Posted on Friday, September 8, 2006

Utility Tax Recalculation Costs City
RICHMOND: Chevron refinery switches to actual usage method;
July's payment is $390,000 less than last year's

CONTRA COSTA TIMES
By John Geluardi

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." (Emphasis added)

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." (Emphasis added)

Reach John Geluardi at 510-262-2787 or jgeluardi@cctimes.com