Budget officials in Louisiana’s oil patch parishes are keeping a close eye on sales tax collections — the best measure of local business activity — watching for sales to start declining and bracing for oil’s worldwide price fall to affect local economies.
So far, oil’s drop from over $100 a barrel to less than $50 has not had drastic effects in St. Mary, Lafayette and Terrebonne parishes since oil prices began to fall in July.
Though there have been layoffs by oil service companies — Halliburton acknowledged some this past week, and Hercules Drilling announced layoffs late last year — Louisiana Workforce Commission numbers so far do not indicate accelerating unemployment in the energy sector. Oil exploration companies, especially those in the expensive-to-drill shale developments across the country, have cut back capital spending plans for 2015.
No one knows where the price of oil is headed, or how long or the extent to which Louisiana will feel the sting. But those with responsibility over local government fiscal matters are watching closely. The memory of the oil patch’s mid-’80s depression remains fresh.
“I think that, in the next couple of months, we really have to stay on top of things,” said Lorrie Toups, chief financial officer for the parishwide Lafayette Consolidated Government.
Sales taxes, which provide a huge portion of the money it takes to operate government, also are a measure of local business strength and residents’ willingness to spend money.
Toups said she watches for month-over-month downward trends in collections of sales taxes. She said Lafayette has a $22.9 million fund balance, a budget cushion against hard times that has more money than is required by city-parish statutes. Still, she said, during a recent move by Lafayette City-Parish Council members to add expenditures to the budget, “we reminded them that we needed to be prepared for an economic downturn.”
St. Mary Parish sales taxes the last half of 2014 were down compared to the last six months of 2013, according to numbers provided by the School Board, which showed 5 percent to 6 percent less sales each month from August through December.
Parish Chief Administrative Officer Henry “Bo” LaGrange said the numbers better reflect an outstanding 2013 rather than a disappointing 2014. Still, he said, parish officials have budgeted conservatively and are watching the numbers.
“Due to the price of oil, we’re expecting in 2015 that sales taxes will decline,” LaGrange said.
There haven’t been any big layoffs in the energy sector, which is concentrated in the eastern part of the parish. LaGrange said Cameron International, a maker of oil-drilling and production components for deepwater projects, is showing no sign of slowing.
“If we do see something that triggers some alarm, then we’ll definitely be ready to address that and hold off on making some expenditures until later in the year,” he said.
In Terrebonne Parish, where offshore fabricators and drilling service companies provide thousands of jobs in and around Houma, December tax receipts were 5 percent less than December 2013. It wasn’t a huge drop, and it was the first year-to-year step back for tax receipts in a long time, but it drew attention.
“There is a folder in my computer called ‘Revenue Watch,’ ” said Jamie Elfert, chief financial officer for Terrebonne Parish Consolidated Government. Elfert said she remembers the 1980s, when an oil price collapse shuttered much of the industry in Louisiana for years.
Elfert said she’s learned to anticipate oil’s bust cycles. “I also know that it doesn’t always happen,” she said.
City-Parish President Michel H. Claudet said Houma businesses have not started heavy layoffs but are working their hands fewer hours each week. He said the businesses spent years cultivating a workforce that they want to keep.
“They’re trying to hold onto as many people as they can,” Claudet said.
Other companies are retiring aging equipment. “I am aware of boats that work in the shallow water … that are being mothballed right now,” he said. “That’s going to obviously mean layoffs.”
Claudet said Houma is somewhat protected because much of the oilfield business in Terrebonne Parish, a coastal expanse of land southwest of New Orleans, is on components and platforms for deepwater Gulf of Mexico projects.
“You have to gauge how long, how deep this cycle’s going to be. … We don’t see anything like the mid-’80s or the early ’90s happening (again) in Terrebonne,” he said.
So far, the Louisiana Workforce Commission, which gathers employment data statewide, is reporting that the oil and gas sector employment remains steady.
“There are no signs of across-the-board, large-scale cutbacks,” LWC Press Secretary Tom Guarisco said. “That’s not to say it won’t happen, but they (the numbers) just aren’t in the data yet.”
Regardless of the oil sector’s woes and worries, state employment officials expect jobs in Louisiana to skyrocket in the next few years, Guarisco said.
Trades professionals who work in the oil fields — welders, machinists, electricians and others — also are needed in Louisiana’s current or future industrial projects. Those include projects in Calcasieu and Cameron parishes, along the Mississippi River and elsewhere in the state.
“That’s many thousands of workers in a short time,” Guarisco said. “Those projects are not one- and two-year deals. … It’s manufacturing in general in other parts of the state.”
Gifford Briggs, vice president of the Louisiana Oil & Gas Association, said last week that Acadiana’s oil and gas service companies are starting to experience losing employees to other projects around the state.
“There are already companies from Lake Charles coming over and poaching electricians,” Briggs said.