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SALEM -- The city has taken the first step toward a potentially leasing city property for the collection of oil and gas.
During its meeting Tuesday, the city council voted unanimously to approve a resolution authorizing City Service Safety Director Joe Cappuzzello to request proposals and enter contracts for an oil and gas lease for all municipal owned property.
Cappuzzello said the city had received inquiries about a potential lease from two developers with proposed rates of $4,500 to $4,750 per acre and that one of the companies had requested 1,200 acres. However, he said that as a municipal entity the city would have to advertise for bids rather than accept an offer from a single company.
Cappuzzello stressed that a potential lease was still in the preliminary phase and that nothing was set in stone yet, and Mayor Cyndi Baronzzi Dickey said that a potential lease would not include surface rights.
"The other did not say how many acres, but I know we have quite a few more. As soon as [City Law Director Brooke] Zellers gets the wording done, we'll go to the newspaper and find out who is for real and who isn't, and if they're going to do a portion or all of it," Cappuzzello said. "The one landman that called was only interested in a certain portion of the acreage, not the entire acreage of the city, just where they are currently doing their drilling."
City Councilman Jeff Stockman asked if the city's semi-autonomous departments which operate under their own budgets separate from the city general fund, like the parks department, would receive a share of the revenue from a potential lease if properties overseen by them were included in the leased acreage.
Dickey said that all revenue would go directly to the city as it owns the properties and the associated mineral rights rather than the departments themselves. However, in the past when the city approved an oil and gas lease, the city administration and council reviewed the revenue and divvied it up between city expenses and departmental budgets.
"Once we accepted an offer the auditor, council, the mayor and the service director all had a meeting about what we would do with those funds. One of the things we did was pay off debt, which is why we are low debt now, and then we did make revenue disbursements to different departments," Dickey said. "That's when council's contingency fund [was established] and we laid out how we were supposed to use that, … It was great for the city, my feeling is that it's always good to pay down debt, but we also have a lot of infrastructure needs in the city that it would be great to have some funds available to facilitate some of this things and keep the streets up to date. Just something to think about, because in the end we all make that decision."
Dickey also said that in the past money from oil and gas leases has been used to address emergency expenses like the costs associated with the demolition of the TanFastic building in 2015.
Councilman Trent Tice asked if lease revenue could be placed into an investment account to potentially generate additional revenue, noting that while the state would not allow that money to invest that money traditionally, he was unsure if it would be eligible to be placed in an account with the State Treasury Asset Reserve (STAR) of Ohio investment pool.
Dickey said that while the city could place the money in an account to generate interest earnings, it hadn't been able to place it in an investment account, but the laws may have changed since.
Council will meet next at 7 p.m. on Nov. 4.