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Interest Revives in Utility User Tax Reform
November 23, 2001
With the city manager predicting a projected FY 2003-204 deficit of $4,636,823, there is revived interest in determining if the City is losing money over a special utility user tax category established to benefit only Chevron. An article on this was published in the West County Times on November 21 and is reproduced at the end of this summary.

While all other utility users in Richmond simply pay 8% of utility bill amounts, Chevron continues to take advantage of an alternate tax based on an arbitrary fixed amount. Frequently referred to as a "cap," the tax computed for Chevron is actually an alternate method that Chevron must agree to at the beginning of each tax year in order to take advantage of it. Because the alternate tax is a function of the previous year's alternate tax and changes in the Consumer Price Index, the amount of the alternate tax is known before the beginning of the tax year.

What remains controversial is whether or not Chevron is benefiting economically from the arrangement and whether or not the City is losing potential revenue. Since the City maintains that Chevron's utility utilization, including co-generation, is not public information, it is impossible to know with certainty whether or not Chevron would be paying a higher or lower tax without the alternative tax opportunity.

I have been one of the few vocal critics of the alternative tax since 1994, when information revealed in an environmental impact report about Chevron's internal energy use became public, thus providing the first hint that the alternative tax may be a fiscal disaster for the City and an economic boon to Chevron. Chevron has maintained, over the years, that they actually pay more under the alternative tax but prefer the arrangement because it enables them to preserve their energy utilization as a trade secret. There is evidence, however, that Chevron's alleged altruism is a sham. Because of he revival of interest in the utility user tax is a way of enhancing revenue and avoiding a deficit, several City Council members are taking a new look at it.

I tried in 1997 and 2000 to have the ordinance amended to modify or eliminate Chevron's alternative tax, but I was unable to get the support of a City Council majority.

Unfortunately, a change in the tax formula will now take a 67% vote of the people, since proposition 218 was enacted since the last adjustment was made to the utility user tax by the City Council in 1994.

For those who may be interested in more detailed information about the history of the utility user tax, how the alternate tax is calculated, the evidence that Chevron is receiving a tax break denied to all other taxpayers, and the efforts made to change this since 1994 can download the attached files.

Consumer Price Index data for gas and electricity can be obtained from the Internet at http://www.bls.gov/data/ , then clicking on CPI-All Urban Consumers (Current Series). Select the location and type of index to be generated.

Published Wednesday, November 21, 2001
Chevron may lose utility tax perk

RICHMOND -- Faced with an increasingly dismal short-term economic outlook, city leaders may soon eliminate a controversial tax perk enjoyed by Chevron.

Under an ordinance passed in 1994, the company pays a flat rate on its utility users tax, which applies to gas, electricity and video and telecommunications services. Critics of the ordinance have long argued it exempts Chevron from paying the city millions in tax revenue.

Chevron has maintained that the arrangement works out financially for Richmond and allows the company to protect trade secrets that could be revealed through its utility bills.

At a study session Tuesday night, Gary Bell, chairman of the city's standing Finance & Economic Development Committee, announced a projected budget deficit of $4.6 million for fiscal year 2002-03. The city's Financial Services Agency projected a $2.4 million surplus for the same period in June.

With federal grants decreasing and city revenue sources drying up, the time could be right to re-evaluate Chevron's tax payments, Bell said.