The Hidden Costs of Leasing to Local Government: Public Banking another Solution to Blight
Howard Markert, Green Party Candidate for Mahoning County Commissioner, will be releasing an open letter to the Mayor and City Council of Youngstown regarding the potential costs to the taxpayers of Youngstown from leasing the City’s mineral rights; at the main entrance of the Mahoning County Courthouse today (Oct. 3, 2012) at 3:30pm. Markert is opposed to shale gas extraction and supports a Citizen’s Rights based ban on shale gas extraction for Youngstown and Mahoning County and will present an alternative way to combat blight and fund demolitions that does not risk the health and finances of Youngstown and Mahoning County residents.
The Presentation will take about 15 minutes and Howard will take questions at the conclusion.
Media Packets will be provided.
Dear Sir/Madam,
My name is Howard Markert; I am a homeowner and landlord in Youngstown’s 4th Ward. I am running for Mahoning County Commissioner and I am opposed to shale gas extraction, because I have done extensive research on the subject over the last three years. I would much rather live next to an abandoned house than a toxic waste zone or a heavy industrial site, and that is exactly what a shale gas drilling site is like. I would never have knowingly purchased my home or my rental properties next to an industrial site or any facility using hazardous materials as this would lower my chances for success. Having the city change the makeup of residential neighborhoods into industrial zones will have a significant detrimental effect on property values and quality of life and jeopardizes property owner’s rights to sell or refinance their homes, potentially increasing the number of foreclosures and blighted properties. The FHA/VA rule (4150.2 pg 7 part D) regarding gas wells reads:
OPERATING AND ABANDONED OIL OR GAS WELLS
Operating and abandoned oil and gas wells pose potential hazards to housing, including potential fire, explosion, spray and other pollution.
1. Existing Construction
No existing dwelling may be located closer than 300 feet from an active or planned drilling site. Note that this applies to the site boundary, not to the actual well site.
Source: http://www.hud.gov/offices/adm/hudclips/handbooks/hsgh/4150.2/41502c2HSGH.pdf
Please notice that this rule means 300 feet from the property line to the boundary of the drilling activity, which includes the entire well pad site and the horizontal bore. This is more restrictive than the Ohio Revised Code which allows wellheads in urban areas no closer than 300 from a structure and makes no mention of the underground wellbore. By allowing drilling in the city on city property that meets Ohio state law you are potentially creating more non-conforming properties in the city; when you consider that in the city the majority of new owner occupants over the last 5 years have used either an FHA or VA guaranteed mortgage, eliminating this option will have a devastating impact on property values and lead to further blighted homes.
In addition here are the names of banks which will not mortgage properties with mineral leases at all, based upon environmental risk, as per information gained from a mortgage broker: First Place Bank, Provident Funding, Citizens, GMAC, Wells Fargo , FNCB, Fidelity, FHA, First Liberty, &Bank of America. What is the impact of this when you consider the many lenders who won’t write mortgages under $75,000? For most buyers willing to consider Youngstown this means they are unable to find a traditional lender, limiting purchases to cash buyers and land contracts which further lowers property values. For existing homeowners this means it is much harder to refinance properties for home improvements increasing the blighted appearance of our neighborhoods and further reducing property values.
The following question was put to the Insurance Information Institute (NY), an insurance industry group:
Are there any homeowner insurance policies that cover damage resulting from seismic testing or drilling activities, whether occurring on land leased to the oil and gas company or on adjoining unleased land?
If a homeowner signs a lease and allows seismic testing or a gas well on his or her property, will his or her homeowner's policy be renewed, may it be cancelled for a change in circumstance or does the insurance company not mind because damage would be excluded from coverage?
Homeowners in upstate New York are unsure about their rights, obligations, and their ability to obtain insurance.
The I.I.I. responded: “We know of no insurance carrier that would provide coverage in this instance.“Mr. Bob Hartwig, Senior Vice President & Chief Economist at the Insurance Information Institute (NY) advised that if a landowner signed a seismic agreement to allow testing involving explosives to take place without notifying his insurance provider, he had significantly changed the conditions of his coverage; his insurance provider could potentially deny any claim based on that change in conditions. On the other hand, if the homeowner notified his insurance carrier of the seismic activities, he would most likely be cancelled, or at the very least, not renewed on the next renewal date.
Property Insurance: Attorney Randy Marcus notes that a number of insurance companies will not insure leased properties, or have substantially raised their premiums. And any insurance company can raise future rates or not renew policies on leased properties. And leases may remain operative, way beyond the terms in the lease agreement (“held by production”). As people have their insurance cancelled or simply cannot afford the premiums, they will enter into default on their mortgages and potentially walk away from their homes creating more blight.
Source: http://un-naturalgas.org/Lessors%20Page/INSURANCE%20EXCLUSIONS%20WIP.pdf
Youngstown’s citizens have been told it’s all about the money and I do understand that, which is why I am concerned that there has been no public discussion of the potential costs to the city that come with increased drilling activity and if those costs equal or exceed any revenues (signing bonus & royalties) that the city hopes to gain.
So I am calling for a full financial analysis to be made public before the Council moves forward on the Mayor’s proposal. I submit the following information for inclusion in the analysis:
Many liability insurance policies exclude claims from gas and oil extraction, what is the status of the city’s policy and how much will it cost to get a rider that will cover such losses?
If the city has jurisdiction to prevent drilling on portions of the Meander Reservoir Watershed and does not do so what would be the estimated cost of remediation and or replacement of this valuable and vital resource and how would it be paid for? How long would remediation or replacement take?
i) Consider replacement drinking water
ii) Consider impact on tourism, businesses, and industry
iii) Consider contractual obligations for sales of water to other government entities and private corporations
“A water protection zoning ordinance is a regulatory control that typically places some restrictions or standards on activities conducted within a specified zone (such as the corridor management zone and/or the emergency management zone). Such ordinances enable municipalities to require people who live or work in this area to avoid contaminating the source of the MVSD’s drinking water. Ordinances can help ensure best management practices are being employed at local businesses and can help reduce the volume of contaminants stored within the protection area. The MVSD may want to consider working with the counties, townships, and municipalities in the protection area to develop zoning overlays that require specific standards for chemical storage, handling of waste materials, and other source control strategies.”
Source: http://meanderwater.com/Portals/MeanderWater/Documents/MVSD%20DWSPP%20EPA%20Endorsed.pdf page 33
I am even more concerned about the indirect costs to the city, many of which are detailed in the example below.
EMERGENCY SERVICES
• Fire and EMS calls have increased as much as 30%.
• Response time has increased 45 to 60 minutes due to congestion and overworked volunteers.
• Traffic and traffic violations have increased. Law enforcement is stopping many trucks but there are no extra funds to compensate for the increased workload.
• Municipalities are giving every well site an address for their emergency response services; this has required a re-addressing throughout the area in order for there to be consistency.
MUNICIPAL SERVICES
• 30% increase in police and fire dept. emergency response for traffic, DWIs, accidents, crimes.
• 10% of Probation Dept clients are from Texas and Oklahoma (along with 8-10% of those in jail). Of these clients, 95% of crimes are alcohol/drug related.
• Local governments are losing established staff to gas companies due to salary differences making the increased work load even more difficult to manage.
• Some volunteer fire departments are struggling to find enough volunteers for the new demand. There are no new funds from drilling companies to compensate for the increased workload.
• The Courthouse had to limit the number of people searching deeds at any one time because they were over-run with requests for information.
• Since local governments see almost no increase in tax revenue, but drilling increases the costs to local governments, some services have been cut. The court system is using more electronic monitoring of criminals on probation rather than keeping them in custody.
• The county is digitizing the county records.
• Municipalities find it difficult to find the time needed to respond to drilling issues with their current staffing levels.
Source: http://www.tompkins-co.org/tccog/gas_drilling/Resources/Community%20Impacts/Bradford%20County%20trip%2012-15-2010.pdf
Note: Many of the positive impacts mentioned in this report will not apply to the City of Youngstown as we have an abundance of available rentals (rents have not increased locally) and most of the businesses (hospitality & entertainment) that will gain the most benefits are located in suburban communities.
However, we will see an even higher level of crime due to existing availability of drugs and prostitution inside the city limits.
Thank you for considering this information in your decision making process.
Sincerely,
Howard Markert
MORE INFO on Oct. 3 Youngstown City Council Meeting and how to contact them and /or sign petition HERE > http://www.frackfreeamerica.org/callyoungstown.html
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