El Segundo, Chevron at odds over oil company's taxes
El Segundo wants to hike taxes on the Chevron refinery, but the oil company — and many residents — are resisting.
The Chevron refinery looms in the background along El Segundo's Richmond Street. (Allen J. Schaben / Los Angeles Times / January 10, 2012) |
By Jeff Gottlieb, Los Angeles Times
January 28, 2012
Doug Willmore wasn't on the job long as El Segundo's city manager before discovering just how deep the town's loyalty runs to the oil giant that put it on the map.
After the city began discussing a big tax increase for the Chevron oil refinery a few months ago, he walked out of City Hall to find a note on the windshield of his car.
"This is a Chevron town and we owe our existence to them and should be grateful. Get that through your head," it read.
The note ended: "Beat it!!!!!!!"
After decades of mostly prosperous times for the city and the oil company, El Segundo is having a falling-out with its longtime benefactor.
A majority of the City Council thinks Chevron should pay an additional $10 million a year in taxes — about three times what it pays now. But the tax push has stirred strong emotions in the town, which was formed a century ago when Chevron built its second refinery there. El Segundo ("The Second One" in Spanish) gets its name from the refinery that overlooks the Pacific Ocean and stretches more than a mile inland.
Many residents remain loyal to Chevron and feel the proposed tax hike is unfair.
The dispute has roiled politics in the small upscale city south of Los Angeles International Airport known for a downtown district lined with mom-and-pop shops, good schools, cool ocean breezes and the rumble of jetliners. Although only 17,000 people live in the city, El Segundo's population swells to 80,000 on weekdays as workers roll into town for jobs at Northrop Grumman, DirecTV, Raytheon, Mattel, Boeing and Chevron.
The tax battle began late last year when Mayor Eric Busch asked Willmore, the former chief executive of Salt Lake County in Utah, to look into an acreage tax Chevron pays the city.
El Segundo enacted the tax on refineries and chemical plants in the 1980s. It receives about $5 million a year from Chevron in various taxes, including the acreage tax and the city's cut of the property tax.
But city officials found that other cities with refineries generated significantly more taxes: Nearby Torrance got $9.8 million from the Exxon Mobil refinery, Carson got $10.2 million from the BP refinery and Richmond, in Northern California, got $15.4 million from its Chevron refinery.
"You look at it and it kind of shocks you," Willmore said. "We could double the taxes they pay to the city of El Segundo, and Chevron would still have lowest tax rate [of any oil refinery] in the state."
He also discovered that the town's other major employers were paying about five times more per acre in various taxes than the oil company. The 951-acre refinery encompasses 36% of the commercial land in the city but contributes just 10% of the city's commercial tax revenue, he said.
Armed with the data, the City Council began discussing a tax hike in December.
Chevron officials said they felt blindsided.
"We would have hoped when this issue surfaced they would have first come talk to us and said, 'Let's work on a constructive path forward,'" said Rod Spackman, Chevron's manager of policy, government and public affairs for the L.A. Basin. "Instead they seemed to do something in a rushed and hurried way."
Spackman told the council that Chevron actually pays the city $7.5 million per year when a reclaimed water fee is figured in. Chevron makes about $500,000 a year in charitable donations in the city.
As news of the tax proposal spread, Chevron swung into action.
Former Mayor Kelly McDowell said he received two calls from a Chevron spokesperson "sobbing and in tears asking me to help out. Chevron is shocked and amazed."
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