In 2016 Moody’s downgraded Williston’s credit rating to one level above junk bond status.
The city had incurred $200 million in debts building out infrastructure for a suddenly much larger labor force. The boom brought workers by the thousands, ultimately swelling Williston’s population by an estimated 16,000 — or more — people in seven to eight years.
That strained all of the city’s infrastructure, from water and sewer services on up to police, fire and more.
While some criticized Williston at the time, its troubled Moody’s rating wasn’t just caused by the amount of debt they had incurred. The legislative structure surrounding Hub City funding was a significant contributing factor.
It set the stage for an every two-year battle that put too much uncertainty into the revenue stream for debt repayment — even though the city had never missed a payment and had reserves, factors noted in an improved rating with Standard and Poors.
The elimination of uncertainty accomplished by the infrastructure bill dubbed Prairie Dog is one reason the most recent legislative session goes down in the North Dakota history books as a huge win for the West.
“This structure will sustain for a long time,” Jadestone Consulting’s Brent Bogar said during a presentation about Western Dakota Energy Association’s lobbying efforts during the legislative session. The presentation was part of the Vision West ND Consortium’s May meeting, held in Williston.
Bogar helped prepare studies during the most recent biennium showing where oil tax money had been distributed, and for what purpose.
The material helped make the case for a different distribution of oil tax revenues, to not only take out the sunset clause binding Hub Cities to uncertainty and higher interest rates, but to help build out essential infrastructure across the state.
“This came in, it was so popular, it was a done deal before the session started,” Geoff Simon, executive director of WDEA said. “I even got Oley Larsen to vote for it.”
Under the bill, Williston’s share of Hub City funding is roughly 58 percent, Dickinson’s 28, and Minot’s 13, with no sunset clause.
That was the big ask for the West, and what sold the previously unsellable was a redistribution of Gross Production Tax money for non-oil producing schools, counties, cities, and even townships.
Townships are going to get 4 percent of the dollars over $5 million GPT, and counties will get 60 percent.
“Counties and townships will be allocated based on road miles and a road needs assessment,” Simon said. “The bill also requires them to use the funding for essential infrastructure projects. Roads, streets, sewers, water projects — those kinds of things.”
The money cannot be used to secure debt payments, but it can be carried over until there is enough available for a project.
The Hub City funding, meanwhile, has two parts. One is a fixed portion, not tied to price and production. That way the cities can go to the Bank of North Dakota with a specific amount of guaranteed funding, which they can use to help secure their debt payments.
“That will help Williston’s credit rating,” Simon suggested.
While Prairie Dog was a big win for the West, help for schools in the Oil Patch is a skirmish to be fought yet another day. Progress was made, Simon said, but he already has schools down as one of the big issues for the next biennium.
“One of the most important components of 2265 is that it allows revenue devoted to a sinking interest fund to keep 100 percent of that revenue from GPT,” Simon said.
Sen. David Rust later clarified that the specific language of that bill is being reviewed. There is some question about the exact language, but it may be that the money can be allocated to things like building funds as well.
There were also rapid enrollment grants, and an increase to the per pupil payment of 2 percent the first year and 2 percent the second, which will bring the payments to about $10,000 per pupil.
On-time funding, which has been highly sought after by North Dakota educators, moved a little closer. But, under the current structure, will still take years to arrive.
The legislature approved 50 percent of what’s needed in the second year of the current biennium. It would then add 10 percent more in each of the next bienniums, until on-time status is reached.
“This puzzles me, why the state cannot do the right thing,” Simon said. “Williston gained 300 students and they are not getting any funding for that because it’s based on enrollment last fall.”
Simon said the fiscal note would have been a one-time $67 million to get the state’s schools caught up and on the right structure.
He doesn’t believe the “we can’t afford it” reason that the legislature gave.
For one, Simon said the legislature has low-balled many of its revenue projections, to such a great degree that they are obviously too low.
Oil revenues, for example, were forecast based on $42. The price is actually between $62 and $63. Sales tax revenues were also depressed more than Simon believes justified.
“I know with the trade war and tariffs and agriculture, the economy is not as strong, but the reality is people are still buying things,” Simon said. “And farmers still have to operate.”
The legislature estimates it will end the biennium with just $44 million on balance, but Simon thinks the actual amount, with more realistic estimates, is more like $800 million.
“They depressed the revenue forecast so much so they could cut spending,” Simon said, suggesting that was aimed at avoiding certain investments, while putting money into certain other things.