Chevron claims Richmond's manufacturers' fee is illegal, files lawsuit

By Katherine Tam
West County Times

Posted: 02/26/2009 12:09:36 PM PST

Chevron sued the city of Richmond on Thursday to halt the collection of revenue from a 3-month-old manufacturers' fee initiative.

The oil company filed its lawsuit in state Superior Court in Martinez, arguing that Measure T violates state and federal laws and should be voided.

Measure T, which voters approved Nov. 4, charges manufacturers a quarter-percent of the value of the raw materials they use each year, if it is more than the annual business license fee they now pay. It is expected to generate about $16 million this year, almost entirely from Chevron.

Supporters argued big manufacturers should pay their "fair share" to operate in a city that needs revenue and jobs. Opponents feared the measure would hurt the city's ability to draw businesses and warned that state law prohibits assessing a business's inventory.

In its legal claim, Chevron argues that Measure T illegally taxes inventory. It also claims the initiative violates other laws, including those involving interstate and foreign commerce and taxation. Chevron refines crude oil produced in other states or countries.

"A new business license tax negatively impacts not only current Richmond businesses, such as the Chevron refinery and other manufacturing businesses, but also businesses considering locating in Richmond," Mike Coyle, refinery general manager, said in a prepared statement.

City Attorney Randy Riddle said he believes the lawsuit does not have merit.

"I think there's very little to their complaint," Riddle said. "It is our view that a court hopefully in the near future will be confirming that Measure T is valid and the voters, in exercising their constitutional right, acted lawfully and within their authority."

City Manager Bill Lindsay added: "We feel that Measure T is legal, and we certainly would intend to defend it in the lawsuit."

Including Chevron, Richmond is home to 56 manufacturers, which represent 0.9 percent of licensed businesses in the city, including out-of-town contractors who must register when they remodel a home or do other work here, city finance officials said.

The city is mailing invoices to businesses, with the amount due by March 15. Late fees will be charged after April 15.

Officials did not intend to spend the money this fiscal year, and instead wanted to incorporate it into the 2009-2010 budget. But they don't plan to spend it while a lawsuit is pending, in case the money must be refunded.

"We would not recommend tax proceeds be spent that are in the midst of a legal dispute," Lindsay said. "Prudence would suggest otherwise."

Asked if Chevron will pay the Measure T fees this year, spokesman Brent Tippen said the company has not received an invoice, but that the company abides by laws.

Chevron would pay an estimated $16 million because it processes as much as 257,000 barrels of crude oil a day at its Richmond refinery.

Reach Katherine Tam at 510-262-2787 or ktam@bayareanewsgroup.com.