Chevron appeals 'illegally' collected taxes in Contra Costa County

Chip Johnson

Friday, December 7, 2007

In the spirit of the holidays, the Chevron Corp. has launched its appeal to Contra Costa County officials in an attempt to recover what it claims is nearly $60 million in taxes collected illegally in the last three years.

Officials at the Richmond refinery say county Tax Assessor Gus Kramer has used an incorrect method to calculate the property tax rate at the 2,900-acre facility.

"We spent a year with tax officials trying to reach a settlement before going the appeals route," company spokesman Dean O'Hair said. "We've had to reluctantly take this route to get a reasonable judgment based on an improper tax methodology and tax law."

Chevron's tax advisers claim that a very long list of public agencies based in the county owe the company for tax overcharges for the fiscal years ending in June 2004, 2005 and 2006. Among them: the county itself, which Chevron says owes nearly $9 million, and the city of Richmond, which allegedly owes nearly $1.4 million.

The company's case and the assessor's rebuttal, being heard by the county's tax appeals board, could take up to a month to complete, O'Hair said.

For his part, Kramer says the refinery is vastly understating the fair market value of its refinery - plain and simple.

"Regardless of whatever methods are used to calculate the tax, the bottom line is this: They claim it's worth $1.1 billion, but Exxon or Valero would buy it at twice that price on the open market tomorrow," he said. "If I could, I'd buy it tomorrow, sell it the next day for (as much as) $3.6 billion and retire."

Kramer said Citgo, a Venezuelan oil company, sold its half interest in a Louisiana refinery, with production rates comparable to the Richmond refinery, for $3.5 billion in 2006.

By Chevron's estimates, the value of its Richmond refinery has nearly doubled since 2004 as oil prices have increased. And until last April, when oil prices climbed again, Chevron officials and company shareholders enjoyed a golden age of refining. Record profits have allowed it to take on a significant project to increase flexibility and production at the plant.

"The plant is worth two to three times what they claim it's worth," Kramer argued. "As a stand-alone refinery, it's worth billions more than they claim it is - and they know it," he said. "I don't begrudge them their profits. I'm a capitalist, too, but what bothers me is when they are disingenuous about the value of the property."

The company, meanwhile, has apparently dismissed the Marquis of Queensbury's rules as well. Kramer found that out recently at a house party in Concord when he met a woman who worked for a separate division of the oil company.

When he was introduced, the woman said, "I'm not supposed to like you," she said. "I've been told you charge our company too much in taxes and I'm not supposed to like you."

While there is no way to predict an outcome of the property tax appeal process, it is possible to break down exactly how much money a company with record profits of $17.1 billion in profits in 2006 is fighting over.

The amount that Chevron claims it has been overcharged in property taxes over the past three years - an average of $20 million a year - comes out to a little more than one-tenth of 1 percent of the company's $17.1 billion in profits last year.

For purposes of comparison, that's equivalent to about $10 for a person who saves $10,000 a year.

But even more important than the money or the legal principle or ultimately who's proved right or wrong, Kramer said, what the company's actions really show is a "them and us" divide that didn't always exist.

Kramer, a Pittsburg native, grew up right down the street from a Shell refinery, and things were different back then, he recalls.

"The plant manager's kids went to the same schools and benefited from the corporate taxes the company paid," he said. "Now their managers live in exclusive communities, Danville, Alamo, Tiburon in Marin County ... and most of their kids don't go to public schools. These companies don't have the vested interest their predecessors had long ago."

Company officials would be quick to point out that their valued refinery workforce is made up primarily of people from Richmond, Martinez and cities and towns all over the county.

It's precisely that reason that the company's tax-related actions seem so narrow-minded.

How does the company benefit when its employees' kids attend substandard, tax-supported public schools that lack basic resources, when services for seniors are being cut and youth and library programs are being reduced?

The company's short answer has been to dismiss doom-and-gloom predictions as a political tactic designed to create contempt for the corporate bully.

"I know politicians want to focus on how the sky is falling, but I think we have to work some of these things out before we get to that position," O'Hair said.

I hope Chevron is confident in its assessment of the situation, because if it wins, the San Ramon Valley Fire District, the agency that provides fire protection for the company's headquarters, will be asked to refund more than $1.9 million.

"If they win this appeal, it will have a very real, very tangible and negative effect on public services," said John Gioia, a county supervisor who represents communities in western Contra Costa County.

Chip Johnson's column runs Tuesdays and Fridays. E-mail him at chjohnson@sfchronicle.com.

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This article appeared on page B - 1 of the San Francisco Chronicle