Chip Johnson Pummels Chevron, Mayor Anderson
September 26, 2006
Big Oil is raking it in these days, and Chevron is one of the companies reaping the bounty of record profits. But most residents of Richmond, where one of the company's oil refineries is located, apparently aren't shareholders.
In fact, the way Chevron sees things, it's paying too much in taxes and the local government owes it money, if you can believe it.
The cause of the latest flap between the city and its No. 1 taxpayer is a dispute over the company's utility tax rate, for which the oil refinery received a special dispensation.
While Richmond residents pay a 10 percent user tax on utility services, Chevron, citing proprietary energy use information, agreed more than two decades ago to determine how much it pays -- and no more than about $14 million a year.
That agreement seems at odds with reality at a time when Chevron and its competitors in the oil industry are reporting the highest profits in the history of the corporate world. At its current profit rate, Chevron is on pace to surpass the record earnings of $14.1 billion it posted last year.
Within that context, the refinery's move in July to begin cutting its payments to the city by about $4.6 million a year seems petty and, well, cheap. But it certainly wouldn't be the first time.
Since the oil refinery set up shop in Richmond at the start of the 20th century, it has dictated the terms of the relationship, and the city, for the most part, has taken its marching orders and moved on.
In the past decade, Chevron has attempted to pressure city officials into lowering its property tax rate, lobbied City Council members to block safety ordinances and agreed to building inspections on site only after the city relented and allowed Chevron employees to conduct the inspections, a rule that was later changed.
The oil refinery has also appealed a Contra Costa County property tax decision. If the appeal is approved, Chevron would be allowed to reduce its property tax payments by about $5 million annually, City Councilman Tom Butt said. The refinery also wants the county to refund $1.7 million in property taxes from past years, he added.
The company has been able to flex its muscle and throw its weight around because the city's economy and, in a broader sense, county revenues, hang in the balance.
More than 30 percent of the city's general fund revenues come from the various taxes paid by the company, said Jim Goins, Richmond's finance director. In 1998, Chevron officials estimated that the company pumped more than $25 million into the city's economic base in the form of jobs and business-to-business sales.
That's why some Richmond politicians, including Mayor Irma Anderson, are now criticizing City Council members Butt and Gayle McLaughlin, who are behind the push to reconfigure the company's tax payments. Butt is seen as the public conscience of the council, and McLaughlin is one of two challengers to Anderson's re-election bid in November. Five others, including two incumbents, are running for three open seats on the council.
For her part, Anderson has said that the city determined more than a decade ago that it has no legal standing to demand the company hand over the energy calculations it used to determine its own tax liability. How's that for inspirational leadership?
In fact, attorneys for the company fired off a cease-and-desist letter when City Manager Bill Lindsay announced the payment reductions at a council meeting in order to discuss the issue in a public forum.
"Demand is hereby made that the city of Richmond, and each of its officers, employees, agents, representatives of council members, immediately cease and desist from any and all disclosure of Chevron's taxpayer or utility ratepayer information. If such unlawful activities do not cease, Chevron will vigorously assert all available remedies, including damages, punitive damages and injunctive relief," wrote Jeffrey Baird, an attorney at the law firm of Bewley, Lassleben & Miller, a Southern California law firm.
In other words, not only are Richmond city officials supposed to take what they get from Chevron, but if they complain about it publicly, the company will move to silence them.
In the light of day, Chevron officials say they are willing to "work" with the city on correcting the tax dispute, and a meeting is scheduled for Thursday.
Goins described Chevron as the city's economic anchor whose tax payments are critical to the city's budget planning.
"For them not to let us know (about the reduced payment) until the last minute and never provide us with projections about our future revenues, they were quite frankly being less than professional," he said. Goins will attend the meeting along with Chevron officials and their tax attorneys, he said.
While it's true that Chevron is the main provider of job opportunities and a regional employer that has contributed to the lives of Richmond and East Bay residents, it also takes a toll. The refinery operation is dangerous to its employees and the surrounding community, as witnessed by a huge fire there in 1999.
If the company's prosperity results in showering shareholders with weighty dividend checks, it seems only natural to wonder how a responsible and compassionate corporate community member would share its good fortunes with the broader community.
Taking money out of cash-strapped city's general fund revenues seems an odd way to say thank you.
Chip Johnson's column appears in the Chronicle on Tuesdays and Fridays. E-mail him at email@example.com.