SAN FRANCISCO BAY AREA
MAY 6, 2010
Tensions Well Up in a Company
Competing Richmond Ballot Measures Aim to Set How Much Chevron,
the City's Biggest Employer, Should Pay in Taxes
By Bobby White
RICHMOND—Chevron Corp. has long had a complicated
relationship with this East Bay city. The oil company's huge
refinery provides jobs and tax revenue, but the city contends
that Chevron hasn't always paid its fair share.
Now, the city
and the oil company are taking their dispute over tax obligations
to Richmond voters with competing initiatives on November's
The measures center on utility
taxes, levies on energy consumption that are assessed in many
cities in California and elsewhere around the U.S. Richmond
officials say Chevron should pay more in utility taxes than
it has in past years, while the company has hinted it might
shutter its operations in the city if it has to pay more.
city council last May proposed a measure to eliminate a provision
in a law that created a unique system for calculating Chevron's
utility tax. While the city assesses a 10% tax on energy use
for most residents and businesses, Chevron's tax liability
is based on a complex formula that ties a fixed sum to inflation,
but doesn't take into account the company's actual energy consumption.
If Richmond's measure passes,
Chevron says it could end up paying nearly $30 million annually
in local utility taxes, about $10 million more than what it
expects to pay for the fiscal year ending in June.
month, Chevron announced a competing ballot initiative to cap
its annual utility-tax payments at $20 million. The measure
also proposes cutting in half the taxes that residents pay
for their utilities, which currently amounts to an average
of about $200 to $250 annually.
The dueling ballot measures
underline the fragile state of affairs between Richmond and
Chevron. Both sides have much at stake in maintaining their
relationship. Chevron employs about 2,700 people in this city
of about 100,000, making it Richmond's largest private employer,
according to the city's finance department. In a city with
19% unemployment, Chevron also is the city's single-biggest
tax contributor, putting in 30% to 50% of Richmond's $132 million
general fund budget last year.
Meanwhile, Chevron's Richmond
250,000 barrel-a-day refinery, which it has operated for more
than 100 years, is the company's second-largest in California
and third-largest nationwide, according to Argus Research.
Tom Butt, a Richmond city council
member, says Chevron's ballot measure could lead to the city
losing $8 million to $10 million from its general fund budget. "If that's the kind of disdain Chevron has
for the city, then it has to be challenged," he says.
Mike Coyle, general manager of
Chevron's Richmond refinery, says the oil company already pays
some of the highest corporate taxes in California. Richmond's
ballot measure would put the company at a competitive disadvantage,
he adds, since refineries in nearby Martinez and Benicia either
don't pay or pay lower utility taxes than in Richmond.
needs to be an environment in the city that welcomes business,
not discourages it from operating," Mr. Coyle says.
ballot measures aren't the first time that Richmond and Chevron
have disagreed. Over the years, the two have sparred over issues
such as a business-license fee, air pollution and a refinery
But the rival ballot initiatives
are making for one of the nastier clashes, say local leaders. "This back
and forth has gotten out of hand," says Judith Morgan,
chief executive of Richmond's Chamber of Commerce. She adds
that if Chevron pulls out of the city, it "could have
a devastating effect on businesses and the community."
tax dispute is rooted in a clause in Richmond's 1983 utility-tax
law. The provision allows Chevron to limit its utility taxes
by using a formula that includes a set dollar amount and variables
based on the consumer price index of gas and electricity costs.
City officials say Richmond feared Chevron would oppose the
utility-tax law if it didn't offer the concession.
Richmond residents elected the city's first Green Party mayor,
Gayle McLaughlin, who partly campaigned on increasing taxes
on Chevron. Following her election, Richmond launched an audit
of Chevron's utility-tax payments.
Around the same time, Chevron
jettisoned the 1983 formula and for two years paid utility
taxes based on actual usage, a step that the company says it
took to calm critics.
Meanwhile, Chevron appeared to
be losing support in city government. In the 2008 election,
two city council members who had been supportive of the refinery
lost their re-election bids. That same year, Richmond's audit
of Chevron alleged that the company had underpaid its utility
taxes for fiscal 2006 and 2007, though the mayor and city council
members say they don't know by exactly how much. While the
audit's findings are sealed, Mayor McLaughlin says that Chevron
unfairly excluded from its tax calculation natural gas that
the refinery used to manufacture other products. She says the
audit "showed the city would be getting quite a bit more" if
the audit's interpretation of the tax formula were followed.
Chevron's Mr. Coyle says the
city's desire to tax raw materials used to manufacture other
products seemed "over the top." The
formula, he adds, allows the company to more reliably estimate
its tax obligations in advance.
The city threatened to sue
Chevron over the alleged underpayment. In an out-of-court settlement,
Chevron agreed to pay the city nearly $30 million, but the
company didn't admit to any underpayment. The city also agreed
to allow Chevron to use the special tax formula through fiscal
2013. Mr. Coyle says Chevron settled the suit to avoid a prolonged
dispute that could damage its relationship with Richmond.
May, the city council moved ahead with its utility-tax ballot
measure to permanently eliminate the special provision for
Chevron. This month, the seven-member city council plans to
hold a vote to formally declare opposition to Chevron's measure.
Chevron officials declined to discuss their campaign activity
around their ballot measure. In Richmond, residents are divided
over the tax issue.
John Spradlin, manager at La
Perla Delicatessen on Richmond's west side, says he doesn't
support increasing taxes on Chevron. He worries the effort
could drive Chevron to sell the refinery.
"When you get tough with Chevron,
that impacts the community," says Mr. Spradlin. "We
lose out on services and funding."
Other residents like Mike Parker,
a community-college instructor, disagree. "The city can't
afford to give special perks to corporations as large as Chevron," says
Write to Bobby White at firstname.lastname@example.org