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Refineries Lose One

It is not often these days that government agencies stick up for the people, but the California State Board of Equalization was looking out for Richmond yesterday. See Tax Break For Chevron May Hit Home
March 7, 2006, and the following story.

You may also want to get on the email list with the State Board of Equalization to urge final adoption during the public comment period. See http://www.boe.ca.gov/.


Refiners lose tax ruling


Some California oil companies could face higher property tax bills in the future after the state Board of Equalization voted Tuesday to proceed with public hearings on a new rule for assessing 20 refineries currently valued at more than $30 billion.

By a 3-2 vote, the panel overrode a recommendation from its staff and decided to move forward with consideration of a rule sought by county assessors that has been under review since January 2005.

Contra Costa County Assessor Gus Kramer testified in favor of the rule. "Refineries should be looked at as a single economic unit just like the average homeowner is," he said.

But most factories and commercial facilities are allowed to depreciate investments in certain equipment in a way not available to homeowners, and refinery owners see no reason why they should be treated differently.

Tuesday's vote set in motion a process of formal public comment on the proposed rule.

At issue is how assessors weigh the continually rising value of the land on which the refineries sit against the value of the steel machinery and other fixtures that continually decline in value due to the wear and tear of converting oil into fuel.

Refinery owners want to maintain an existing rule that allows them to depreciate fixtures and also enjoy Proposition 13's limit on annual hikes in the value of their land. Assessors want to offset fixture depreciation with land appreciation, so long as the net gain doesn't violate Proposition 13's limit.

Other properties currently treated in the manner that assessors want to treat oil refineries include oil and gas wells, mines and geothermal fields.

The new rule could have a big impact locally. Four oil refineries account for about 5 percent of the taxable property in Contra Costa County, while in Solano County a lone refinery in Benicia accounts for about 2.5 percent of the tax roll. Owners of four of those refineries got 2004-05 tax bills for $66.3 million but have filed appeals seeking to cut their combined obligation by $38.6 million.

In Contra Costa County, pending appeals by three refinery owners -- Chevron, Shell and ConocoPhillips -- could force 146 public agencies to return as much as $70 million and reduce future revenue by as much as $30 million annually, according to estimates by the Contra Costa Administrator's Office. Successful appeals could result in the loss of a fire department ladder truck and lay-offs of library staff and fall heavily on Richmond, where Chevron is the largest taxpayer.