Outrun Change

We need to learn quickly to keep up with the massive change around us so we don't get run over. We need to outrun change.

The oil boom in North Dakota has been a horrible, terrible, awful thing for government agencies in the state – part 2

Image courtesy of DollarPhotoClub.com

Image courtesy of DollarPhotoClub.com

 

Yesterday I started explaining how an article at McClatchy DC on 9/9, Oil boom a loser for North Dakota cities, counties, study finds, had enlightened my previous ignorance.  I now realize the worst thing about the oil boom in North Dakota is that city and county governments have actually found themselves under fiscal pressure. I had not know that before reading this article. In fact, as I explained yesterday, I was not aware of any governmental agency anywhere at anytime that had not been able to fund all desired projects. Only in North Dakota and only because of the oil boom has that happened.

Sarcasm alert

Do I need to repeat my sarcasm alert from yesterday? If that would help, please read the opening paragraph.

Housing shortage hits local governments hardest

The article explains to us that Williams County government actually had to buy apartments in order to provide housing in order to get people to go to work for them.

Employer provided housing. In North Dakota. Wow. That is breaking news to me.

Oh wait, I guess maybe I had heard something (like maybe in every month of the last four years) about all jobs with the bigger companies included company paid housing as part of the pay package, and many jobs with other companies included housing. Now that I scrape the recesses of my memory I do recall reading something somewhere about the number of beds in the man-camps was in the range of 10,000.

But we now have the news flash that government agencies are having to provide housing. Whatever will they do? How will they cope?

(For some perspective, that bed count means employers are providing housing for around 10,000 guys at a time that Williston has grown from around 11,000 people to around 30,000. Somewhere in the range of half the new arrivals in Williams County were living in employer-provided housing before the slowdown.)

Yet the stress factor in the article is the county government having to provide housing.

An indicator of the distress on city governments is that Dickinson increased permits for single-family housing by 330% in just a year. How terrible! Those overworked zoning people increased processing of building permits by factor of three in just a year. Sooooo much paperwork! Poor dears!

Now some people might think that construction of houses tripling in a year might be a good thing. Some people might suggest that means the economy and the free market is correcting for increased demand. Some people might think that zoning staff scrambling to get permits processed for a rapid expansion in housing is a good thing.

The study however, corrects that silly thinking of some people. I realize the far more important factor is that the increase in workload is a terrible drain on city finances.

A few reality checks

Okay, I’ll stop the ridicule. That is enough sarcasm for the rest of the month. Maybe the year.

From my personal observations while visiting Williston, comments from my son who is living there, and multiple comments from the author of Million Dollar Way blog, there has been a huge amount of infrastructure construction in the last several years.

Many miles of roads have been built. A huge amount of shopping has opened. A massive amount of apartments and houses have been completed in the last couple of years. A new sewer treatment facility is operating in Williston.

The infrastructure is catching up with the boom. The current slowdown allows more catch up.

Congrats to the carpenters, plumbers, heavy equipment operators, and construction companies who have built all that stuff. Yes, and a hearty congrats to the overworked city zoning and permit staff who have worked very hard to process the permits for all that construction. No sarcasm there. I’m quite serious:  Good job, everyone!

My general impression is that the amount of infrastructure in place and under construction will be needed for the next several decades even if drilling continues at the current level. Even if drilling slows down more, that infrastructure is needed.

There are enough new, permanent jobs in the region to use all that infrastructure for several decades.

I would call that a tremendous success. Not a dismal failure as the article suggests.

The slanted article is based on a study from the Energy Initiative group at Duke University. I have no plans to read the study. One commenter on the article accuses the research group of having an extreme anti-fossil fuel bias. Their website does not reveal their agenda. The long, flowery, run-on sentences don’t actually explain their point of view, but there are enough dog-whistle buzzwords to give plenty of hints. The titles of stories at the website also give hints of their perspective.

State surplus

Let’s look from another direction. Let’s consider the flood of money going to the state from taxes on oil extraction.

In addition to providing a lot of funding for the state government with a lot of the funding getting pushed back to local cities and counties, the cash surge is being stashed away in a rainy day fund called the Legacy Fund.

The North Dakota Legacy Fund was started in 2010. According to the state treasurer, the balance on deposit reached $1B in April 2013, $2B in May ’14, and $3B in May ’15. That’s a billion dollars deposited into the fund each year out of surplus. That was after all spending at the state level.

Consider a few calculations:

  • $1,353 annual deposits into Legacy Fund on a per capita basis – annual increases of $1B after all state level spending divided by population of 739K in 2014 per google
  • $4,059 balance in North Dakota Legacy Fund in May ‘15 on per capita basis – $3B balance in surplus fund in May ‘15 divided by population of 739K in ‘14 per google
  • $2,900 budget of the California state government in 2016 on a per capita basis – FY 16 budget of $113.4B divided by population of 38.8M in ‘14 per google

For some perspective, that means that on a per person basis, the state of North Dakota has set aside for future use an amount that is almost half the per capita spending at the state level in California. The legislators in North Dakota are saving half as much on a per person basis as the bloated behemoth that is my state government spends each year. Remember that is the surplus after North Dakota funds all their state operations.

The Legacy Fund has in reserves after all state funding an amount on a per capita basis that is one-third larger than the California per capita spending.

Whether the legislature in North Dakota is sharing enough, too much, or too little of the taxes with local governments in western part of the state is a long discussion that involves lots of voices, but there has been a substantial amount flowing back to the affected cities and counties.

Conclusion

The oil boom in North Dakota has created strain on all levels of government, all service providers in the private sector, everyone who has moved into the state for the tremendous job opportunities, and everyone who was living in the state before the boom began.

At the same time, the boom has been a tremendous blessing to the overall US economy, the state in general, everyone living in the state, and all the otherwise-unemployed people who have made a living these last few years only because of the boom.

The infrastructure in North Dakota is catching up. Government agencies are providing great service in spite of the major pressure on them.

Huge boom, lots of new jobs, massive ongoing infrastructure construction for projects that will be needed for decades, government struggling but still delivering needed services. California should have such problems.

A calmer dissent

For a far less hysterical discussion, check out Rob Port, author of SayAnythingBlog.com, who says Local Officials Dispute National Media Report: North Dakota’s Oil Boom Was Not A “Loser”.

He quotes one local politician who was quoted in the article. He gave a presentation at Duke University outlining the challenges of the boom, but is quite surprised to be quoted to support the suggestion it was a ‘loser’ for the community. Multiple other quoted people point out the upside along with the challenges.

One comment hinted at a long time issue in the northern plains.  Cities and counties that previously were dieing a slow death are now growing.  Places were seeing their young people leave after high school because there was no work. Well, there is lots of work in North Dakota now. Oh, wait, that have-to-leave-the-state-to-find-a-job idea is now in play here in California.

Mr. Port’s closing comment:

Nobody in western North Dakota is wearing rose colored glasses. The rapid growth in traffic, crime, and population have been difficult to keep up with. But I’m not sure anyone familiar with the facts on the ground, and free of any ideological or political motives, can say that the oil boom has been a loser.

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