A while back we got a telephone call from a reader of this column wanting to know why we had not written a column in support of Otsego Manor continuing to be owned and operated by Otsego County. And even though we have followed the debate over this issue in the newspaper, we readily admitted we did not feel we knew enough about the situation to take a stand.
But we assured our caller we would try to learn more about this issue, something which we have done.
As far as we can tell, selling Otsego Manor is an issue which is driven by the financial reality of the situation. It is our understanding that the total cost to run the Manor is something in the neighborhood of $366 per day, per resident. Yet reimbursements for care are seemingly much less. Medicare, which covers, if we understand it correctly, only rehab care, pays the most at $360 per day while Medicaid reimbursement rate is $190 per day. Private pay residents are charged $250 per day. And while the county is eligible for money through the federal IGT program, there is no guarantee as to what, if any, amount may be paid through the IGT program. For example in 2012, an amount for IGT of $3.2 million was budgeted but only $2,348,748 was received. And finally when all the other revenue for the Manor is tallied, it falls, as we understand it, to the county to provide the rest of the revenue necessary for the operation of the Manor.
At this point it would seem that in order to continue to maintain the Manor, the county would need to significantly increase its revenue stream. However, the ability of the county to increase its revenues is probably easier said than done. And unfortunately, it seems unlikely that the county will be able to increase revenue without some improvement in the economy of this area. Of course, we tend to think that a healthy economy is incumbent upon having a healthy business climate. And while we are ever hopeful that the business climate in our area is improving we are not certain that is the case.
There is little doubt that there are many in the area who want Otsego County to continue to operate the Manor. Yet at the same time there are those who choose, no matter what the benefits might be, to decry bringing any business activity to the county that might interfere in any way with their vision of the area. And therein lies the problem. Unless there is an opportunity to allow business activity, which will result in an increase in the tax base and thus in revenues that can be realized from property taxes, it becomes increasingly more and more difficult for the local governments to provide the services that residents want.
For example, the argument seems to have been made repeatedly that natural gas production in this area will only benefit the landowners who lease their property and the gas companies that develop the gas wells. However, given the tax laws in New York state, every local government and school district as well as the county in which there is a natural gas well will benefit by the fact that natural gas wells can be taxed as real property. The ad valorem tax, as it is known, allows those governmental entities which can levy property taxes to do so once the real property value of the gas well is determined. And, from what we learned by attending a recent meeting held in Oneonta by the Hometown Energy Group, a natural gas well can easily be assessed around $4.5 million. It should be noted that in the case of horizontally drilled gas wells, any one drill pad, which requires one square mile of space, can usually accommodate up to eight gas wells which would seem to make the real property value of each drill pad something in the neighborhood of $36 million.
At the meeting we acquired a brochure with the somewhat lengthy title of “Local Tax Benefits for the Town of Triangle and Whitney Point Central School District from Natural Gas Drilling Operations.” From this brochure we learned that if one well pad supporting six horizontal gas wells was located in the Town of Triangle, the town would stand to receive in the first three years of taxing the well as real property something in the neighborhood of an addition $1.8 million in property taxes.
Likewise, if each of the seven towns in the Whitney Point Central School District were to have one drill pad, each supporting six horizontal wells, the school district would, in the first three years, realize an additional $6.5 million in property taxes.
In a similar vein, it should be pointed out that energy pipelines are also taxed as real property. For example, we learned at the meeting in Oneonta that the Town of Windsor, has nine and one half miles of natural gas pipeline running through it. And in one year, the county collected $310,000, the town collected $157,000 and the school district collected $793,000 in property taxes on that pipeline. Of course, Otsego County also has a natural gas pipeline, the Tennessee pipeline, running through it and has for a number of years now. It is expected that this year the three towns and three school districts as well as the county will realize a total of $217,499 in property taxes from that pipeline.
Thus, in thinking about the potential benefits of an industry such as natural gas in terms of property taxes, we do think that there is an argument to be made that the ability of any governmental entity to provide services to its residents depends to a certain degree on the strength of that governmental entity’s revenue stream. Of course we are not suggesting that saving the Manor as a public facility would be possible if only natural gas drilling were allowed in the area. However, it might have helped. We really don’t know and probably never will.
The decision to sell the Manor seems to be moving ahead and the possibility of realizing any great revenue from natural gas drilling in Otsego County seems remote. However, what we think we know is that this area needs to do something to better support the economy of the area if we wish going forward to grow rather than decline. Unfortunately, we would be clueless as to what might be the most beneficial path to pursue and so leave it to finer minds than ours to come up with possible solutions that we as a community can work together to achieve. But, until such solutions are found, we will be left to simply imagine what might have been if we had been better able to balance our needs and our wants.
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