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City may owe Chevron $26 million

on October 22, 2010

Chevron Corp has filed a lawsuit seeking to reduce the amount of property tax it paid to Contra Costa County in 2004, 2005 and 2006. According to a memo from City Council member Tom Butt, the city could have to pay back up to $26 million in collected property taxes from the company’s Richmond refinery.

The haggle over how much the refinery’s land is worth has been going on for years.

Chevron had already appealed the initial appraisal, saying the assessor overvalued the property.

The oil company says the property was worth only $600 million in 2004, compared to the county’s finding of $2.5 billion. Based on the numbers put forth by the company, the refinery’s value went from that $600 million to $1.14 billion between 2004 and 2006, a jump of almost 100 percent.

The Assessment Appeals Board decided that the land was worth less than the county assessed but more than Chevron said it was worth during those years. It ordered the city to repay the company at least $12.6 million with interest in September 2009, but the repayment will be significantly higher than that. The county has repaid $6 million so far, and agreed to pay about $12 million more by August of next year.

The conflict appeared to have been settled. But the compromise did not sit well with Chevron.

In May the company took action against the county, saying the taxes Chevron paid still exceeded the amount it owed for the property. The county has filed a cross-complaint.

At the time of the first appeal, a spokesperson said the company must protect itself from bloated assessments if it wants to stay competitive in the oil market.

The oil giant is making similar disputes in places other than Richmond.

On Oct. 7 the Associated Press reported that the company sued Kern County, California, also over property taxes. The county raised taxes on a Bakersfield oil site as new wells were discovered on the land. The company says it should not have to pay new taxes on the oilfield; new drilling, its lawyers argue, merely maintains the property’s current value.

In that case, the $3.5 million dollars the company claimed it overpaid in taxes is probably less important than the legal precedent that would be set if the county went unchallenged—that property taxes are subject to change according to new profits being generated. A ruling in Chevron’s favor could prevent the issue from coming up again.

For the counties in both lawsuits, the money returned is a major depletion of projected funding. The West Contra Costa Unified School district gets a large portion of tax dollars from the refinery.

In 2009, when the Appeals Board was in the process of reviewing Chevron’s argument, city budget planners were already worried. “The impact on local government would be devastating if they lower all these assessments,” City Supervisor John Gioia told the Contra Costa Times.

Chevron has made an effort in recent years to build bridges with Richmond’s communities. The company said it contributed $3.4 million in Richmond projects last year, sponsoring school and youth organizations, libraries and other nonprofits.

The Richmond City Council has asked the city attorney to intervene in the lawsuit to support the county in defending the last estimate of the property value. All council members but Nat Bates voted in support of the city intervening to guard the funds.

Chevron has also appealed the assessment made by the Assessment Appeals Board for the taxes levied on the refinery’s property in the years 2007 through 2010, but hearing dates have not been set.

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