This is old news by now, so I’m not sure why this Chronicle article came out on Christmas day. Maybe the hook is because it was such a good Christmas present for Chevron.

An editorial in the December 24 Contra Costa Times recommended that the City of Richmond fix the defects in the original Measure T and re-try it on a future ballot measure. The contra Costa Times editorial concluded, “We opposed Measure T. We agreed with backers that the Chevron refinery should step up to the plate and be a bigger contributor to the community in which it resides. But we feared, correctly as it turned out, that the measure would not withstand legal challenge, although we anticipated it would fall for other legal reasons.”

“Clearly, it’s time for cooler heads to prevail, for all parties to sit down and see if they can hammer out a compromise. If not, backers of last year’s initiative now have a road map for fixing their measure.”

Judge strikes down Richmond's Chevron tax

Bob Egelko, Chronicle Staff Writer

Friday, December 25, 2009

(12-24) 14:31 PST RICHMOND -- In a blow to financially strapped Richmond and a $20 million victory for Chevron Corp., a Contra Costa County judge has struck down a tax approved by voters last year that assessed the company for the value of the crude oil it refines in the city.

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Measure T is unconstitutional because the tax is out of proportion to the business Chevron does in Richmond and the services it receives there, said Superior Court Judge David Flinn.

He said the tax also violates state law because it is based on the value of materials that Chevron uses in its refinery. Only the state can impose such a use tax, Flinn said.

He said Chevron is entitled to a refund.

Michael Colantuono, a lawyer for Richmond, said Thursday that the city will appeal the Dec. 16 ruling.

Colantuono said that under Measure T, Richmond told its tax collector to set levies on Chevron in proportion to the amount of economic activity the company conducts locally, through employment at the refinery and demands on city services. The company declined to take part in the process or submit its own proposal, he said.

Flinn said in his ruling, however, that Measure T did not authorize the tax collector to establish such a formula.

He said Richmond had also failed to explain "how there can be any connection between the volume (of oil) being produced and a 'contribution' to the conduct of business in Richmond."

As a result, the judge said, Richmond is interfering with interstate commerce by exposing Chevron to the possibility of being taxed more than once by other cities or states for the same business activity.

Chevron's lawyer, Jeffrey Vesely, said the company was pleased with the ruling.

City voters passed Measure T with a 51.5 percent majority in November 2008. It applied to all manufacturers but was aimed primarily at Chevron, the nation's second-largest oil company.

Previously, the city taxed businesses based on how many local employees they had. The ballot measure established an alternative tax, based on the value of the raw materials a manufacturer used. A company would have to pay the higher of the two taxes.

Colantuono said Chevron paid several hundred thousand dollars a year under the former method. The company said it paid $20.5 million under Measure T.

The city has put Chevron's funds in escrow pending the outcome of the case, Colantuono said. Although Richmond has had to cut services to balance its budget, it would not have to make additional cuts if it lost the case, the lawyer said.

Mayor Gayle McLaughlin and other supporters of the ballot measure contended that Chevron, which recorded a record $23.9 billion profit in 2008, has never paid its fair share to the city. The company disagreed, citing $61 million worth of contributions for various city projects last year.

The City Council approved an upgrade of Chevron's refinery in July 2008 over the opposition of environmental groups, but a judge halted the project a year later. The company plans to appeal.

E-mail Bob Egelko at begelko@sfchronicle.com.