Chevron blames Richmond regulations, calls the county inept, as property tax hearing opens

The last time Chevron and Contra Costa County clashed over property taxes, the hearing took two years.

Assessment Board of Appeals members Clark Wallace, Arthur Walenta and James Giacoma. (photo by: Rachel Waldholz)

The question then was how much the refinery owed in taxes from 2004-2006. When the property tax appeals board finally issued a ruling — in September 2009, 22 months after opening statements – the opinion cited a law, Rule 474, which both sides agree wasn’t even on the books in 2004-2006. The case landed in court, where it remains.

And now, as of Monday, here we are again. Same parties. Same issues. What’s new are the dates: this time Chevron and the County are arguing over taxes owed by the refinery from 2007-2009.

Chevron says the refinery was worth about $1.8 billion in 2007, and $1.15 billion in 2009. The county says it was more like $3.4 billion and $3.1 billion. If the board rules with Chevron, the county – and its cities, school, water and fire districts — would have to refund nearly $60 million, according to county assessor Gus Kramer.

How did the two sides get so far apart? In a hearing Monday before the Assessment Appeals Board, Chevron called the assessment arbitrary and unprofessional, and argued that taxes, regulations and the bad economy had reduced the refinery’s value. The county, for its part, said that the refinery has been remarkably profitable, increasing its value and justifying the higher assessment.

Lawyers for the county Robin Thornton, John Makin and Kevin Lally. (photo by: Rachel Waldholz)

The appeals board met in the Board of Supervisors’ chambers in Martinez, where a minimal audience had divided itself by loyalty: on the left side of the aisle, Chevron’s entourage of lawyers, staff and witnesses, about a dozen strong, in dark suits. On the right, a group of stalwarts from the Richmond Progressive Alliance, including Richmond Mayor Gayle McLaughlin, armed with signs. RPA member Eduardo Martinez wielded a two-sided placard: when the county spoke, it read, “We Agree.” When Chevron spoke, it read, “Despicable, Disgusting, Obscene.”

Up on the dais sat the appeals board: chair Arthur Walenta — who Chevron tried to remove from the board this spring — Clark Wallace, and James Giacoma. Wallace also served on the board in the 2004-2006 appeal.

This time through the appeals process, everyone is hoping to be done by Christmas (the official goal is five weeks: Dec. 2). The morning events, though, didn’t seem to indicate anyone was in a particular hurry.

An hour was spent deciding who would go first, which, to be fair, actually matters: typically, the party that bears the burden of proof must present their case first, while the party presumed to be correct then responds. Chevron asked that the presumption be removed from the Assessor’s office, shifting the burden of proof.

“The presumption is given to someone who is presumed to have done their job correctly,” said Chevron lawyer Lawrence Hoenig, of the San Francisco firm Pillsbury Winthrop Shaw Pittman. “That’s not the case here.”

The board demurred; Chevron went first.

This was followed by an invitation to the board to visit the refinery, extended and politely declined (Frankly, I’d like to,” Wallace said, “But you have so many restrictions on it, I feel like my mind would be messed up even more.”) There was a tussle over whether three subpoenas to members of the Assessors’ office had in fact been served. Chevron expressed its desire that there be restrictions on audience signs. The board expressed its disinterest in meeting that desire.

Margaret Jordan and Mike Parker, of the Richmond Progressive Alliance, attended the hearing. (photo by: Rachel Waldholz)

Then there was the issue of confidentiality. Hoenig asked that the hearing protect one number in particular, a number of intense interest to many in the room: how much money Chevron’s Richmond refinery actually makes. He requested that the board clear out the public if the number was discussed.

“It’s impossible to do an opening statement without discussing how much money this refinery is making,” said the county’s lawyer Kevin Lally, of the firm Greenan, Peffer, Sallander and Lally. But he agreed to close the courtroom when the number was mentioned.

“I will refer to it as the number that shall not be named,” Lally said.

Accordingly, each time the talk veered too close to specifics, the members of the audience who were neither lawyers nor witnesses trooped out to sit on folding chairs in the hall, where they joined portraits of the five county supervisors and a banner advertising Creek and Channel Safety Awareness Month (“Stay Out! Stay Alive!”).

At 11:33 a.m., Hoenig announced that he was about ready to give his opening statement.

Hoenig argued that the county had assigned the assessed values arbitrarily, without following state standards for appraisal or offering any evidence. He also argued that the financial crisis reduced the refinery’s value in 2007-2009, along with new federal and state environmental regulations like the Obama administration’s increased fuel standards for cars and California’s climate change legislation, which Hoenig said hit the fuel industry particularly hard.

And, Hoenig said, “This refinery is located in Richmond. There are difficulties in Richmond.”

Half a dozen representatives of those “difficulties” were sitting in the audience, as Hoenig suggested when he cited the burden of Richmond’s utility user’s tax, business license fee and Measure T, all three priorities of the RPA (measure T has since been overturned). City taxes, regulations and permitting procedures put the refinery at a disadvantage against even local competitors, Hoenig said: “There are four refineries in this county. Only one is located in Richmond.”

The city representatives saw it differently. “I just thought it was a blatant example of big money interest punishing the community in which it is operating,” said mayoral aide Marilyn Langlois, when the Board recessed for lunch.

In the afternoon, it was Lally’s turn. At this point, five hours in, Walenta declared suit jackets optional, to sighs of relief and general disrobing.

Lally argued that Chevron makes a lot of money from the refinery, and that makes the refinery incredibly valuable.

Chevron attorney Lawrence Hoenig listens as county attorney Kevin Lally gives his opening statement. (photo by: Rachel Waldholz)

“Since I’m not allowed to use the number, it is a refinery that spins off buckets of money,” Lally said — “That’s confidential,” broke in board member Wallace, to chuckles — “And these buckets are pretty big,” Lally said.

And at that point, the audience was booted again, back to the hallway. Supervisors. Folding chairs. Channel safety.

Before she left, Mayor McLaughlin declared herself bewildered by Chevron’s appeal. “The overall situation here is we know that Chevron has record profits and can clearly afford to pay the assessed taxes,” McLaughlin said. “No one is going to lose their jobs if Chevron loses. If the county loses … people will be laid off. Residents will suffer.”

When she recently toured the refinery, McLaughlin said, “I said, ‘I ask you not to bring forward this appeal. I ask you to withdraw it.’”

Chevron spokesperson Dean O’Hair said the county’s assessment jumped from $1.9 billion in 2003 to $3.5 billion in 2004, and that the refinery just wanted consistency. “We want to have an understanding of the process going forward so we have some stability and predictability in how the refinery is valued,” O’Hair said.

It should be of interest to the Richmond community that the refinery be treated competitively, so that it can continue to be an economic engine in the city of Richmond,” O’Hair said. “The other refineries are not being treated as this refinery is.”

Each side will have 60 hours to present its case and call witnesses. If the two sides cannot reach agreement on how the refinery is assessed, the whole show could repeat itself every three years until they do (the board limits hearings to three years at a time). Chevron has already appealed its 2010 taxes and is considering an appeal of its 2011 taxes.

Only five more weeks to go?