Gates Mills Village Council last week unanimously approved taxing the royalty income from gas and oil wells.
Gates Mills charges a 1 percent tax on earned income. Tax Administrator Robert Reitman said, for example, if revenue or income from a gas well were $100,000 annually, the village could receive 1 percent on that amount, or $1,000. The tax is retroactive to January of this year.
There are about 47 wells in the village with more on the way, according to officials. While the village cannot tax on the extraction of natural resources, it can receive a royalty fee for the revenue raised from selling the gas, Mr. Reitman said.
"Including gas-well revenue as income subject to our village income tax would be consistent with our current taxation of other business activity," he wrote in a memo.
While the amount is insignificant, it accentuates a principal, Mr. Reitman said. The cost incurred by the village's safety forces benefits only a very small number of property owners, which calls into question the fairness of placing the burden of service on all for the benefit of a few who are realizing a profit, he said.
Council President Karen Schneider said the money collected would help with training fire-department members who have to deal with gas-well issues.
It's a responsibility the fire department never had before, Councilman F. Jerome Tone said.
Donald Thorpe, a resident since 1967, who has a gas well on his property, said he felt as if he was being penalized and that it was not fair. He said the value of his property had not depreciated, according to his recent property tax bill.
A couple of residents who have wells said they had not had any problems with them and did not require the fire department's aid.
Councilman William Barnes said firefighters still had to be trained so they can handle future problems.
Training is a critical component, village leaders reiterated. Mayor M. Conrad White said several members of the fire department were going to a training session last weekend that would be helpful in dealing with those incidents.
A Central Collection Tax representative assured the village such a tax would be constitutional, Mr. Reitman said. Mayfield Heights and Independence, as well as several other municipalities in Ohio, have instituted the tax. Regional Income Tax Agency already recognizes royalty income tax from gas wells.
The village would earn a modest amount of money on the proposed royalty income tax, Mr. Reitman said.