2008-02-22_APPLICATION CORRESPONDENCE - C2008086 (39)

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CHAPTERFOUR Environmental Consequences and Mitigation were to choose to locate in the area served by Fruita Monument High School, and if they were all to arrive within a very brief period, say 2 years, then an estimated 133 new elementary, middle school, and high school students would have to be placed in an already crowded system. This scenario is cautionary, however. It is not likely to occur for several reasons: some of the new jobs may go to current residents; many of the miners new to the area would choose to live at dispersed locations throughout the Grand Valley; and the ramp-up to full production could take more than 2 years, moderating the effect of the growth in the student population. In addition, Mesa County Valley School District 51 may propose a bond issue to the voters in the fall of 2008. If a bond issue were to pass, then new schools would be constructed that would accommodate anticipated growth in the west end of the Grand Valley. Public Revenue The Red Cliff Mine would be subject to various taxes and royalties that would produce substantial revenue for local, state, and federal governments. Both Mesa County and Garfield County would assess ad valorem taxes on the mine facilities, including the rail spur, and on the value of the coal in the ground. Mesa County would also receive sales taxes based on business and consumer expenditures generated by the proposed action. The State of Colorado would recover a severance tax on the value of a mineral resource irretrievably lost to the state. The federal government, from whom the coal resource is being leased, would receive an annual royalty payment as well as an annual rental fee. The federal royalty for coal mined by underground methods is 8 percent of the gross value of the coal produced. When the Red Cliff Mine is producing at the proposed rate of eight million tons per year, the annual royalty payment to the federal government would be $15.4 million, assuming an open market price of $24.00 per ton. Historically, federal mineral royalties were split evenly between the federal government and the state of origin, which would result in a $7.7 million annual distribution to the State of Colorado. (A recent federal appropriations bill changed the distribution to 52 percent federal and 48 percent state for 1 year. If this change were extended by the Congress, Colorado's share of the Red Cliff Mine royalties would be approximately $7.4 million.) Severance taxes are imposed by states on certain nonrenewable resources that are "removed from the earth" because "the value of such resources to the state of Colorado is irretrievably lost." The severance tax on coal is applied to all production after the first 1,200,000 tons produced annually. For underground mines, a 50 percent credit against the taxis also applied. The per ton severance tax rate is currently $0.54 per ton and has remained at that level since 1992. (The possibility of raising the rate is under review by the Colorado State government and legislature.) When the Red Cliff Mine is producing at the proposed rate of eight million tons per year, the annual severance tax imposed by the state could be $1.8 million, based on an assumed open market price of $24.00 per ton. Property taxes would be levied and collected by both Mesa and Garfield counties. Mesa County would assess property taxes on the railroad spur and other properties within the county. Garfield County, where the mine facilities and most of the recoverable coal are located, would assess property taxes on the mine facilities and on the value of the coal in the ground. When the Red Cliff Mine is producing at the proposed rate of eight million tons per year, the annual property tax receipt due to Garfield County could be $710,035, based on the price assumption and assessment methodology of the Colorado Division of Property Taxation and on the current mill 4-19 DBMS 574