In a pair of stories in today’s Contra Costa Times, Lisa Vorderbrueggen updates the epic clash with Chevron over property tax appeals. The potential hit for Richmond is as follows:
- Richmond's total share of the $18 million 2004-2006 refund, at 2 percent of the One Percent plus 48.5 percent of the general obligation share, was $2.3 million. (Already paid.)
- Richmond's total share of a maximum 2007-2009 Chevron refund of $73.2 million, including both components listed above, is $9.4 million.
- If Chevron wins the 2004-2006 court case, it could trigger an additional refund of $56 million. Richmond's share (based on the two components listed above) would be $7.2 million.
- Under the worst-case scenario and Chevron wins everything it wants in court and at the appeals board, and the cities win their lawsuit, the total hit to Richmond would be $102.2 million. (Based on Richmond paying 60 percent of the One Percent piece of the refund plus 48.5 percent of the debt service portion of the refund.)
Clearly, under the worst case scenario, Richmond would be bankrupted.
Millions hang in balance of Chevron assessment suit
By Lisa Vorderbrueggen
Contra Costa Times
Posted: 01/07/2012 08:09:11 PM PST
Updated: 01/08/2012 04:59:40 AM PST
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Tens of millions of dollars that Contra Costa public agencies already have spent is on the line in the latest round of the epic seven-year battle between the county and Chevron over property taxes on the oil giant's Richmond refinery.
After months of evidentiary hearings, the battling parties are expected to deliver closing arguments this week in the oil company's appeal of its 2007-09 refinery values, from which the county bases property taxes. The three-member county Assessment Appeals Board will likely issue a decision this spring.
If Chevron wins everything it wants, local public agencies would repay as much as $73 million in property tax revenues. A quirk in state law means all 143 public agencies in Contra Costa that benefit from property taxes will pay a portion of the refund, even if they received little benefit from Chevron's taxes.
If the county prevails, Chevron's tax burden remains the same.
The protracted debate is equal parts technical and political, with both sides arguing that the other misapplied appraisal methodology out of incompetence or in an attempt to skew the outcome.
Contra Costa Assessor Gus Kramer characterizes Chevron as a deep-pocketed bully trying to leverage the financially struggling county with expensive and time-consuming back-to-back appeals and court challenges.
"Negotiating with Chevron is like dealing with an abusive spouse," he said. "In public, it's all milk and honey and 'Let's try and work it out.' But as soon as they get behind closed doors, they beat us up unmercifully."
Kramer also has populist sentiment on his side, as few sympathize with the plight of a global company that reported record profits of $27 billion in the year ending in September. It's a figure Richmond Progressive Alliance member Mike Parker calls incontrovertible evidence of the company's pursuit of profits over community interests.
"Chevron has no reason to be asking for money back," he said. "It's another example of wealthy corporations getting their way by using their lawyers and getting more powerful and even richer."
The oil company vehemently rejects a link between the corporation's overall profits and the Richmond refinery value, likening it to slapping a number on the corner Starbucks based on the parent firm's earnings.
Chevron asserts that Kramer is targeting "Big Oil" to boost his standing with voters. In addition, it says his staff members consistently fail to produce the rationale behind the values they set for the 109-year-old refinery.
"We are sensitive to the community, but as a business, our ability to pay taxes, be the largest taxpayer in the county, provide jobs and attract investment (to the Richmond refinery) is based on something different from what we have today," Chevron spokesman Dean O'Hair said. "We are following the same appeal procedure, which is available to any property owner questioning the correctness of their property tax assessment."
The refinery pays about 1.35 percent of its assessed value in property taxes, or $35 million this year, the proceeds of which are distributed in a complex formula largely to Richmond and its schools, the county, transit, water, sewer and a handful of other local districts.
Assigning value to a petroleum refinery is complicated.
Basically, only land, buildings, equipment and other physical improvements are eligible for property taxation. To derive taxable value, assessors routinely discount a property's fair market value for nontaxable factors, such as equipment depreciation, business risk and raw material inventory.
Disputes are not uncommon.
All Contra Costa petroleum refineries have appealed their property tax values at one time or another in the past two decades.
Only Chevron, however, has pushed its dispute into the formal hearing process before the Assessment Appeals Board, with both sides arguing that the compromises offered were unreasonable.
The quarrel began in 2004, when the oil company filed the first of its eight annual appeals against what it called unwarranted increases.
That year, the assessor set the taxable refinery value at $2.4 billion -- up from $1.9 billion in 2003. Chevron countered with a value of $431 million.
The gap persisted, as did the financial stakes along with it.
If the county or the appeals board had adopted Chevron's proposed values in all of the past eight attempts rather than its own, the company would have cut its tax bill since 2004 by an estimated 64 percent, or $176 million, according to a Bay Area News Group analysis.
Chevron probably won't win everything it wants, of course. The appeals board and the courts could award the company a portion or none of what it seeks.
In the company's 2004-06 challenge, the appeals board dropped the refinery's taxable value about 20 percent and triggered an $18 million refund. However, the reassessment was still far higher than what the oil company argued was fair.
Chevron is challenging the appeals board decision in Superior Court in the 2004-06 case and could win further concessions.
The company's 2010-11 appeals, under which the company seeks millions of additional dollars in refunds, will not begin until the appeals board reaches a decision in the 2007-09 case.
In the challenge currently being fought, the biggest chunk of any refund, with a maximum level of $73 million, would come out of property tax dollars earmarked for schools.
But the state will absorb the schools' potential $30 million share. No Contra Costa school district will actually lose money because of a deal with the state over guaranteed minimum per-student funding levels.
Public agencies that pledged property tax revenues to repay bonds could lose as much as $16 million. Nearly half would come out of tax revenues set aside for repayment of Richmond's pension obligation bonds, forcing the city to find the money elsewhere. Contra Costa County general government could be forced to refund as much as $7.5 million.
It's a relatively small piece of the county's $1.2 billion annual budget. But after five successive years of cuts in everything from jobs to wages to public services, county leaders say the potential loss is the equivalent of salt on an open wound.
The nearly bankrupt Contra Costa Fire District could see an even bigger hole if saddled with up to a $4 million estimated share of a refund.
The district relies almost entirely on property taxes, which have plummeted along with housing values, and already the county expects to put a tax measure before voters in November to keep the fire district afloat.
Richmond is worried, too. Its refund share could reach $9.4 million out of a $121 million budget, based on how the county apportioned the 2004-06 refund.
But nearly two dozen Contra Costa public agencies filed a lawsuit challenging the county's refund formula. The outcome could shift onto Richmond roughly 60 percent of the first refund, plus the same percentage of any repayments mandated in subsequent appeals. It could devastate the city's budget.
Contra Costa Supervisor John Gioia hopes Chevron will forgo a refund and be more lenient on repayment terms if successful in its appeals.
"The board of supervisors cannot inject itself into the debate about the appropriate value for the refinery, but I have conveyed to Chevron that its appeal could have significant negative impacts at a time when we have already cut wages, jobs, benefits and services," said Gioia, whose district includes Richmond. "My hope is that we can reach a settlement that involves no refund."
There is precedent for a deal, although zero may be a tough sell.
In the 2004-06 refund, Chevron agreed to a two-year repayment plan and waived the interest. Oil company spokesman O'Hair said the company will work with the county and the other agencies to minimize the effect on services if a refund is ordered.
Contact Lisa Vorderbrueggen at 925-945-4773 or, IBAbuzz.com/politics. Follow her at Twitter.com/lvorderbrueggen.
Richmond working with Chevron to try to avoid devastation to budget
By Lisa Vorderbrueggen
Contra Costa Times
Posted: 01/07/2012 07:55:18 PM PST
Updated: 01/07/2012 09:41:16 PM PST
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Fearing financial devastation from multiple pending lawsuits and appeals over Chevron's refinery property taxes, Richmond is negotiating a pre-emptive side deal with the oil giant.
The city has no choice, Richmond Councilman Tom Butt said.
"Richmond didn't do anything wrong," he said. "We had nothing to do with assessing the refinery. But we took the taxes the county gave us, and we spent them on services. The money is gone. We can't get it back.
"And so, we have to do what Chevron is doing: We have to look out for ourselves."
Chevron is appealing its Richmond refinery taxable values set by the county assessor for 2007 through 2011 and filed a lawsuit further challenging the 2004-06 numbers. The company already won a partial reduction for the earlier years and an $18 million refund.
In a related case, 22 Contra Costa cities, fire, parks and sewer districts outside Richmond filed suit challenging the county's refund-distribution formula that spread the repayment among all 143 agencies in the county that received property taxes.
The agencies argue that because they did not benefit from Chevron's property taxes, they should not have to pay any of the refund. But a quirk in state law requires all public agencies countywide to share in paying property tax refunds even if they received a disproportionately far lower amount of the money in the first place.
Richmond receives about 60 percent of the property taxes Chevron pays each year but would only repay 2 percent of a refund.
If a judge sides with the cities and Chevron were to win everything it seeks in court and at the county appeals board for years 2004-09, Richmond could get hit with an estimated $102.5 million bill, the equivalent of 85 percent of its general fund budget this year. Chevron also has filed appeals for the refinery's 2010 and 2011 values, which could add millions more to the refund tally.
The final outcome may come nowhere close to such a cataclysmic number, but Richmond is preparing for the worst.
Among the options the city put on the table, Chevron could agree to pay back to Richmond all or a portion of any refund it may collect.
Chevron spokesman Dean O'Hair said the company will help craft a "soft landing" for all public agencies that may bear a share of a refund.
Such a deal could prove controversial.
Other cities may view the move as a dangerous precedent that could encourage large companies to contest their property values and redirect tax proceeds to their favorite public agencies.
Mike Parker, a vocal Chevron critic and member of the Richmond Progressive Alliance, opposes the idea, too.
"I'm not personally for a deal that lets Chevron off the hook because it has made a special deal for Richmond," he said. "Richmond should stand up with the rest of the county and demand that Chevron should pay its fair share."
Contact Lisa Vorderbrueggen at 925-945-4773, lvorderbrueggen@bayareanewsgroup.com, www.ibabuzz.com/politics or at Twitter.com/lvorderbrueggen.
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