Deal looks to uncover undervalued property - County and school officials say deal paying off for taxpayers

By Traci Chapman
Published on May 22, 2008

For a fifth-straight year, Canadian County Commissioners last week inked a deal with Visual Lease Services aimed at boosting property tax revenues — a deal area officials say has exceeded “all expectations.”

County and school district officials said the partnership between Canadian County, local school districts and Holdenville-based Visual Lease Services has “dramatically” increased revenues in the last four years. Visual Lease locates and map assets — specifically equipment related to oil production — that should be included on the county’s tax rolls, County Assessor Ronnie Funck said. In the process, he said, the company has found “scores” of equipment that was either undervalued or not included on tax rolls at all.

“A couple of years ago, we located a rig that had a value of about $1.5 million, and without Visual Lease’s services, we may not have known about it,” he said. “That alone — which meant a 12-percent assessment ($180,000) to the county — was a huge gain.”

Mustang School District Superintendent Karl Springer said his district partnered with the county to hire Visual Lease, and its investment has paid off “tremendously. It has been a very successful endeavor for both the county and the school district.”

Funck said the joint effort began in 2003, when the county entered into a $150,000 initial contract with Visual Lease. Since 2003, the contract has been renewed at a $40,000 maintenance level, he said.

Springer said local school districts “jumped on board” with the agreement and helped fund some of the cost, not only for the initial contract but also to help pay a “small fee” for subsequent renewals.

Funck said the contract has translated into a windfall for the county’s school districts.

“When you think about the fact that about 83 percent of what we collect goes to schools, the fact we get this benefit makes a big difference to our kids,” he said.

Gary Mask, Visual Lease’s chief financial officer, said Visual Lease serves 35 counties in Oklahoma, four in Colorado and two in Kansas. The company, which was founded in 1996, employs 45 people. Mask said the services Visual Lease provides could not be accomplished by many counties “in-house” because of the associated cost and “specific nature” of the oil industry.

“A lot of these counties — including Canadian County — would most likely lose out on quite a bit of ad valorem revenue because they just don’t have the personnel to evaluate this equipment and keep track of its movement,” he said. “A lot of equipment on a well site is exempt from ad valorem tax because owners are subject to a gross production tax. The rub is that you need to determine which equipment tax goes to which entity — to the state or to the county. There is also a big problem with undervaluing equipment, and that can cost a county thousands and thousands of dollars.”

District 3 Commissioner Grant Hedrick agreed, saying that was one of the motivating factors when the county first contracted with the company.

“We sat down with them (Visual Lease) and the school superintendents, and we quickly saw what a benefit the service would be,” Hedrick said. “We don’t have anybody with that kind of expertise. It was a huge benefit to us because they already had the experience with values and how oil companies work.”

Mask said the concept is “simple” — locate oil equipment, determine if it is subject to ad valorem property tax, value it, map it and provide the information to the county assessor.

First, he said, Visual Lease employees set up a global positioning satellite system for all oil wells and operations in the county. The next step is to go to the courthouse and get the last three years of assessments off county assessor’s records.

“We check and compare between what’s on the records and what is actually there,” he said. “It gives us a starting point and frame of reference from which to start.”

Mask said the next step is the longest — the physical inspection of all oil field equipment, well by well and property by property.

“We list all of the equipment and take photos of it,” he said. “We also GPS all of the wells, lines, meters and pipeline and track all of the pipeline for future reference.”

After the data is collected, employees enter the GPS data into a global information system, Mask said. This allows a “simplified” comparison of what the county shows is on a piece of property and what is actually there, he said.

While the initial setup is the most labor intensive part of the company’s job, Mask said, the collection of data is an “ever-evolving” process. Technicians go back out into the field to make adjustments to inventories when a new well is drilled or if equipment has been moved, he said.

“It sounds like a simple system, but there’s a lot to it,” he said. “By the very nature of oil companies, equipment moves around a lot. We help make sure the assessments are correct so the county maximizes its tax revenue.”

Funck said not only does Visual Lease map and monitor oil and gas activity in the county, it also provides assistance in cases where oil companies dispute its values.

“There is a protest process, and their help with that has helped streamline it for us,” he said.

Oil companies — like residents — only receive notices from the assessor’s office when they are slated for an increase, Funck said. Once that notice is received, the company has 20 business days to protest the assessment. If a protest is lodged, he said, the county schedules an informal hearing.

“They provide information — items of evidence like appraisals — and we make a determination within 5 days,” he said. “If they want to protest further, they then have 10 days to lodge a protest with the county Board of Equalization.”

If the protest is denied at that level, Funck said, the company can then file an action in district court.
“We don’t have too many of those,” he said.

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