Published on January 17, 2010

Chevron the Target of Tax Measure Effort in Richmond

By Katherine Tam
Contra Costa Times

Supporters of a ballot measure to change Richmond's utility users tax law are mobilizing, with the election still 10 months away.

Voters will decide in November whether to limit residents and businesses to one method, instead of two, for calculating what they owe the city. They would continue to determine payments by computing 10 percent of the amount charged for utilities, but the proposed measure would eliminate the option of using an alternative flat-rate formula.

Most utility users don't use the flat-rate formula because the resulting amount — roughly $14 million a year, more than most local businesses gross — is too high. The Chevron refinery, which city officials say used the flat-rate method because the 10 percent method would cost the oil company more, would be affected if the measure passes.

Supporters have begun distributing campaign postcards and plan to go door to door.

"If I pay 10 percent and you pay 10 percent, the giant in the city must pay 10 percent," said Juan Reardon, a member of the Richmond Progressive Alliance, which backs the measure.

Chevron argues that the ballot measure, which also would expand the definition of utility services to include all gas used or consumed to produce energy or for other purposes, would hurt its ability to compete with other refineries. The Chevron Richmond refinery pays more in taxes, licenses and fees than other competitor facilities, spokesman Brent Tippen said.

"Chevron clearly understands the important role we play in helping the city achieve its vision through existing taxes and fees, but we must draw a line when taxes are illegal, as recently ruled by the court on Measure T, or unreasonably expansive," Tippen said.

A judge in December ruled 2008's voter-approved Measure T, a manufacturers fee initiative, unconstitutional.

The utility users tax measure is one of three city ballot measures Richmond residents could see this year. Councilman Jim Rogers and others are pushing for an advisory measure directing the city to use $1.5 million from utility taxes to keep open three under-enrolled neighborhood schools. In addition, the city might ask voters as early as June for higher taxes to fund paramedic training for firefighters and other public safety needs. Separately, the West Contra Costa Unified School District is weighing a bond measure for capital improvements.

Efforts to change the utility users tax law grew out of a city dispute with Chevron.

The refinery calculated its payments using the flat-rate method after the 1983 law went into effect, then switched to the 10 percent method in 2006. City officials noticed Chevron's payments were $4 million a year less than before. Unsure which figures were correct, the city hired a law firm to obtain and analyze the refinery's data and verify whether its payments were accurate between 2006 and 2008. The confidential audit culminated in a settlement in February in which Chevron agreed to pay the city $28 million.

The City Council voted unanimously last summer to put the utility users tax measure on the November ballot.

If it passes, the refinery would not be affected until June 30, 2013, because the settlement allows Chevron to use either method to compute its utility taxes for the next three years.

Supporters, including council members, estimate the measure could generate $10 million to $15 million in new annual revenue.

Meanwhile, a version of 2008's Measure T could land on the same ballot. That initiative would have drawn the bulk of its revenue from Chevron, but failed to pass legal muster. Contra Costa Superior Court Judge David Flynn ruled that Measure T would put companies with operations in multiple cities at a competitive disadvantage if they must pay fees here and elsewhere.

Officials are considering recrafting the measure, removing flaws cited by the judge and putting it back before voters this year, Mayor Gayle McLaughlin said. The City Council is scheduled to take up this issue Tuesday. [emphasis added]

Katherine Tam covers Richmond. Follow her at Twitter.com/katherinetam.