|Refinery Property Tax Reduction Impact
April 10, 2006
Based on information compiled by the Contra Costa Tax Assessor and published in today’s West County Times, the Chevron property tax appeal, if successful would cause Richmond to have “to return $1.7 million and reduce next year's budget by $5.2 million, which is the second-highest reduction in the county. The West Contra Costa school district would have to return $3.6 million and reduce next year's budget by $5 million, the third highest reduction.”
This would have an absolutely devastating effect on Richmond services. For example the annual cut exceeds the entire $3.4 million budget for the Richmond Library, which might spell the end of the Library forever. People just cannot understand why a corporation would move so aggressively to minimize taxes at a time when profits are spiraling higher than ever before. There is clearly a disconnect when oil profits are diverted from essential public services to higher compensation for management and shareholders.
Contra Costa faces property tax loss
Dozens of government agencies will suffer significant revenue cuts if three Contra Costa County oil refineries succeed in reducing their property taxes.
The three refineries, Chevron in Richmond, Shell in Martinez and ConocoPhillips in Rodeo, have filed separate appeals to a county assessment appeals board to reduce their property value by a combined $7 billion for the past two years.
That means 146 public agencies, including cities, schools, emergency services and hospitals, may have to return $70 million to the three refineries and shave $30 million a year from future budgets, according to a speculative March 10 budget summary prepared by the Contra Costa Administrator's Office.
It is not unusual for oil refineries to appeal their property taxes, said Contra Costa County Assessor Gus Kramer, who determines residential and business property values.
"Typically what happens is they file an appeal and then we make an appointment to sit down and talk about the value," he said. "But this time they are avoiding the conversation. When I suggested it, they just scattered and I haven't heard from them since."
Steve Lesher, a spokesman for the Shell Refiney, said Shell understands they have a obligation to the community but needs to better understand how their property taxes are assessed.
"Our property values have gone up even though we have reduced operations," he said. "We are hoping the appeals process will sort that out."
If the appeals board sided with the refineries in hearings, the county's general fund would take the largest losses, having to return $9.4 million and reduce future budgets by $5.3 million, according to the summary.
The Contra Costa County Fire Protection District, which serves seven cities including Walnut Creek, Concord and Lafayette, would have to pay back $4.8 million to the refineries and shave about $700,000 off future annual budgets.
The loss of $700,000 a year would mean giving up about one third of a fire station or one ladder truck, said fire Chief Keith Richter.
"It would be about the equivalent of closing one station for four months a year," Richter said.
East Bay Regional Parks would have to return $2 million to the refineries for property taxes collected over the last two years and cut future budgets by $1.1 million a year.
"It would have a severe impact because the services we provide are stretched thin right now," said General Manager Pat O'Brien. "If it happens, our goal would be to save jobs so we would cut down on supplies and defer new equipment purchases."
County libraries would have to return about $1 million and reduce future budgets by $319,000, according to the summary.
"We have not made any projections, but about 75 percent of our budget goes to staff and benefits, so that would probably the first place we would look to make cuts," said library Administrative Services Officer Susan Caldwell. "But because of growth in the county, we are looking (at) increased property taxes and a fairly stable budget."
The cuts would have the greatest negative effect on West County because the Chevron refinery is located in the midst of a dense, urban area; nearby public agencies are apportioned a larger share of the refinery's property tax revenue.
Richmond would have to return $1.7 million and reduce next year's budget by $5.2 million, which is the second-highest reduction in the county. The West Contra Costa school district would have to return $3.6 million and reduce next year's budget by $5 million, the third highest reduction.
Richmond, which is just gaining financial stability after a devastating $35 million budget deficit in 2004, is not in good shape to withstand such a huge loss. The city's two branch libraries are still closed, city roads are in terrible shape and the city's failing sewer system requires millions in upgrades.
School district spokesman Paul Ehara said he could not imagine what programs would be cut.
"It would be very, very difficult to carve out $5 million from a budget that is already pared down to the bone," Ehara said. "It would be agonizing if this were to happen."
Cuts at the county level would also affect West County with reductions in health care services, senior programs, the Sheriff's office and probation and fire departments, according to the summary.
It's ironic that the section of the county that has the greatest need will be the hardest hit, said Contra Costa County Supervisor John Gioia.
"This will have huge implications for local government in West County," he said. "Brookside (Doctors) Hospital in San Pablo stands to lose $312,000 a year, a loss that could mean the hospital will have to close."
The refineries appealed their property values to the three-member assessment appeals board, which is appointed by the Board of Supervisors. The board has not yet set a date for the hearings.
Chevron spokeswoman Camille Priselac said the county administrator's estimate of potential losses is speculative and she could not comment on it.
However, she pointed out that the Richmond refinery, which sits on 2,900 acres, is the county's largest taxpayer. In 2005, the refinery paid $33 million to the county in property taxes and another $16 million to Richmond in utility users and sales taxes.
"Chevron has always paid its taxes and we are looking forward to proceeding with the appeals process and working to establish a fair and accurate property value," she said.
In addition, Chevron contributed more than $1 million in 2005, mostly to Richmond agencies such as the library, youth jobs programs and police activities league.
But city and county officials said they don't understand why the three refineries are seeking to reduce their property taxes at the same time they are enjoying record profits.
"It just doesn't seem right that while Chevron is experiencing some of its largest profits ever, they are also trying to lower their tax base," Gioia said. "It doesn't send the right message."
In 2005, San Ramon-based Chevron Corporation increased its revenue 28 percent to $198 billion. Its net income rose 6 percent to $14.1 billion.
According to a Chevron report filed earlier this month, Chief Executive Dave O'Reilly received a 35 percent pay increase to $8.8 million, not including stock options, which could be worth another $38.4 million in 10 years.
Priselac said the two things are separate. "The refinery is one piece of Chevron," she said. "It's not helpful to connect the refinery's property value to overall corporate profit."
The appeals have so far cost Contra Costa County about $200,000 in staff time, Kramer said. Once the appeals process begins, preparation costs will skyrocket to about $1 million per refinery.
"No worries there," he said. "I've been saving for a rainy day."
Contact John Geluardi at 510-262-2787 or at email@example.com.
Estimated refunds from government agencies:
Contra Costa County General Fund $9.4 million
Contra Costa County Fire Prevention District $4.8 million
Contra Costa County Library $1 million
East Bay Regional Park District $2 million
West Contra Costa School District $ 3.6 million
City of Richmond $ 1.7 million