifquist explains why Kern, not yet fully recovered from 2014’s oil price downturn, is likely to declare another fiscal emergency

County of Kern Assessor Jonathon Lifquist

County of Kern Assessor Jonathon Lifquist

As the tax assessor for the nation’s third largest oil-producing county, Jonathon Lifquist is acutely aware of the impact of collapsed oil prices. He took on the assessor’s job in 2014, when oil prices plunged. Now, he’s facing an even greater challenge. What’s more, Kern County won’t be alone in feeling the impact of the oil industry’s losses.

What’s your role as Kern County assessor? 

The Assessor is responsible for valuing all property in the county, tracking ownership, documenting new construction, administering property tax exemptions and mapping property boundaries for the entire county.

Public services such as Sheriff, Fire Department and schools depend on revenue based on property tax assessments, while taxpayers, rightfully, want to pay no more in property taxes than required by law. (Yes, most would prefer to pay less.) The Assessor’s job is to do right by both sides.

“Low oil prices are bad for the county and county government.”

What’s been your reaction to seeing oil prices plummet to record lows?

Oil and gas properties have always accounted for a good percentage of Kern County’s total assessed value. Over half of Kern’s assessments for much of the past century were attributable to oil and gas valuations. While that percentage is substantially smaller today, Kern County’s public agencies are aware that the county’s fiscal health is largely dependent on a healthy oil industry.

Low oil prices are bad for the county and county government – reducing the value of oil properties themselves but also affecting our local economy as a whole. Today’s record lows are particularly distressing.

What effect do these prices have on the County of Kern?

The 2014 drop in oil and gas prices reduced local property tax revenues, forcing the county to declare a fiscal emergency. Though the County Administrative Office (CAO) recently declared an end to the emergency, county government has not fully recovered. The 2014 declines were minor compared to the recent catastrophic plunge in oil prices, which would likely put the county back into fiscal emergency if low prices continue into 2021.

How is the County of Kern positioning itself for the future with oil prices at these levels?

“We don’t know yet what the final outcome will be, but the county is preparing for a financial hit.”

So much is going on right now – an increase in county spending in response the COVID–19 pandemic, dramatic declines in oil and gas prices and the distinct possibility of other property value declines resulting from the economic shutdown and decline in the oil economy. The CAO has called for across-the-board budget cuts as a precautionary measure. We don’t know yet what the final outcome will be, but the county is preparing for a financial hit.

When would the County’s budget actually begin to feel the effects of the oil downturn?

The structure of the California property tax system dictates that value determinations are six months old at the beginning of the fiscal (tax) year and 18 months old by the end of the fiscal year. The consequence of an economic decline or recovery will affect the county budget a year or so later on average. The lag does give the county time to prepare, but realistic projections cannot be undertaken until we get closer to the Jan. 1 valuation date.

What do the oil industry’s losses mean for counties outside of Kern?

Although it’s undeniable that oil affects the economies in other counties other than Kern, my knowledge is limited to the impact on Kern’s assessment roll and property tax revenues. I can say that, although Kern accounts for the majority of California’s share of oil and gas, the oil and gas economy extends throughout the state. Many Southern California and coastal counties have oil and gas reserves. Southern California and Bay Area counties have major oil refineries. Although the state government is pushing a fossil fuel-free state, natural gas generation still accounts for almost half of the state’s electricity, and fossil fuel-powered automobiles and trucks account for the vast majority of vehicles on our roads.

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