By JENNIFER HILLER and VICKI VAUGHAN
When Ray Kroll took the economic development job in Karnes County a few years ago, the property value of the entire county was around $500 million.
Now, thanks to the Eagle Ford shale play, the property tax rolls have jumped to $1.3 billion.
“To think that you would use the b-word in conjunction with Karnes County is just crazy,” Kroll said. “We’re talking in billions and not millions.”
Property tax, sales tax and hotel-motel tax revenues are rising along with oil and gas production across the Eagle Ford shale formation, which sweeps from the Mexican border to East Texas.
But along with the promise of once-in-a-generation oil riches comes overwhelming pressures on communities accustomed to a quiet, rural lifestyle.
Heavy trucks are damaging roads, kicking up dust and creating traffic where traffic never existed. Hotels and rental properties are full to bursting; new RV parks are dotting the landscape. “We have a lot of RV parks coming,” Karnes County Judge Barbara Shaw said. “We’re talking hundreds and hundreds of RV slots.”
So instead of spending à la The Beverly Hillbillies on swimming pools and movie stars, much of the new tax money will go to mundane things, such as roadwork.
Even school district budgets are evolving with the oil play.
In Yoakum, population 5,441, school superintendent Tom Kelley recently discovered his district will be considered rich when a gas processing plant is completed next year in his area. For the first time, Yoakum will be a “Robin Hood” district that must share its wealth with a poorer school one.
“I never, ever dreamed I’d see this in our area,” Kelley said. “It just blows my mind.”
The big boom
Drilling permits in the Eagle Ford have jumped from 26 in 2008 to 2,991 in early November, according to Texas Railroad Commission data, and the new oil and gas production has brought with it more pipelines, processing plants and oil company offices, boosting property values.
Oil field workers flocking into the Eagle Ford contribute to an increase in sales tax and bed tax revenue.
In Dimmit County, sales tax revenue jumped more than 800 percent in four years, from $384,000 in 2008 to more than $3.5 million so far this year.
Sales tax revenue is up 395 percent in Three Rivers since 2008, to $541,000.
Hotel revenue is up more than 650 percent in Dilley since 2008, and rose 309 percent in Cotulla and 229 percent in Beeville.
Overall, local government revenues in the Eagle Ford shale are projected to jump more than ninefold, to $450.6 million in 2020 from $47.6 million in 2010, according to a study by the Center for Community and Business Research at the University of Texas at San Antonio’s Institute for Economic Development.
The shale boom is even spreading to cities not located in the actual oil play.
Oil-field services companies are expanding rapidly in Alice, which also is drawing parts fabricators, creating about 2,000 jobs, said city manager Ray De Los Santos Jr.
In the last fiscal year, Alice budgeted $650,000 in sales tax revenue each month. In every month but one, though, sales tax revenue exceeded $1 million, leading to a budget surplus of $6 million, according to De Los Santos.
The city now plans to build a civic center – and pay cash for it.
And while there are stories aplenty of newly rich landowners making extravagant purchases, local governments don’t appear to be losing their minds over the increased revenue.
City and county officials say they intend to be cautious about spending their newfound riches. Primarily, the money will be used on infrastructure, especially roads.
Brian Schoenemann, the Texas Department of Transportation’s area engineer who’s overseeing roads in several hard-hit Eagle Ford counties – including DeWitt, Gonzales and Lavaca – said people who normally breeze through town to get to work now find themselves sitting through several stoplights or struggling to turn onto a road filled with 18-wheelers.
“In Houston you sit through two lights and have to wait, and it’s expected,” said Schoenemann. “In (DeWitt County), it is a big deal. It is very different than what people are used to. They’re not the sleepy little towns anymore. Now it’s hectic.”
And it’s a struggle to keep up with needed roadwork. On rural roads with no shoulders, for instance, trucks carrying oversize loads sometimes have to veer off the pavement, creating depressions that can become dangerously steep dropoffs.
If it gets too hard to keep up with maintenance, some farm-to-market roads may have to return to gravel, the TxDOT engineer said.
“We may have to re- sort to that,” Schoenemann said. “We’re not there yet.”
DeWitt County Judge Daryl Fowler said his county has a fund dedicated to future road repairs. “We’ve started a savings account. We know this activity will end someday, and we want to be prepared.”
For now, DeWitt County has agreements with two companies that contribute to a road and bridge fund. “If everything holds steady, we’ll add about $2 million to our treasury for road repairs,” Fowler said.
Until bust do we part
Murrell Foster, executive director of the Three Rivers Chamber of Commerce in Live Oak County, said, “With any excess money we have, we plan to primarily use it for repairing and improving our infrastructure. Everything has taken a beating from the heavy trucks.”
John Rightmyer, an attorney who also teaches economics at UTSA, said the historic oil and gas business cycle makes it hard for communities to plan.
“With any sort of boom there will come a bust,” he said. “You don’t want to …build all of these brand-new hotels, and then find in a few years they’ll be empty because Cotulla doesn’t get a lot of visitors.”
The wildly variant production models, which show production lasting anywhere from a few years to 30 years, don’t help much with budgeting.
“Some people still think it’s speculative, and others says it’s the greatest thing since sliced bread, and we should drill holes all over,” Rightmyer said. “It falls on who you believe.”
Schoenemann said the state and counties have to do the same sorts of guesswork with road repairs.
“The road system they had for the local traffic was built adequately, but that’s not with all of these large, oversized vehicles going through,” the TxDOT engineer said. “Do they build it to a standard to hold up to these large vehicles, and then in five years, you could have a road that was overbuilt?”
Impact on elderly
It’s hard to forget previous oil busts that left, for instance, many buildings in Houston boarded up in the 1980s, Rightmyer said.
“If they’re old enough to remember it, they have it in the back of their minds,” he said.
Most county and city leaders worry that the Eagle Ford shale boom won’t last as long as oil and gas experts have predicted.
“How long is this money going to come in?” Shaw asked. “We have a lot of problems right now with infrastructure, but how much can we spend on roads?”
Many older Karnes residents have told Shaw, the county judge, that the heavy truck traffic on the county’s roads keeps them from going out as much.
“We need roads now, but will we need them in the future?” she wondered, noting that Karnes went through a mini oil-boom in the early 1980s.
“We were a poor county before,” Shaw said, “and we were still a poor county when they left.”
But for now, the drilling activity has reversed population loss in some South Texas communities.
The latest U.S. Census Bureau data shows Karnes County as a withering community that has lost 4 percent of its population since 2010. But Kroll said the census figures were collected before Houston-based EOG Resources found oil.
“That’s what really made this area explode,” Kroll said.
“If you look at those census numbers it will tell you we’re a shrinking, dying community. All you have to do is drive through the Walmart parking lot and see all of the new Cadillacs. Drive through town and see how many people are redoing their houses.”