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County preparing contingency plan for budget cuts as oil industry struggles through COVID-19

Posted at 8:31 PM, May 06, 2020
and last updated 2020-05-07 00:47:40-04

BAKERSFIELD, Calif. — The rise of the COVID-19 pandemic has left the nation suffering, not just on the medical front but also economically.

With stay at home orders in place, oil industry leaders say the demand for oil reached an all-time low. Stocks plummeted and an oversupply of oil is still sitting in tankers off the shores of Southern California. Those in the industry say they are waiting for the economy to reopen and demand to pick back up. According to the recent unemployment numbers most Americans have been left unemployed, furloughed or trying to save their businesses.

“People are losing jobs everywhere right now. In oil especially,” said Chad Hathaway, owner and founder Hathaway LLC..

Hathaway said he’s never seen a climate like this and his independent oil company has already had to layoff employees.

“...It’s tragic. It’s one of the most difficult things in the world for an employer to have to do is to lay somebody off,” Hathaway said.

A 2019 report by the Los Angeles County Economic Development Corporation shows Kern County is one of the state’s most oil rich counties. Kern County tax records show over the last few years six of the top 10 taxpayers in Kern County are oil related companies.

Jon Lifquist, Kern County assessor, said the decline of oil is a major concern because the county relies on property tax revenue from the oil industry. Although, it will not affect the current budget it may impact the next year’s fiscal budget which begins on July 1. Lifquist said the county is preparing for the contingency of budget cuts already.

“This is worse than the 2014...15, 16 decline. So, it could be more serious than what we’ve felt, what already caused the county to declare a fiscal emergency. So, we’ve got to prepare for the worst because this does not look good,” said Lifquist.

In previous years plunging oil prices had a direct impact on the county's budget, and once again Lifquist said all county departments could take a revenue hit. Including public safety departments such as the Sheriff’s Department and County Fire. He also said public schools would also feel the impact because property taxes are one source of revenue that funds them.

“If oil remains as low as it is today all the way through the end of the year, and into 2021 that would definitely affect Kern County’s tax rolls and Kern County’s tax revenue,” said Lifquist.

Director of Kern Citizens for Energy Tracy Leach, said she believes the county may be in a tough spot if the economy isn’t up and running soon.

“Billions of dollars to our economy every year just in Kern County, never mind the rest of the state,” said Leach.

And some business owners saying the downfall was faster than what they expected.

“What I didn’t foreshadow was the acceleration of demand destruction,” said Hathaway.

Americans remaining under quarantine for weeks to stop the spread of COVID-19 left most not driving or flying. Retailers and restaurants having to keep their doors shut has left almost nowhere for residents to go.

“We were at this time last year plus or minus $60...$70 bucks a barrel … we’re at ten,” said Hathaway.

In a statement recently released by Chevron said in part, “The impact of lower prices is clearly felt across the U.S. energy industry, including here in Kern County where the industry is a major driver of our community’s prosperity. Chevron is taking actions across the company that are expected to preserve cash, support our balance sheet strength, and preserve long-term value."

The industry also fuels more than our cars and planes. In hospitals alone oil and gas materials produce products such as latex gloves, x-ray machines and pace makers. Our technology is also powered by the industry, supplying goods like cellphones and computers, even down to our coffee makers, credit cards and hair coloring.

“We are one of the largest consumers of oil and natural gas in the country. We are the fifth largest economy in the world, we use a lot of petroleum products. So, it doesn’t make any sense to damage, turn off, destroy our oil industry in Kern County while we continue to use the product,” said Leach.

County tax records show the top six oil related companies generated over 178 million in tax revenue in the 2019-2020 tax year. Which equaled over 13% percent of the county's property tax revenues.

“I think if this goes on too much longer, Kern County in the coming years when property tax, those assessed values are reassessed, that property’s reassessed at a lower value. It’s going to be pretty devastating next year for Kern County as we attempt to fund social services, and our public safety, and our officers and firefighters, ” said Leach.

Businesses owners like Hathaway are also fearful of the long-term economic impacts.

“I’m terrified that my children may not have an opportunity to be a part of this industry because of foolish mistakes that are being made by our leadership that’s my biggest fear,” said Hathaway.