As gasoline prices reach all-time highs and ChevronTexaco reports a 77% increase in profits, the owner of Richmond’s 3,000 acre refinery is pressing forward with an effort to have its property taxes cut by tens of millions of dollars, which would result in a reduction of revenue of millions of dollars to the City of Richmond, further exacerbating the City’s precariously balanced budget and resulting in further layoffs and reductions in service.

Following is a story from today’s Contra Costa Times:

REFINERIES APPEAL TO COUNTY FOR TAX RELIEF
Up to $33 million at stake if properties reassessed
By Peter Felsenfeld
CONTRA COSTA TIMES

Posted on Thu, Mar. 24, 2005

Peter Felsenfeld covers Contra Costa County. Reach him at 925-977-8506 or pfelsenfeld@cctimes.com.

Despite banner profits, Contra Costa's two largest oil refineries want the county to cut this year's property tax bills by about two-thirds.

If ChevronTexaco and Shell Oil Products succeed in appealing the annual assessment, the state, county, Martinez, Richmond and two school districts would receive up to $33 million less than what the county billed, according to the Contra Costa Assessor's Office.

Additionally, the ConocoPhillips refinery in Rodeo is seeking a $2.1 million reduction, a 23 percent cut.

The county's gasoline producing giants often contest their property taxes -- as do other companies -- but not to this degree, Contra Costa Assessor Gus Kramer said.

"In light of the price of gasoline and their profits, this is obscene," Kramer said. "It's truly shameless."

A five-member tribunal of finance and real estate experts appointed by the county Board of Supervisors will rule on the three companies' appeals, an expensive process that will drain county resources and could drag on for months. No hearing date has been set.

Richmond's Chevron refinery and the Shell facility near Martinez are Contra Costa's top two property tax payers, so any change in tax revenues could be significant for public programs that rely on the money. It's unclear how the Martinez Unified and West Contra Costa school districts, which receive about 50 cents of every property tax dollar from the two refineries, would fare if refunds are given at the end of a successful appeal process.

The challenge comes during a year in which county officials hiked the taxable value of both refinery operations by more than 20 percent, driven by profit margins on oil and gasoline and other factors. Contra Costa calculates refinery taxes using a complex formula that incorporates land values, new construction, machinery depreciation and oil prices.

When consultants for both companies did their own calculations, they came up with a far lower value for the properties, although Chevron spokesman Dean O'Hair declined to discuss the details Wednesday.

If the companies' figures are used, the tax bills would actually come to $23 million less than what they paid last year.

Given the discrepancy, O'Hair said, it pays to closely examine the competing methodologies.

"The way we understand whether the increase is reasonable or not is to go through the appeals process," O'Hair said. "This is a procedure any taxpayer might use."

Shell has long-standing questions about the way assessments are determined, company spokesman Steve Lesher said. For the past three years, the oil behemoth's property taxes had been fixed through a 1999 settlement with the county, but the deal's expiration has prompted a fresh challenge.

Additionally, Shell managers in 2003 shuttered a facility that manufactured lubricant oils used in heavy industry, devaluing that part of the property, Lesher said.

"We understand that part of our responsibility is to have a higher tax burden," Lesher said. "But it's in the public interest for everybody that the system is clear and fair."

The dispute unfolds during a high time for the nation's oil companies. The ChevronTexaco Corp. in 2004 earned more than $13 billion after taxes, a 77 percent increase over 2003, according to company filings. The corporate parents for ConocoPhillips and Shell last year enjoyed 77 percent and 42 percent gains over 2003, respectively.

Company officials declined to disclose profits for the Contra Costa refineries, though they described their performance as above average.

Supervisor Mark DeSaulnier of Concord said their decision to challenge the assessments demonstrates that the oil companies want the benefits of a California location without some of the expensive drawbacks.

"They (the refineries) want the operating costs of Louisiana or China," he said. "It's part of their corporate culture."

Defending the county's position won't come cheaply. The appeals process will likely cost the Assessor's Office about $1 million for attorneys and experts, Kramer said, none of which is recoverable -- even if the county prevails.