hub-cities · • hub cities with the support of the state have made required, smart, and prudent...
TRANSCRIPT
Hub-CitiesAffordability, Needs, and Funding Gaps
Presented to:
Energy Development
and Transmission
Interim Legislative Committee
March 8, 2018
PLANNING FOR THE FUTURE
Supporting Continued Investment
• As demonstrated, Hub Cities have made required, smart, and prudent investment through the boom
• All of our State’s communities that support energy development are typical small town ND that have been thrust into high paced growth at a high cost
• Integral to a high quality of life is providing a cost of living existing/prospective residents and businesses can afford
• While price of oil often dictates activity by employers, quality of life and cost of living dictates activity of employees
• ND is in competition with other plays for Human Capital:
– Permian
– Niobrara
– Woodford
– Eagle/Ford
AFFORDABLE | COMPETIVE | ATTRACTIVE COMMUNITIES
Cost of Living | Comparable Plays
Ft. Collins,CO
WatfordCity, ND
Williston,ND
Dickinson,ND
Minot, ND Gillette, WY Greeley, CO Casper, WY Midland, TX Odessa, TX Norman, OK
124.2
117.2115.1
112.6
105.4 104.4 104.2
100.597.7
94.5
87.8
Cost of Living Index*
Bestplaces.net | Index value of 100 is representative of national average
AFFORDABLE | COMPETIVE | ATTRACTIVE COMMUNITIES
Affordability | Comparable Plays
*As of November 2017
• Hub City local industry support is primarily through Infrastructure and City Services
• All Hub Cities depend on Gross Production Tax revenues to support required infrastructure and service expansion
• How else do communities support affordability of services?
By managing:• Property Taxes• Utility Fees• Sales Taxes• Special Assessments• Debt
INVESTING IN OURSELVES
Affordability | Supporting Housing
Based on publically available listing and recent sale price on Zillow.com*
$5,325
$4,597
$2,974 $2,961 $2,898 $2,489
$2,186 $1,876
$1,518 $1,488 $1,345
$-
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
$100,000
$150,000
$200,000
$250,000
$300,000
$350,000
Median Home Price Annual Property Tax on a Median Priced Home
AFFORDABLE | COMPETIVE | ATTRACTIVE COMMUNITIES
Median Home Prices | Comparable Plays
*As of November 2017
2008 2017- 2017
AFFORDABLE | COMPETIVE | ATTRACTIVE COMMUNITIES
Cost of Living | ND Utility Rates
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
WatfordCity, ND
Minot, ND Odessa, TX Dickinson,ND
Midland, TX Ft. Collins,CO
Norman,OK
Greeley, CO Casper, WY Gillette, WY Williston,ND
$1,372
$1,118
$1,028 $1,012 $1,005$981
$881
$715 $693$667
$510
Total Combined Annual Utility Bill
Includes: Water, Wastewater, Stormwater, Sanitation
INVESTING IN OURSELVES
Cost of Living | Utility Rates
AFFORDABLE | COMPETIVE | ATTRACTIVE COMMUNITIES
Total Local Sales Tax Rate and Taxable Sales
WILLISTON DICKINSON MINOT
TAXABLE S&P*
$366.9M
LOCAL SALES TAX RATE (INCLUDING COUNTY)
3.00%
TAXABLE S&P*
$222.2M
LOCAL SALES TAX RATE
1.50%
TAXABLE S&P*
$263.3M
LOCAL SALES TAX RATE (INCLUDING COUNTY)
2.50%
*As reported Q3 2017
AFFORDABLE | COMPETIVE | ATTRACTIVE COMMUNITIES
Total Debt Load / Debt per Capita
$5 $73
- -$14 $26 $34
$267
$6 $49
$79 $39
$340
$92 $63
$104
2008 2018 2008 2018 2008 2018
WILLISTON DICKINSON MINOT
TOTAL DEBT (MILLIONS)
Assessment Debt Other Debt
$383
$2,773
- -
$394 $1,034
$2,710
$10,093
$4,016.65
$1,370 $1,616
$3,094
$12,865
$351
$1,764 $2,650
2008 2018 2008 2018 2008 2018
WILLISTON DICKINSON MINOT
DEBT PER CAPITA
Assessment Debt Other Debt
• Six-City study developed to show how quality of life is maintained through continued infrastructure and service investments
• Hub Cities have tall task of maintaining an affordable quality of life and cost of living
• Needed future investments will keep pressure on City to maintain affordable tax and fee levels
• GPT/Hub City funding is a critical tool
INVESTING IN OURSELVES
Affordability | Maintaining Quality of Life
• Completed Early 2017
• Capital and Operational Forecasting and Financial Gap Analysis
• Study Funded 50/50 by WDEA and Participating Cities
• Impacts Forecasts for Six (now 7) Participating Cities
Williston | Watford City | Dickinson | Tioga | Stanley | Killdeer | Minot
• Further projected population increases are expected to place additional service demands on each city
• Impacts to include the expansion of infrastructure and operations that will be required to meet the needs of each community.
WDEA 6-CITIES STUDY RESULTS
DICKINSON WILLISTON MINOT
ANNUAL POP.
GROWTH
3.5%INFRASTRUCTURE
MILES
23.5%UTILITY ACCTS.
24.1%
2.8%INFRASTRUCTURE
MILES
19.0%UTILITY ACCTS.
19.4%
2.0%INFRASTRUCTURE
MILES
12.7%UTILITY ACCTS.
12.8%
POPULATION & GROWTH PROJECTIONS
Hub City Projected Growth (2017-2023) – Moderate O&G Activity
ANNUAL POP.
GROWTH
ANNUAL POP.
GROWTH
6-YEAR CAPITAL IMPROVEMENT NEEDS
Projected Amount Less Preliminary Funding (Millions)
• Regional analysis looking at operational levels of service from communities similar in size to long-term growth trajectory of participating Cities
• Operational levels based on metrics of population, utility accounts, infrastructure miles, and facilities operated
• Benchmark data used as basis for future staffing, fleet, and budgetary impact projections
BENCHMARKING
A.) Average across Williston, ND; West Fargo, ND; Gillette, WY; Bozeman, MT; Minot, ND; Grand Forks, ND; Great Falls, MT; Bismarck, ND
B.) Hybrid Fire Department
C.) Purchased Water
D.) Includes Ambulance Services
Benchmarked Department
BenchmarkedAverage
FTEA Dickinson FTE Williston FTE Minot FTE
Staffing Ratio
Finance/Administration 4.3 3.4 4.1 3.3 per 10,000 Population
Human Resources 1.0 1.1 0.7 1.0 per 100 Total FTE
Fire 11.9 7.2B 19.9D 13.7 per 10,000 Population
Police 19.7 24.4 22.1 19.4 per 10,000 Population
Engineering 3.6 3.8 4.5 2.6 per 10,000 Population
Building / Inspections 2.2 2.1 5.6 2.9 per 10,000 Population
Planning & Zoning 1.4 1.3 2.3 0.9 per 10,000 Population
Streets 8.9 6.8 13.2 9.9 per 100 CL Infrastructure Miles
Sanitation / Landfill 2.5 1.8 5.4 1.6 per 1000 Utility Accounts
Shop / Vehicle Maintenance
1.5 1.3 1.9 1.7 per 10,000 Population
Water / WW / Storm 11.4 7.2C 17.6 10.2 per 10,000 Population
BENCHMARKING RESULTS
Staffing Ratios
Projected Incremental Annual Cost for New FTE 2018 2019 2020 2021 2022 2023
Dickinson $1.1M $1.5M $2.2M $2.5M $2.8M $3.0M
Minot $0.2M $0.9M $1.2M $2.0M $3.1M $3.4M
Williston $767K $2.1M $4.6M $5.1M $6.2M $6.7M
0
50
100
150
200
250
300
350
400
450
2018 2019 2020 2021 2022 2023
200 207221 225 231 235
333347
374 379 390 395423 432 436 446 459 462
Dickinson
Williston
Minot
BENCHMARKING RESULTS
Projected Employee Growth
REVENUE
Major Revenue Source Projections
0
10
20
30
40
50
60
70
80
90
100
2017 2018 2019 2020 2021 2022 2023
Mill
ion
s ($
)
MINOT
0
10
20
30
40
50
60
70
80
90
100
2017 2018 2019 2020 2021 2022 2023
Mill
ion
s ($
)
WILLISTON
0
10
20
30
40
50
60
70
80
90
100
2017 2018 2019 2020 2021 2022 2023
Mill
ion
s ($
)
DICKINSON
*Water, Sewer, Storm, Refuse
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Minot Williston Dickinson Watford City Stanley Tioga Killdeer
Projected Distribution of Major Revenues
Gross Production Tax Sales Tax Property Tax Highway Tax State Aid Utility Rate Revenues*
MAJOR REVENUES BY CITY
FUNDING GAP
Cash Based Funding Gap Analysis
$(600)
$(500)
$(400)
$(300)
$(200)
$(100)
$-
$100
$200
$300
2018 2019 2020 2021 2022 2023
Mill
ion
s ($
)
MINOT
$(600)
$(500)
$(400)
$(300)
$(200)
$(100)
$-
$100
$200
$300
2018 2019 2020 2021 2022 2023
Mill
ion
s ($
)
DICKINSON
TOTAL GAP
$112.4M*
*not including flood control
(500)
(400)
(300)
(200)
(100)
-
100
200
300
2018 2019 2020 2021 2022 2023
Mill
ion
s ($
)
WILLISTON
TOTAL GAP
$181.3M
TOTAL GAP
$128.8M
SUMMARY
• All of our State’s communities that support energy development are typical small town ND that have been thrust into high paced growth at a high cost
• Hub Cities with the support of the State have made required, smart, and prudent investment through the boom
• This investment has put strain on local revenues to keep pace and Hub City funding has been a critical tool
• Integral to a high quality of life in each Hub City is providing a cost of living existing/prospective residents and businesses can afford
• As O&G development continues, unique funding and financing strategies will be required to fill the total funding gaps projected
• Addressing shortfalls will require solutions at both the local and State level
Thank you!
March 8, 2018
TESTIMONY
Shawn Gaddie AE2S Nexus
INTERIM ENERGY DEVELOPMENT AND TRANSMISSION COMMITTEE Bismarck, ND March 8, 2018
Mr. Chairman and Members of the Committee, thank you for the opportunity to present to you today. I
have had the pleasure and honor of working with the Hub Cities of Dickinson, Williston, and Minot and
the Western Dakota Energy Association to identify and help plan for the potential impacts of
infrastructure and operational changes necessary to serve growing communities in the western part of
our state.
The first topic I would like to cover today is that of how we as a State attract and retain workers in the
highly competitive job market of the oil and gas industry. As you have heard in past presentations from
industry representatives, a major challenge since the downturn is finding the workers in state to run the
frack crews and keep operations going. Instead, workers are finding comparable jobs, with comparable
pay in different shale plays with a lower cost of living that may have more attractive climates, larger cities,
or other amenities. This message indicates that in order to stay competitive among national oil and gas
plays, we must continue to improve tangible and measureable quality of life aspects for our workforce.
While our communities look to continuing to provide opportunities for improved quality of life, they must
do so with an eye towards affordability – a challenge that every community faces.
To better understand how each of the Hub Cities compare on affordability, we looked at multiple
communities across various plays. These communities were identified by industry representatives to be
in competition for the human capital required to support further oil and gas development in Western ND:
Community Shale Play Cost of Living Index1 Median Home Price
Ft. Collins, CO Niobrara 124.2 $285,450
Watford City, ND Bakken 117.2 $302,450
Williston, ND Bakken 115.1 $260,000
Dickinson, ND Bakken 112.6 $272,719
Minot, ND Bakken 105.4 $209,500
Gillette, WY Niobrara 104.4 $209,842
Greeley, CO Niobrara 104.2 $285,000
Casper, WY Niobrara 100.5 $214,950
Midland, TX Permian 97.7 $273,900
Odessa, TX Permian 94.5 $185,000
Norman, OK Woodford 87.8 $204,905 1Sterling’s Best Places Cost of Living Index – as of November 2017
The results of this analysis showed that in various cost of living indices, each of the Hub Cities generally
had higher costs of living than other communities in comparable shale plays. Similarly, this was
corroborated when looking at median home prices across these communities where Dickinson, Williston,
and Watford City all have above average median home prices ($246,000) for the communities surveyed.
While local taxes, rates, and fees are not generally included in these cost of living indices, they are an
important part of overall affordability and are generally one of the few items that are within the ability of
State and local authorities to control. In comparing the total cost of property taxes on a median priced
home along with utility fees, North Dakota communities again are generally at or above the average for
communities evaluated. When considering the impacts on affordability overall, North Dakota needs to
remain cognizant and intentional in striking the appropriate balance to the overall State and local taxation
strategy.
Across communities in North Dakota, the Gross Production Tax (GPT) is critical to supporting investments
in infrastructure and city services that improve quality of life and affordability in these communities.
Without the funding the GPT provides Hub Cities and all other O&G impacted communities would need
to reevaluate how critical infrastructure is implemented and how it is paid for. The resulting cost burden
would negatively impact the overall affordability within North Dakota communities and impede the ability
to compete for the human capital necessary to meet long-term industry needs.
Looking ahead, this revenue stream will continue to be tested as the infrastructure investment needs of
communities grow. The second key item I would like to highlight is the investment needs for each of the
Hub Cities as identified by the Western Dakota Energy Association’s 6-City study completed early 2017.
Considering the volatility in the oil industry and the anticipated moderate recovery, the Study was
intended to demonstrate core City needs as the price of oil began the recovery cycle and included an
evaluation of traditional capital infrastructure improvements required such as water, sewer, roads, and
other essential community infrastructure. It also identified how operations and City services provided will
need to grow to keep pace with the anticipated growth pattern in each City. The results of the study
provided a 7-year financial roadmap for each City’s anticipated capital and operational financial needs
and quantified the fiscal impacts that each City can expect to realize for a prescribed population growth
planning scenario.
Population forecasts for the impacts analysis were based on adaptations from the workforce and
population analyses performed by North Dakota State University (NDSU) in conjunction with Vision West.
The workforce and population analysis focused on county-level economic activity in the region and its
effect on workforce and population through 2040 under varying oil price recovery scenarios. The resulting
County-level projections for a moderate recovery scenario were adjusted to City-level results based on
historic trends in city/county capture rates and other county hub city benchmarks from across the region.
Ultimately under the moderate price recovery scenario, the population forecasting model projected
annual growth rates through 2023 at 3.5% for Dickinson, 2.8% for Williston, and 2.0% for Minot.
The study also identified existing operational service levels for each of the Hub Cities and identified growth
projections that will drive future operational service levels. Projected operational levels were analyzed
based on key metrics of population, utility accounts, and centerline infrastructure miles. Infrastructure
mile projections were based on average mile of linear infrastructure required per unit population from
2013 – 2015. Similarly, future projections of utility accounts were based on average population in each
City per water account data from 2013 – 2015.
Capital improvements needed to support projected growth were also identified and prioritized by year of
construction from 2017 to 2023. Capital improvements fell into categories of transportation, water,
wastewater, storm water, airport and other public facility needs (City Hall, Public Works, and
Recreational). Preliminary identified funding sources, such as SRF loans, State Water Commission Cost-
Share, and other anticipated Federal and State Funds, were then assigned to total projected infrastructure
needs where appropriate to identify a total remaining unfunded CIP cost. The projected capital costs from
2017-2023 after assignment of preliminary funding sources totaled $198M for the City of Dickinson,
$258M for the City of Williston, and $194M for the City of Minot* (*excluding anticipated Flood Control
expenditures and dedicated revenues).
Considering the growth projected through 2023, operational increases were also projected and analyzed
to determine appropriate future municipal service levels across impacted City departments. To make
prudent projections, the study team reviewed and analyzed specific organization, staffing, and fleet
inventories from a cross-section of benchmark communities throughout the region with populations
similar in size to Dickinson, Williston, and Minot and along each City’s anticipated growth trajectory. Based
on the results of the benchmarking analysis against the comparable communities, staffing and fleet needs
were forecasted in order to effectively deliver services at desired levels of service into the future.
The estimated new incremental annual cost for these employees was calculated to be just over $3.0
million annually by 2023 for the City of Dickinson, 3.4 million annually for the City of Minot, and $6.7M
annually for the City of Williston. Considering projected capital and operational revenue requirements
across the 7-year timeframe, a multi-year revenue and expense projection model and cash flow
spreadsheet was developed based on each of the Hub Cities 2017 budgets. The models were used to
determine the 7-year financial “gap” for all capital and operational requirements for growth impacted
funds. The modeling analysis also included a detailed review of each City’s line item budgets in order to
determine appropriate escalation factors for all anticipated growth impacted expenses and revenues.
Similarly, a detailed analysis of projected major revenue sources such as Gross Production Tax, Sales Tax,
property tax, and utility rate revenues was completed, with appropriate escalation factors applied to
minor revenue line items. Ultimately, under the prescribed growth projection scenario, the total cash-
based funding gaps were projected at $129M for the City of Dickinson, $181M for the City of Williston,
and $112M for the City of Minot by the year 2023* (*excluding anticipated Flood Control expenditures
and dedicated revenues).
The results of the study ultimately highlighted that even at the tail end of a slow-down with past significant
investments made in each Hub City, a moderate oil price recovery will continue to place significant
demands on each of the Hub City’s infrastructure and governmental services. Past investments by the
State and the City in trunk infrastructure have positioned each City for further growth. It is also expected
that moderate oil price recovery will moderately increase each City’s revenues, however, the rebound in
revenues are not projected to meet the anticipated needs. To this end, the City of Dickinson, the City of
Williston, and the City of Minot will remain heavily dependent on major revenue sources such as GPT to
offset projected capital infrastructure and associated debt service demands. Furthermore, unique funding
and financing strategies will be required to fill the total funding gaps projected and strategies for
addressing these shortfalls will require solutions at both the local and State level.