Sunday, March 23, 2014

Valero refinery blackmailing Benicia city, threatens to close down unless it can refine toxic petroleum

"Property tax involving refinery could affect Benicia finances"
2014-03-23 by Tony Burchyns from the "Vallejo Times-Herald"
BENICIA -- A major property tax dispute involving the Valero Benicia Refinery could shake city finances, officials say.
The multi-year property tax appeal -- which was revealed in a Benicia City Council budget session last month -- follows a spike in the refinery's assessed value in 2011 around the time Valero completed a major emissions-reducing project.
At a cost of more than $700 million, the flue-gas "scrubber" unit was part of a larger project designed to boost throughput and expand the range of crudes the plant can process.
Despite these improvements, Valero -- which generates about 40 percent of the city's revenues -- is arguing the plant's market value has dropped. Further, Valero officials say without access to lower-cost North American crude via its controversial crude-by-rail project, Benicia and other California refineries will find it difficult to compete. The project's draft environmental impact report is due out next month.
"If you look at refineries both here in the U.S. and around the world, you'll see examples where plants that have been for sale for years are closing down because there are no willing buyers," Valero Vice President of Media and Community Relations Bill Day wrote in an email.
Valero shut its Aruba refinery in 2012 only after trying to sell it for more than a year, Day said. It closed its Delaware City refinery in 2009, which was losing more than $1 million per day, to stem major financial losses.
"Valero always pays its fair share of taxes in the communities where we have operations, and unless I'm mistaken, Valero is the largest taxpayer in Benicia," Day added. "We do not feel an obligation to pay an unfair share of taxes."
Day said discussions are underway between Valero and the Solano County assessor-recorder's office. An Assessment Appeals Board hearing hasn't yet been scheduled in the case, Assessor-Recorder Marc Tonneson said.
Meanwhile, county officials are withholding from local governments $2 million in tax revenue generated by Valero, pending a settlement in the case. Benicia's share of that revenue is 26.5 percent, according to the county auditor-controller.
"It's really the prudent thing to do," Solano County Auditor-Controller Simona Padilla-Scholtens said of the decision to hold back revenue from local governments because of the size of the appeal. "It minimizes the exposure. If Valero wins the appeal, I don't want to have to go back and take the money back from local governments."
That's what happened the last time Valero filed a property tax appeal.
Valero appealed its base value after buying the refinery from Exxon in 2000. County officials set the value at $734 million, but a consultant advised the county to increase the base year amount by about $200 million.
The parties settled in 2006 when the county agreed to return to that $734 million base year amount and factor the following years using an income-based approach.
The settlement found Valero overpaid $9.8 million from 2000 to 2006, and Benicia had to repay $1.6 million of that amount, county and city officials said. Further, the city's ongoing revenue was reduced by hundreds of thousands of dollars per year as a result of the settlement, Benicia Mayor Elizabeth Patterson said.
"Another property tax reduction at the magnitude of the last one does not serve the community, and it may mean that we have to cut back additional community services and take more drastic measures to control our costs," Patterson said. "It may mean we can't hire the staff we need to maintain the quality of life we expect."
In its current appeal, Valero is seeking a temporary reduction in its factored base value, Tonneson said.
In 2012 and 2013, the county assessed the refinery at $1.02 billion and $964 million, respectively. In its appeals for those years, Valero listed its value at $230 million and $100 million, respectively.
Asked to explain the gulf, Tonneson wrote in an email, "It's common for an applicant to indicate an 'applicant's opinion of value' on the appeals form at half or less than is on the roll. Should the case go before the assessment appeals board, both Valero and my office would need to convince the board that our respective value is correct."
Northern California's four other refineries -- all located in Contra Costa County -- have assessed values ranging from $1.3 billion to $2.7 billion, according to Contra Costa County Assessor Gus Kramer.
While neither side has released details of the case, Day said Valero has reached "satisfactory conclusions" in the times where it has protested what it viewed as an unfair tax assessment.
"Valero understands refinery valuations very well, because we are in the refining business and have bought and sold refineries," Day said. "We often have a better understanding of valuations than the assessing agencies."
Meanwhile city officials can only wait and see what happens.
"We can only go by what's been publicly stated," City Manager Brad Kilger said." The city, or any city, really has no say in what decision is made by the county assessor on assessed valuation appeals."

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