Chevron, Richmond spar in court over voter-approved fee

By Katherine Tam ktam@bayareanewsgroup.com

Posted: 10/09/2009 12:08:31 PM PDT

Updated: 10/10/2009 05:20:42 AM PDT

Nearly a year after Richmond voters approved a manufacturers fee to generate at least $16 million a year, the question of whether the city can legally collect the money still awaits an answer.

City officials stand behind the new law, but Chevron, which would pay the bulk of the fee Richmond would collect, says it violates state and federal laws.

Attorneys for both sides appeared Friday morning in Contra Costa Superior Court in Martinez to argue the legality of Measure T. The hearing — one in a series since the oil company sued in February — ended after an hour with Judge David Flynn saying he would take the arguments into consideration.

A ruling is probably weeks away, if not months, attorneys suspect.

Measure T 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. The money is to flow into city coffers to pay for road repairs, job training and other public services.

The measure is discriminatory, Chevron said. The oil company argues that Measure T forces companies such as Chevron, with manufacturing operations in one city and offices in another, to pay taxes or fees in two cities, whereas a company with operations solely in Richmond would pay just the Richmond fee. That discriminates against intercity and interstate businesses, the company said, and puts them at a competitive disadvantage.

"It's a tandem tax, and that's the Achille's heel," said Jeffrey Vesely, an attorney representing Chevron.

But Richmond has the power to impose a fee on the privilege of doing business in the city, officials say. And it was within its authority when the tax collector issued an enforcement policy in March that authorized businesses operating partly in Richmond and partly somewhere else to pay fees that are proportionate to their operations in the city, they added.

Before Friday's hearing, a dozen Measure T supporters gathered on courthouse steps and held signs that read "A Fair Share for Richmond," which were conspicuous in last year's campaign.

"It's a simple case of making sure a fair share of taxes gets paid for Richmond," Mayor Gayle McLaughlin said. "They're (Chevron) trying to use a technicality that holds no water to avoid paying their fair share."

In April, Chevron paid the city about $21 million in business license taxes. The city has not spent the money, officials said, and is holding off while the lawsuit is pending.

Flynn issued a tentative ruling in late August questioning the validity of Measure T. In his statement, Flynn said the ordinance "gives a clear benefit to a manufacturer that has all of its operations within the city of Richmond over one, like Chevron, who has additional operations outside of the city and may be subject to taxation in such other jurisdictions."

Reach Katherine Tam at 510-262-2787. Follow her on Twitter: @katherinetam.