Chevron Sticks it to
Richmond Once Again, Then Twists the Knife
September 08, 2006
At a time when the company and its shareholders are enjoying skyrocketing profits paid for by oppressed motorists at the pump, Chevron has thrown down the gauntlet on the utility user tax, and we hope the City of Richmond has the intestinal fortitude to respond quickly and forcefully. Contrary to what Chevron Refinery spokeswoman is quoted as saying (and Mayor Anderson agreeing) in the West County Times article below, the City of Richmond does have the right to examine whatever records are necessary to understand how Chevron has computed its tax.
(a) It shall be the duty of every person required to collect or self-collect and remit to the City any tax imposed by this chapter to keep and preserve, for a period of three years, all records as may be necessary to determine the amount of such tax as such person may have been liable for the collection of and remittance to the Tax Administrator, which records the Tax Administrator shall have the right to inspect at all reasonable times.
The way the utility user tax ordinance is written, Chevron has a choice of two ways to pay the tax, either a lump sum based on an arbitrary formula (commonly called ďthe capĒ) or 10% of its energy costs like every other taxpayer in Richmond. Chevron has previously selected the lump sum basis, and he City has agreed to accept it. This year, Chevron chose the conventional method, which the City has no alternative other than to accept.
What makes Chevronís situation challenging is that, unlike you and me, they provide part of their own energy through cogeneration and use of fuels for heating and processing. For the rest of us, our utility suppliers (i.e., PG & E, ATT, etc) simply pay the tax to Richmond on our behalf based on our utility bills. The utility user tax ordinance has detailed formulas for calculating tax based on non-utility supplied fuel use and cogeneration, but the only way the City can verify the accuracy of Chevronís numbers is by reviewing detailed records. Presumably, Chevron also uses some utilities provided by conventional utility companies, and additional payments may come in from those sources.
Meanwhile, there is going to be some belt-tightening in Richmond to the tune of maybe $4 million to $5 million a year. Some of this could be made up through the proposed Business License ordinance revisions on the November ballot. The Richmond Chamber of Commerce, of which Chevron is a powerful member, urges defeat of the measure, saying Richmond doesnít have an income problem, only a spending problem.
Whether itís fewer police, fewer streets repaired or fewer programs for restless young people, whoever gets hit by that $4 million shortfall can thank their local refinery and local chamber of commerce for it.
Posted on Fri, Sep. 08, 2006
The Chevron refinery's new method of calculating its utility tax could cost Richmond $4.6 million in annual revenue.
For 20 years, the refinery has calculated its utility tax payments by using a "cap rate," or flat rate method, which provided the city with reliable monthly installments of about $1.2 million. Utility taxes are typically calculated according to the actual usage of electricity, gas, water and telephone services, which fluctuates from one month to the next.
Two months ago, the refinery switched to the actual method to calculate its payment. The refinery's first installment under the new method, for the month of July, was $390,000 less than last year's.
The city does not know whether the new, reduced payment is accurate because the refinery, which generates more than 50 percent of its own energy, does not release energy production or usage information, said Richmond Finance Director Jim Goins.
"We received their July payment by wire transfer last week, and it was unaccompanied by any documentation," Goins said. "This is a brand-new experience, and I don't want to speculate what it means. As soon as we get their records, we can give a response."
But that's not likely to happen anytime soon, said Chevron refinery spokeswoman Camille Priselac.
"The city can't audit our energy usage because of business confidentiality," she said. "We don't disclose information about our energy production."
Richmond, which is still recovering from a $35 million budget crisis in 2004, will not feel short-term budgetary pain, Goins said.
"We have been able to set aside $1.5 million in reserves, so it's not going to cripple the city this year," he said. "But over the course of three years, that's $12 million, a significant loss of revenue that will hurt a lot of programs such as capital improvements, road maintenance and other projects."
Goins said it's too early to tell whether city jobs hang in the balance.
For 20 years, Chevron was the only business in Richmond to calculate its utility tax using the cap rate. Some elected officials criticized the special arrangement and speculated it allowed Chevron to underpay the tax.
"This has continued to be made into a political issue by some," Priselac said. "We just hope that by paying the tax on the actual basis, the city can focus on other issues, such as public safety."
City Councilwoman Gayle McLaughlin, a cap-rate critic, said the refinery will have to open its utility usage books for inspection even if it requires legal action.
"That confidentiality clause is something that has been disputed by many," she said. "Corporate responsibility is essential to Richmond and especially for the Chevron refinery, which has such a huge impact on the city in terms of air quality and public health."
The Chevron refinery emitted 457,000 pounds of toxic air pollutants in 2004, according to the Bay Area Air Quality Management District.
Chevron's critics have finally gotten their wish at the expense of the city, Mayor Irma Anderson said.
"McLaughlin and other council members had doubts that previous councils had done their due diligence to ascertain that the cap rate was best for the city," she said. "I've been on the council since 1993, and we were told by our former city attorney that legally Chevron never had to give us the real facts."
McLaughlin remains dubious of Chevron's legal standing.
"This is a door that's begun to open after being closed for 20 years," she said. "It's bound to squeak and make rusty sounds."