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Oil and Gas Boom Makes Districts Rich but Uneasy

Booming oil and gas production in the Eagle Ford Shale play has made property values soar — a sudden, surprising and sometimes stressful boon to some of the state's poorest school districts.

In Dilley ISD, southwest of San Antonio, business manager Elpidio Mata and Superintendent Nobert Rodriguez have seen property values balloon to about $275 million from $130 million two years ago.

School districts can get rich just as fast as the people in the oil bidness, and the poor-to-rich whiplash can have some weird aftereffects.

Texas public schools get about half of their money, on average, from property taxes. And when the property turns out to be sitting on top of the Eagle Ford Shale play, the sudden changes in wealth can produce fiscal temblors in the schools.

Some, like the Dilley Independent School District, see an influx of money and get to keep it. Others, like Cotulla ISD, see the money come in but don’t get to keep it for very long.

Dilley, southwest of San Antonio on Interstate 35, has seen property values balloon to about $275 million from $130 million two years ago, according to Nobert Rodriguez, the superintendent. It is by most measures a poor school district — one that gets money from the state to supplement what can be raised from local property taxes.

The general idea (school finance is approximately as simple as the tax code) is that no district should have too high a tax rate and that the state will supplement those that can’t raise enough locally to pay for schools. The rich districts that can, with the same tax rate, raise more than a certain amount for public schools have to use some of their money to support the poor districts. That’s called “recapture” in the gnarled language of school finance.

The boom in property values means more money for Dilley, where 78 percent of the students qualify for free and reduced school meals, a benefit that is based on family income. And as fast as its fortunes have risen, Dilley is still in a position to raise money locally and to get money from the state. Property values will have to increase by another $140 million or so before the state comes asking for money. It’s not impossible, Rodriguez said. “Last year, we went up $100 million.”

Cotulla ISD, on the next major exit ramp from I-35 as you go south, is in a more difficult situation. Values there have jumped to $2.3 billion from $877 million, according to Superintendent Jack Seals. The district will bring in more money this year and won’t have to write the state a big check — there’s a one-year lag before the new local values are plugged into the state’s formula. Next year, however, Seals estimates, Cotulla will be writing the state a $15 million check.

It doesn’t mean the district is rich or that the people in it are wealthy — just that the land it taxes has gone up quickly and dramatically in value. In Cotulla ISD, 85 percent of the students were from economically disadvantaged families in 2010.

But more money in revenue can mean more money for the schools, as is the case in Dilley. In Cotulla, it’s an issue for the accountants, who will need to set aside enough of this year’s windfall to help cover next year’s check to the state. Theoretically, they’ll have about the same amount of money to spend per student each year.

But booms make the schools nervous. Right now, construction is at a crazy pace, and there are big trucks on all the roads. Out-of-town workers outnumber rooms and beds and have to sleep in trailers, new hotels, portable buildings or the backs of their trucks. It’s a classic boom. People are getting rich and working hard, and the dirt is flying.

Since 2010, more than a dozen school districts — mostly small ones like North Zulch, Carrizo Springs and Karnes City — have seen property values rise rapidly with more than half of the growth coming from mineral properties, according to an analysis by Moak, Casey & Associates, a consultancy in Austin.

If the boom stops, property values will drop. If oil and gas prices fall — even if the production and construction continue — property values will fall. In the Dilleys and Cotullas, that would mean less money. Dilley gets to keep its windfall now without sending it to the state, but wouldn’t see it replaced should values drop. Cotulla would be able to get state money again. But remember that one-year lag that’s working for them now? It would work against them in a year of declining values.

“I worry about declining values in the future,” Seals said. “If values drop, we’re going to be well behind the eight ball.”

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