If El Segundo is the home of Chevron’s second California refinery, Richmond must be El Primero. El Segundo is often held up as the ultimate business friendly town; however, some of the same kind of tax disputes that Richmond and Chevron have argued and ultimately settled may have gotten the city manager fired.

Chevron's influence in El Segundo comes under increased scrutiny

By Kristin S. Agostoni Staff Writer
Posted:   02/20/2012 07:40:25 PM PST
Updated:   02/21/2012 03:22:25 PM PST
When El Segundo leaders last year were deciding whether to pursue a nearly ninefold tax hike on the Chevron oil refinery, they looked out to a City Council chambers filled with company supporters.
Employees and their families, school leaders and former elected officials argued the proposed increase to the refinery's acreage tax was ill-timed and even wrong.
Whether they had any sway is difficult to know, but the council weeks later dropped the plan to put the hike on the April municipal ballot and instead entered into negotiations with Chevron. Those talks could win El Segundo millions of dollars more from the oil company if they go the city's way.
But as both sides come to the table, Chevron's influence in the town it helped found 100 years ago has come under scrutiny.
For one, the now-fired city manager who brought the tax plan to the council - Doug Willmore - said he believes his ouster was retaliatory. His attorney plans to file a claim challenging the council's 3-2 vote on Feb. 9 to dismiss him.
And old records circulating around City Hall - some of which were released last week to the media - have raised suspicions about a deal city officials struck with Chevron 18 years ago to settle a tax dispute. That agreement came after an auditing firm suggested the refinery owed El Segundo several million dollars in unpaid taxes. The city ultimately suspended the firm's work, and the resulting settlement with Chevron yielded a couple hundred thousand dollars that were turned over to the auditor.
"We were kind of always led to believe that Chevron was so generous to this town," said resident Neal Boushell, a father of three who supported Willmore's recent efforts to increase the acreage tax.
As he sees it, Chevron - which reported net income of $5.12 billion in the last quarter of 2011 - could stand to pay more to support the city's infrastructure and other expenses.
"We're all asked here in El Segundo to pony up money for our education foundation," Boushell said. "I didn't run into a single person who thought raising Chevron's taxes was bad."
But in El Segundo, a town that prides itself on being business-friendly and often resists tax increases, Willmore's proposal caused a stir.
Willmore and the staff had suggested hiking the acreage tax paid by refineries and chemical manufacturing businesses from $1,382 to $12,146 per acre, which would have brought an extra $10.2 million annually into city coffers.
Chevron spans 951 acres - about one-third of El Segundo's 2,957 acres of commercial property - yet generates only about 10 percent of its general fund revenue, the staff said.
Willmore found that to be "a pretty serious inequity" when comparing Chevron's taxes to revenues generated by other local businesses. The staff also looked at other South Bay cities with refineries; both Torrance and Carson brought in more money even though refineries in those cities occupy slightly smaller footprints, the report stated.
Just before the council decided Jan. 13 to scrap the ballot tax measure, Mayor Eric Busch and refinery General Manager Frank Semancik announced they'd agreed to negotiate. They didn't mention specifics - saying the details would be worked out among members of a newly formed committee. But according to an email Willmore sent that week to city department heads, the deal could involve a payment of $5 million per year extra for 15 years.
Considering that amount of money, Willmore's attorney, Bradley Gage, questions the firing.
"I think the interesting aspect in this case is, what influence does Chevron have?" Gage asked. "Seventy-five million, I believe, is a powerful incentive for a company to get involved in local politics."
Rod Spackman, Chevron's government and public affairs manager, denied the company had any role in Willmore's departure - a move that came with little explanation from the town's elected leaders because of personnel privacy issues. (However, at least one official has said the acreage tax hike - supported by three council members, one of whom voted to fire Willmore - is unrelated.)
"Any suggestion by any individual that we would ever attempt to bring in any way pressure to the city about a personnel decision ... is simply not true," Spackman said. "We just simply would never do that. We would never do anything along the lines of what you've suggested."
Moreover, Spackman said, what's gotten lost is the fact that Chevron "came to the table" to talk about the acreage tax. "What we're trying to get to is a process with the city that has a constructive outcome to it," he said.
This isn't the first time Chevron and El Segundo have negotiated over taxes, as the old documents show.
In 1994, three years after an auditing firm suggested Chevron was deficient in paying $7.5 million in taxes, including $3.4 million in natural gas taxes, the city and the oil company agreed to settle for a fraction of that amount - $800,000, minus a $600,000 credit the company received against its business tax license.
The remaining $200,000 from the deal went to the auditing firm - then called Municipal Resource Consultants - which counted on receiving 25 percent of what it recovered for El Segundo.
And Chevron had filed a claim arguing that - contrary to what the auditing firm determined - the refinery was owed more than $500,000.
According to the settlement papers, the city and Chevron had disagreed on how the town's tax ordinance applied to Chevron's gas usage. Chevron argued, in part, that the company didn't have to pay on both the gas it consumes and the electricity generated as part of its co-generation process, characterizing the arrangement as double taxation.
Don Maynor, a Bay Area attorney who worked on audits with Municipal Resource Consultants, said he remembers when the company was told "to suspend the activity" in El Segundo after its preliminary findings were presented.
"As far as we knew, there was a possibility of a gross underpayment of taxes," Maynor said. "We were basically at step one."
A second part of the settlement set the utility-users' tax on natural gas at $150,000 - a number subject to an annual Consumer Price Index adjustment. (City documents indicate Chevron's 2011 gas payment was about $222,000.)
Maynor said the rate seems to be "a small amount compared to other cities."
"We work with a lot of cities, and big utility companies often have an influence with city councils," he said. "They have special relationships with cities, and how that influence comes out, I don't know."
Former Councilman Mike Robbins, who served at the time with Councilman Carl Jacobson, said he remembers the council ultimately agreeing with Chevron's position on the utility tax. Robbins said he believes it's unfair double taxation to charge Chevron for the same energy that it converts from one form to another twice.
"The City Council looked that over and this became an item of possible litigation," Robbins said.
"There is a basic concept of fairness," he said. "In this case, it was clearly a case of unfair, double taxation. Either way, we were going to get sued, either by (the auditing firm) or Chevron or both."
And Robbins said the firm "had a pretty good incentive to go looking for uncollected tax revenue," given it would earn a percentage of it.
"We really did not want El Segundo to be viewed as a city that was hostile toward business."
Jacobson, in a brief phone call, said he wouldn't want to draw conclusions about documents he hasn't seen in 20 years.
It's unclear what Chevron's utility-users' tax bill for natural gas would amount to today if it were based on actual usage instead of the $150,000 base.
The city staff had been trying to get an answer to that question, the email correspondence shows. One consultant estimated the annual bill could be at least $654,000.
Today, Chevron pays El Segundo about $1.9 million annually in utility-users' taxes on electricity, telecommunications and natural gas, Spackman said. Overall, annual refinery revenues are nearly $5 million.
The numbers pale in comparison to what the company pays in Richmond, Calif., where the utility-users' tax is 10 percent. (El Segundo's rate is 3 percent).
In 2010, Chevron and Richmond officials reached a deal to settle tax disputes and drop two competing ballot measures. Chevron was to continue paying roughly the same utility-users' tax bill, then about $20 million a year, and an additional $114 million in taxes spread out over 15 years, the San Francisco Chronicle reported.
But Chevron's Spackman said it's unfair to draw comparisons between the two cities.
"The taxing structure is different. The rate that you pay is different," he said, adding: "We have an acreage tax that nobody else in El Segundo has."
But for all the talk about taxes and perceived inequities, Chevron, for some, is more than a source of revenue for El Segundo.
Former Councilman Alan West, who was in office when the 1994 gas tax settlement was reached, said he's always seen Chevron as a community partner.
West recalled calling the company once to see if he could pick up a piece of used oil pipe for a flag he wanted to fly in front of his auto repair business; the next day, he said, a Chevron truck pulled up with a collection of them. When local leaders wanted to build a park, West recalled, "They said, `How can we help?'
"In my opinion, they were and are the community. They started it, and they developed the streets and the houses for their employees to live in," he said. "To me, everything you want to hear about El Segundo incorporates Chevron oil."
kristin.agostoni@dailybreeze.com
Follow Kristin Agostoni on Twitter at http://twitter.com/kagostoni

City manager who proposed refinery tax hike fired

The Associated Press
Posted:   02/15/2012 09:37:47 AM PST

EL SEGUNDO, Calif.—El Segundo's city manager has been fired after proposing an increase in Chevron oil refinery taxes.
The City Council voted 3-2 in closed session last week to fire Doug Willmore, the coastal city's top administrator who was paid $218,000 a year. He's entitled to half his annual salary as severance.
A reason for the decision hasn't been disclosed.
Willmore says he believes it's related to his staff proposal to significantly increase the acreage tax paid by the 840-acre Chevron oil refinery.
The tax hike proposal was introduced in December and resulted in a strong reaction from Chevron, which was known as Standard Oil of California when it bought the property six years before El Segundo's incorporation in 1971.
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Information from: Daily Breeze, http://www.dailybreeze.com

El Segundo city manager fired after questioning Chevron’s tax contributions to the city

Feb. 15, 2012 | By Molly Peterson | KPCC
8

This is the sun setting over the Chevron refinery in El Segundo
City Council members have voted to remove El Segundo’s city manager two months after he proposed a tax rate hike for the oil refinery that gave the city its name.

Back when Chevron was still named Standard Oil, the company established its second West Coast refinery in an area later incorporated as El Segundo.
Last year the town’s mayor directed city manager Doug Willmore to look into the acreage tax Chevron pays the city. Willmore reported back that while Chevron’s refinery occupies 36 percent of El Segundo’s commercial acreage, it provides only 10 percent of general fund revenue.
Smaller refineries in Torrance and Carson pay more tax to their host cities, and double what Chevron pays per acre. Willmore pointed out that El Segundo is short on infrastructure funds and money for long term projects.
But now city leaders have voted by a 3-2 margin to fire Willmore about 10 months after he took the job.
Willmore had won praise for attracting business and positive media coverage to the city. Now he suspects retaliation.
His lawyer has told reporters that the former city manager may be protected under whistleblower regulations. City leaders have offered no public explanation for their actions.

El Segundo fires manager who sought higher taxes on Chevron

El Segundo gave Doug Willmore no reason for his termination but he suspects retaliation.

• 

The Chevron refinery in El Segundo; the city manager was fired after a failed… (Mel Melcon / Los Angeles Times)
February 15, 2012|By Jeff Gottlieb, Los Angeles Times
A few months after he was hired as El Segundo's city manager, Doug Willmore learned that his efforts to force Chevron, the town's oldest employer, to pay higher taxes had made him some enemies.
He found a note on his car reminding him this was a Chevron town. "Beat it," the note concluded.
Last week, a divided City Council took that advice and fired him, less than 10 months after appointing him to the job.
Willmore said that the council gave no reason for his dismissal but that he felt the council had fired him "in retaliation about Chevron."
Willmore is entitled to half his annual salary of $218,000 as severance, if he signs an agreement not to sue. On Tuesday, his attorney, Bradley Gage, said he was about to file a claim against the city, the first step toward a lawsuit.
Late last year, Mayor Eric Busch asked Willmore to examine the acreage tax Chevron paid on its refinery, the largest in the state. Willmore found that for decades Chevron had paid millions of dollars less in taxes than did other refineries in the state.
After taking preliminary steps to place a measure on the ballot to increase Chevron's tax, supporters didn't have the four council votes they needed to send it to voters. Instead, the council and Chevron agreed to negotiate.
Rod Spackman, Chevron's manager of policy, government and public affairs for the L.A. Basin, denied that the oil company was involved in Willmore's ouster.
"That kind of suggestion is simply untrue," he said.
Councilman Carl Jacobson, one of three council members who voted to fire Willmore, said the city manager's dismissal was not related to Chevron.
Councilman Don Brann, who supported increased taxes on Chevron but voted to get rid of Willmore, said he had other reasons for wanting the administrator fired. Because of the potential lawsuit, he declined to go into details. The Chevron issue, he said, "may have been the final straw" for some of his colleagues.
He gave Willmore credit for attracting businesses to town: "He really had a lot of entrepreneurial ideas I endorse."
Busch declined to comment because it was a personnel issue.
Willmore's relations with Chevron got off to a rocky start after he arrived in April from Utah, where he had been chief executive of Salt Lake County.
Willmore told The Times several weeks ago that during their first meeting, he asked Spackman if the company would release deed restrictions on some properties it had sold. He said Spackman told him, "Mind your own business."

El Segundo Council Fires City Manager; Controversy over Chevron Tax to Blame?

California City News
El Segundo City Manager Doug Willmore was recently fired and while no official reason was provided for his dismissal, Willmore commented he believes a staff proposal to increase the acreage tax paid by the 840-acre Chevron oil refinery is the real reason he was shown the door, and at least one councilman is quoted as saying it “may have been the final straw.”

The city receives about $5 million a year in various taxes from the oil giant; however, when Willmore did a little research, he found that even if Chevron doubled the taxes it paid to the city, then it would still have the lowest tax rate of any oil refinery in the state. In addition, many other companies in the region pay a lot more per acre in various taxes when compared to Chevron. So the push for a tax increase began in December, which ruffled the feathers of Chevron officials. An effort to put the issue to a vote eventually went nowhere with little support from the council, so it was instead agreed that negotiations would take place between the city and Chevron. 

The Post Gazette reports:
“Former Mayor Kelly McDowell said he received two calls from a Chevron representative ‘sobbing and in tears asking me to help out. Chevron is shocked and amazed.’ Mr. McDowell said he later received a 90-minute call from Mayor Busch, asking Mr. McDowell to testify in favor of putting the proposed tax increase up for a citywide vote.”
City Manager Willmore was only the job for about 10 months but the tax issue certainly provoked backlash. In fact, at one point Willmore found a note on his car that read “This is a Chevron town, and we owe our existence to them and should be grateful. Get that through your head. Beat it!!!!!"

Ultimately, the Council voted 3-2 in closed session to fire Willmore. The Times has reported that he will file a claim against the city, which is the first step toward a lawsuit. Willmore is the former chief administrative officer of Salt Lake County, Utah.