Senate Bill No. 167
(By Senators Kessler (Mr. President), Unger, Snyder, Stollings, Fitzsimmons, Miller, Laird, McCabe, Wells and D. Hall)
[Originating in the Committee on Economic Development;
reported March 27, 2013.]
A BILL to amend the Code of West Virginia, 1931, as amended, by adding thereto a new section, designated §11-13A-5b, relating to the use of oil and natural gas severance tax revenues; setting a baseline of oil and natural gas severance tax revenue collections; creating the West Virginia Future Fund; providing for the distribution of funds collected in excess of that baseline; providing for initial funding of West Virginia Future Fund to consist of twenty-five percent of excess proceeds from oil and natural gas severance taxes; expressing legislative intent not to encumber or otherwise use any principal or interest from the West Virginia Future Fund for a term of twenty years; addressing use of the West Virginia Future Fund; further dedicating three percent of all oil and natural gas severance tax revenues annually to the oil- and natural gas-producing counties of origin and their respective municipalities; establishing state and local oil and gas county reallocated severance tax funds and providing for distribution of the moneys to the county commissions and governing bodies of the municipalities by the State Treasurer; establishing amounts each oil- and gas-producing county and their respective municipalities are to receive; requiring the creation of local funds into which moneys are to be deposited; requiring moneys to be expended solely for economic development projects and infrastructure projects; providing definitions; providing restrictions on the expenditure of moneys; providing duties of State Tax Commissioner; requiring report of expenditures to Joint Committee on Government and Finance; providing audits of distributed funds when authorized by the Joint Committee on Government and Finance; and authorizing legislative and emergency rules.
Be it enacted by the Legislature of West Virginia:
That the Code of West Virginia, 1931, as amended, be amended by adding thereto a new section, designated §11-13A-5b, to read as follows:
ARTICLE 13A. SEVERANCE AND BUSINESS PRIVILEGE TAX ACT.
§11-13A-5b. Setting a baseline of severance tax revenue for purposes of future tax severance allocation; Creation of West Virginia Future Fund; legislative intent; reallocation and dedication of a percentage of total severance tax for benefit of oil and gas producing counties and their municipalities; permissible uses of distributed revenues; duties of State Treasurer and State Tax Commissioner; audits; rulemaking.
(a) For fiscal years beginning July 1, 2013, a baseline for collections of severance tax on the privilege of producing oil and natural gas levied by section three-a of this article that are deposited in the General Revenue Fund or that are distributed to counties and municipalities, as provided in section five-a of this article, is established at $64.8 million.
(b) There is created in the State Treasury a special revenue account, designated the "West Virginia Future Fund," which is an interest-bearing account and may be invested by the West Virginia Investment Management Board in the manner permitted by the provisions of article six, chapter twelve of this code, with the interest income a proper credit to the fund. Notwithstanding any provision of this code to the contrary, twenty-five percent of the excess proceeds, above the baseline set by subsection (a) of this section, received on and after the effective date of this section as state revenue pursuant to the provisions of section three-a, article thirteen-a, chapter eleven of this code as a result of Marcellus Shale production shall be deposited in this fund. The Legislature may by general appropriation or by designation of other funding sources to be deposited in the fund provide further funding as it considers appropriate.
(c) The Legislature declares its intention to use the fund as a means of conserving a portion of the state’s revenue derived from the increased revenue proceeds received by the state as a result of any new oil production and Marcellus Shale and other new gas formations as well as other funding sources as the Legislature may designate in order to meet future needs. The Legislature further declares its intention that the fund should maintain safety of principal while maximizing total return and that principal and interest not be used for any purpose other than to meet future needs that may arise including diversification of the state’s economy, tax relief, enhancing education and workforce development and for purposes which other funding sources are not available. The principal and interest of the Future Fund may not be used for a term of twenty years in order to allow the fund to reach maximum accumulation except for the purposes enumerated in this section.
(d) (1) Effective July 1, 2014, one percent of the total tax attributable to the severance of oil and gas imposed by section three-a of this article, including any amount in excess of the baseline set by subsection (a) of this section, shall be transferred to the county commissions of the oil and gas producing counties as provided in this subsection.
(2) Effective July 1, 2014, two percent of the total tax attributable to the severance of oil and gas imposed by section three-a of this article, including any amount in excess of the baseline set by subsection (a) of this section, shall be transferred to the governing bodies of municipalities within the oil and gas producing counties as provided in this section.
(3) The proceeds dedicated in subdivisions (1) and (2) of this subsection may not exceed the sum of $20 million per year.
(e) The amounts of the tax dedicated in subsection (d) of this section shall be deposited, from time to time, into a special fund known as the Oil and Gas County and Municipality Reallocated Severance Tax Fund, which is hereby established in the State Treasury, as the proceeds are received by the State Tax Commissioner.
(f) The net proceeds of the deposits made into the Oil and Gas County and Municipality Reallocated Severance Tax Fund shall be allocated among and distributed quarterly to the oil and gas producing counties and their respective municipalities by the State Treasurer in the manner specified in this section. On or before each distribution date, the State Treasurer shall determine the total amount of moneys that will be available for distribution to the respective counties and municipalities entitled to the moneys on that distribution date. The amount to which an oil and gas producing county or municipality is entitled from the Oil and Gas County and Municipality Reallocated Severance Tax Fund shall be determined in accordance with subsection (g) of this section. After determining the amount each oil and gas producing county and municipality are entitled to receive from the fund, a warrant of the State Auditor for the sum due to each oil and gas producing county and municipality shall be issued and a check drawn thereon making payment of that amount to the oil and gas producing county and municipality by hand, mail commercial delivery or electronic transmission.
(g) The amount to which an oil and gas producing county or municipality is entitled from the Oil and Gas County and Municipality Reallocated Severance Tax Fund shall be determined by:
(1) Dividing the total amount of moneys in the fund then available for distribution by the total number of barrels of oil and total number of cubic feet of gas produced in this state during the preceding quarter; and
(2) Multiplying the quotient thus obtained of each by number of barrels of oil and number of cubic feet of gas produced in the county or municipality during the preceding quarter.
(h) (1) No distribution made to a county or municipality under this section may be deposited into the county’s or municipality’s General Revenue Fund. The county commission of each county and the governing body of each municipality receiving a distribution under this section shall establish a special account to be known as the “(Name of County or Municipality) Oil and Gas County (or Municipality) Reallocated Severance Tax Fund” into which all distributions made to that county or municipality under this section shall be deposited.
(2) Moneys in the county’s and municipality’s oil and gas county reallocated severance tax fund shall be expended by the county commission and governing body of the municipality solely for economic development projects and infrastructure projects.
(3) For purposes of this section:
(A) “Economic development project” means a project in the state which is likely to foster economic growth and development in the area in which the project is developed for commercial, industrial, community improvement or preservation or other proper purposes.
(B) “Infrastructure project” means a project in the state which is likely to foster infrastructure improvements including, but not limited to, post-mining land use, water or wastewater facilities or a part thereof, storm water systems, steam, gas, telephone and telecommunications, broadband development, electric lines and installations, roads, bridges, railroad spurs, drainage and flood control facilities, industrial park development or buildings that promote job creation and retention.
(4) A county commission or governing body of a municipality may not expend any of the funds available in its oil and gas county and municipality reallocated severance tax fund for personal services, for the costs of issuing bonds or for the payment of bond debt service. Total funds available shall be directed to project development which may include the costs of architectural and engineering plans, site assessments, site remediation, specifications and surveys and other expenses necessary or incidental to determining the feasibility or practicability of an economic development project or infrastructure project.
(i) On or before December 31, 2015, and December 1 of each year thereafter, the county commission of each county and governing body of each municipality receiving a distribution of funds under this section shall deliver to the Joint Committee on Government and Finance a written report setting forth the specific projects for which those funds were expended during the preceding fiscal year, a detailed account of those expenditures and a showing that the expenditures were made for the purposes required by this section.
(j) An audit of funds distributed under this section may be authorized at any time by the Joint Committee on Government and Finance to be conducted by the Legislative Auditor at no cost to the county commission audited.
(k) The State Tax Commissioner shall propose for legislative approval legislative rules pursuant to article three, chapter twenty-nine-a of this code for the administration of the provisions of this section, and is authorized to promulgate emergency rules for those purposes pursuant to that article.