A drop in oil won’t put Santa Barbara in the red

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Platform Holly, owned by Venoco gas corporation, sits about two miles from the Goleta coast at Coal Oil Point. Photo: U.S. Department of Energy (The original image is no longer available, please contact KCRW if you need access to the original image.)

Santa Barbara County has a complicated – and at times, turbulent– relationship with oil. In May, the Refugio oil spill resulted in roughly 140,000 gallons of crude gushing over state beaches. Environmentalists rallied and called for an end to oil production in the region.  At the same time, these corporations remain among the top tax payers in the county – which raises the question: how badly would local schools and county services suffer if oil production stalled, or shut down completely?

Platform Holly, owned and operated by Venoco, sits in the ocean within 3 miles of Santa Barbara County’s shoreline. That means the oil corporation pays taxes to the county. But, ever since pipeline 901, operated by Plains All-American, ruptured, Venoco was forced to stop extracting and transporting oil from Holly. This situation caught the attention of Mark Schniep, the director of the California Economic Forecast, which provides analysis for businesses and public sector clients. He pointed out that if this pipeline remains shutdown, platforms like Holly could be worth far less, and therefore contribute less to the county.

“Oil and gas facilities are highly valued. They yield significant property taxes, and much of those property tax dollars go to the public schools,” said Schniep.

The closure of pipeline 901 had a dramatic effect on oil production at Platform Holly. Graphic: Mark Schniep (The original image is no longer available, please contact KCRW if you need access to the original image.)

He says if the pipeline, which transported oil from platform Holly, remained closed for the next three years, the county could lose $37 million in property taxes. The biggest loser would be the Goleta district, which could lose as much as $5 million.

This doesn’t scare Ralph Pachter, at least in the immediate future. He’s the assistant superintendent for fiscal services of the Goleta School District. He says in their school budget of more than $40 million a year, oil accounts for less than three percent of that total.

On top of that, the real estate market in Goleta is hot. Gains in residential or commercial property taxes could make up for what’s lost in oil production taxes.

“Taken in the larger context of the growth in Goleta and the additional housing and commercial properties that are coming online, it’s still possible we could remain in the black,” said Pachter.

The real problem would be if oil revenues plummet over the long term, while the recent gains in the housing market flatline. Then, Pachter admits, there could be some problems.

Ellwood Elementary School is one of many schools in the Goleta Union School District that receives money from oil production taxes. Photo: GUSD (The original image is no longer available, please contact KCRW if you need access to the original image.)

“Internally, we’d have to look at things that aren’t under union contracts and a lot of the support programs that Goleta provides,” he said. “Services would have to be cut, support for cultural arts potentially. You could see a float up of class size to help rein in costs.”

If we look at the county at large, it’s a similar story. Santa Barbara collects around $700 Million in total property tax revenue. Oil only makes up about two percent of that.

“It wouldn’t be a catastrophic cash flow problem for the county,” said Bob Geis, chief fiscal officer of the county. “We have ag, tourism, condos, multiple family housing and all our commercial real estate. That variety of economics makes for a really strong county.”

Santa Barbara County is in far better shape than an area like Kern County, to the north. Their oil companies account for thirty percent of the county’s property tax revenues. When oil prices collapsed this year, Kern County declared a fiscal emergency.

That’s not a scenario that county officials in Santa Barbara need to worry about. While oil will continue to have a giant impact on local politics, its impact on the financial health of the county is relatively small.