ISSUES | Chevron and Taxes
How Chevron Got a Good Deal
Settlement of Chevron Richmond's Property Tax Appeals
In early November, the County Assessment Appeals Board approved the Settlement previously agreed to by our politicians and Chevron. The deal settled all open property tax appeals for 2004-2012 and established a 2012 valuation of the Richmond Refinery at $3.28 bil. This means Chevron Richmond will be paying a touch under $50 mil in property taxes next year with the City of Richmond getting around $14 mil of this. Annual property taxes will be able to go up 2% per year from there. How did they come up with this number?
- Continued low assessment of the land. The agreed 2012 assessment for the 41.6 mil sq ft of land that is directly under the Wharf, storage tanks and refinery was only $94 mil. This works out to $2.26/sq ft and continues a general approach of assessing industrial property at very low rates per sq ft. In contrast, residential land in Richmond is typically assessed at $35-60/sq ft (depending on when you bought your home). If Chevron’s refinery land was assessed at even half the rate of residential land, their assessment would be over $600 mil higher. Less than 3% of Chevron Richmond’s total assessment is for the land.
- Net additions & improvements of $1.2 bil over the last 35 years. This seems mighty low when we know how many capital programs have been completed over this time period. We think this number should have been higher.
- $800 mil in Prop 13 allowed 2% annual assessment increases. This is the number that none of the people involved in the deal want to talk about. This number should have been $1 bil higher. If you took 1978 assessment values and simply increased them by 2% for 35 years, you would have doubled the original assessment. If the weighted average additions and improvement were made 18 years ago, those assessments should have gone up 50%.
We’ll never know what would have been a fair settlement. The bottom line is that it should have been at least $1 bil higher without even getting into the questions of a fair assessment of the land or how many of the additions and improvements should have been added to the tax rolls. It was a very, very good deal for Chevron.
The Settlement means that over the last 35 years, Chevron Richmond’s property taxes have gone up around 150% while their sales and profits have gone up around 400-500% and the cost of government services have gone up by 300-400%.
Our County Assessor and our Board of Supervisors were clearly worn out by Chevron. State law says that any of 3 assessment methodologies can be used and that the method generating the lowest assessment should be used. There are no real estate sales that can be fairly used to value the Richmond Refinery. Historically, Chevron has thought their lowest valuation would come from calculating “enterprise value” based on future income streams. But when the Assessment Appeals Board used this methodology, they came back with an average assessment of $4 bil for the 3 years 2007-2009. Chevron didn’t like this decision and decided their best chance to get a lower assessment was by switching to a cost basis plus 2%/yr increases. This perfectly legal switch from using an “enterprise value” calculation methodology based on future income streams to a cost basis with Prop 13 rate increase limits meant that the County would have had to be prepared to fight an entirely new battle over the next few years and to pay at least $2 or $3 mil in legal fees and expert witnesses to “stay in the game.”. The Richmond City Council acted (rightly or wrongly) just as a by-stander – they weren’t the ones paying the bills to defend against Chevron’s appeals or the ones responsible for coming up with values for the 12,000 individual assets. The new game made cost accounting expertise even more important.
A few last points:
- It would have been easy to argue for a $4.3 bil assessment instead of $3.3 bil – We’ll never know why the County Assessor’s office didn’t fight for at least $4 bil. A $4 bil assessment would have meant $10 mil/yr more to the County and a $4.5 bil assessment would have meant $17 mil/yr more. This is what we left on the table – between $10 and $17 mil per year ($3-5 mil/yr for the City of Richmond’s General Fund).
- There is every reason to believe we would have won the appeals in Superior Court. Our politicians say it was a question of your stomach for risk and your willingness to pay to stay in the game. But what was the actual risk? It is hard to imagine a significantly lower outcome than the $3.28 bil Settlement amount coming out of Superior Court. There was actually almost no downside risk. As for the cost, the County could have fought for a decade and still recovered all of their costs with one year of higher taxes. Unfortunately, we’ll never know what a Superior Court decision on a proper valuation would have been.
- Why did Chevron settle? Because it was a very good deal for them – and because they want better relations with the City Council and the community going into the 2014 elections and the permitting of the refinery modernization project. And this is why they might very well have settled for $4 bil if anyone had simply had the backbone to call their bluff.
- The money at stake wasn’t as important to the County (or the School District) as it was to Richmond and our City Council let us down. The $3-5 mil/yr we lost from our General Fund was a bigger hit to us on a percentage basis than the hits taken by the County and the WCCUSD. The Assessor wanted to settle and so did the Assessment Appeals Board and the Board of Supervisors. Our Richmond City Council could have said we needed more time to think about the deal or that we would only settle for $4 or $4.3 bil, but Vice Mayor Booze snuck the Settlement Agreement through in closed session when Mayor McLaughlin was out of town - without the question appearing on a printed agenda, without time for serious review of the numbers, and without time for public comment. We know Mayor McLaughlin would have been more careful about protecting the public interest than Vice mayor Booze.
- This battle is now over, but the fight to reform Prop 13 is gathering strength. Prop 13 was put in by the voters in a state-wide referendum and it can be modified by the voters. What we need are two simple changes:
- Tie annual commercial and industrial property assessment increases to inflation – say CPI + 1.5%. At our current low inflation rates, this would mean Chevron’s property taxes could go up 3% per year instead of 2% per year. Much of the damage caused by Prop 13 was caused by capping property tax increases for large property owners at 2% when inflation was running at 4 to 5%.
- Allow County Assessors to re-value the land associated with large commercial and industrial properties. How can the prime coastal land beneath the Richmond Refinery be worth only $94 mil? Chevron makes between $2 and $3 bil/year* in operating profits on the products produced in Richmond. It’s just “special treatment” for the 3rd largest and 3rd most profitable corporation in the United States. Why do they deserve such a tax break? It’s not as if they’ve been increasing the number of jobs at the Refinery – over the past 35 years full time employment has been reduced considerably.
* Chevron doesn’t publish its profitability by refinery so all we can do is reverse engineer their financial statements. We know that Chevron’s US Downstream operations generate around $90 bil in sales and that Richmond produces around 1/3rd of this amount. Average profitability for the corporation across all of its business is around 12%. With Richmond’s higher-value products (lubricants and jet fuel), it is safe to say that Chevron makes closer to $3 bil/yr than $2 bil/yr from the products made in Richmond. (See PowerPoint deck for more details)
Ruling for the Community
Board Rules Against Chevron Claims
The Contra Costa County Assessment Appeals Board announced its decision today ruling against Chevron and in favor of the Community. For the most part the Board found that the Assessor's valuations for 2007,2008,2009 were reasonable and appropriate. The board found that the Assessor's office inadequately supported its assessment, but that Chevron had also failed to make its case. The Board made its own determination of value. Not only did the board not lower Chevron's property tax assessment, it actually raised it.
Taking all three years into consideration, Richmond and other cities in the county, the county, the school district and the state won't have to return approximately $100 million dollars to the immensely profitable oil company. We are entitled to an additional $25 million!
One panel member suggested that, for all her hard work, the clerk of the panel, Carrie Del Bonta, should immediately apply for a raise. If the decision had gone Chevron's way, she might have been looking at a pay cut or a lay-off.
Richmond Progressive Alliance
Statement on Chevron Property Tax Appeal Decision
Every once in awhile justice triumphs in a system that is heavily weighted in favor the rich and powerful.
The Richmond Progressive Alliance congratulates the Contra Costa Property Tax Assessment Appeals Board for seeing through Chevron's financial sleight of hand, and for bravely rejecting Chevron's thuggish extortion attempt. We appreciate that you ruled that Chevron must pay the amount originally calculated by the assessor (and more) solely on the evidence. Notwithstanding this, our senior citizens thank you, our police officers and librarians thank you, our K-12 educators thank you, our ill children thank you, and our school district, and the city and county governments elected by the people to safeguard their health and welfare thank you, too.
Chevron Told it Must Pay More Taxes
Why We Won this Time
Community Action Makes a Difference
Justice was served by the Board's decision. While the community is suffering from high unemployment, foreclosures, loss of vital safety-net services and threats of more lay-offs, Chevron posted profits of $7.8 billion and $5.1 billion for the previous two quarters and has a very strong cash position. Justice requires that Chevron's share should be more-not less
Chevron is able to use its surplus cash to invest in lawyers, lobbyists, "experts", and PR firms to bully local, state and national governments to get legal loop holes and judgments. As individuals, most of us cannot afford the legal and political costs to get our property taxes reduced. The county and cities cannot afford the legal and expert costs to prepare assessments that withstand legal challenges and to fully defend the community from avaricious attacks Courts. Appeals board hearings are not neutral when Chevron gets a bigger part in writing the rules and has the overwhelming advantage in interpreting them.
Chevron won its appeal for the 2004, 2005, 2006 with a very similar case. (That decision is now being appealed in the courts by both sides.) Even though one person was on both Appeal Boards, in both cases the decision were unanimous. Why this complete reversal when the playing field is not level?
Not having a Chevron Agent on the Appeals Board certainly helped
In the earlier case Joe Fisher, leader of Black American Political Action Committee (BAPAC) of Contra Costa was on the Appeals Board. BAPAC had received large contributions from Chevron as well as campaign contributions which it distributed to favored candidates who supported Chevron's policies. See East Bay Express article.
Another difference between this appeal and the first appeal was that this time the Richmond Progressive Alliance worked hard to keep the proceedings in the public's eye. Citizens wrote letters and attended the hearings and county workers received flyers describing the impact a Chevron victory would have on them. Public rallies kept the issue in the press. Chevron-man was booed when he spoke in favor of the 1%. Articles appeared frequently in the RPA newsletter, the CC Times, Richmond Confidential and the Chronicle. These activities helped focus attention on the crucial importance of the outcome and thus supported the county lawyers as they went about their job. Thanks to all those who worked with us to keep this issue in front of the public and giving support to the exceptionally hard-working and underpaid county lawyers and the refinery assessor and major witness, Mr. Yu.
The Occupy movement helped create the political climate of a much greater understanding of how the 1% were using the laws, lobbyists, and political contributions to increase their unfair share.
Kissing-up to Power Does Not Work
In the last few city council meetings, when the issue of Chevron's appeal came up, Council members Booze and Bates made it a point to praise Chevron and emphasize how much Chevron gave to the community in taxes and contributions. Their attitude seems to be that since Chevron is so big and so powerful, we have to support its policies. Booze absented himself when the Council voted to request Chevron to drop the appeal. This may be the influence of Chevron's substantial political contributions, past and future. Or perhaps its a case of political "Stockholm Syndrome' in which captives come to identify with their captors or where people who are abused defend their abusers?
Chevron is a corporation. Its bottom line is profits. The people who run it are human and should be treated as such, but the decisions are based on corporate needs not human needs. Corporations don't respond to people being nice to them. They respond only to things that affect their bottom line. Their "positive" PR strategies, their support and cooperation for community projects ultimately are intended to create a political climate that allows them to conduct their business in a way which benefits their bottom line.
In the days before the announcement, Chevron is rumored to have offered assurances to the city that it would not require the city to pay back all the money that they expected would be owed to them. They were trying to appear to be the "good guys." In reality they were attempting to exert control over our city government with a 'favor" in exchange for benefits to them in the future. This amounts to an attempt to usurp our democracy. If they genuinely wanted to help the city and its people they would never have brought the appeal to lower their taxes, potentially bankrupting the city.
It is not over
Even though we won, Chevron cost the County millions in legal defense. Chevron will probably appeal and keep appealing. Chevron can afford the cash for lawyers- the County cannot. Chevron may well press for a compromise so the County can save the costs of litigation. The County and Richmond must stand tough against the bully technique. If Chevron wants to be a good neighbor let it start by dropping all of its tax appeals.
Let's enjoy these moments of people's victory. But remember that the big picture has not changed. It just depends on our willingness to organize.
Due Process or Legal Bullying
Defenders of Chevron ask what is wrong with Chevron appealing for a reduction using the rules just as you or I would. The difference is that it is not a level playing field. You and I cannot afford the lawyers and experts that Chevron can to make the rules work for them. The result is a system of rules which has helped a massive shift of wealth from working people to the top 1% over the past 30 years. The sco-called neutral rules magnify and increase--in a vicious circle-- Chevron's power.
One way that the 1%, like the banks and Chevron, get an ever-expanding part of the pie is their ability to do legal bullying. How this works:
- First they lobby extensively to get technical loopholes in laws that slip under the radar when they are passed.
- Then, they can hire expensive lawyers, "experts," and huge staff to use these loopholes to challenge county or city governments which cannot afford for defense of the public anything close to what the corporations can spend to make their case.
- And if by chance they should lose in the first round in courts, the corporations can appeal. In the meantime any money that is involved is put in escrow so that neither side can use it. Of course the corporations can easily afford this but the county and city cannot afford to wait years for their taxes.
So the legal bully does not have to win their case in court--just use their deep pockets to force the city and county to settle. And then they can use their PR staffs to spin and cover what they have done
Chevron is using the same techniques as the banks are using in resisting regulation. The Security and Exchange Commission (SEC) is forced to settle most of its cases with a slap-on-the-wrist for the banks because "it does not have the money or the staff to battle the deep-pocketed Wall Street firms in Court.”
It is unlikely that Chevron has a just case for its demands for a property tax rebate. It is likely pursuing this case to get leverage on other issues. But we will never be able to judge for ourselves since virtually all of Chevron's case is closed to the public because it contains "proprietary information."
Chevron is relying on its ability to financially overwhelm the County Assessor's office and bring pressure from county officials for a quick settlement. We have to mobilize the pressure of public sentiment against Chevron so it drops its bully legal attack.
"SOMEBODY HAS TO SUFFER...
YOU DON'T EXPECT US TO"
There are a some folks who ask why RPA doesn't publish Chevron's point of view. It must be that Chevron's full time PR staff, the millions for "we agree" ads, promotion of charity events, and even those "targetted" ads on your Facebook page when you look up RPA are not enough. So when the RPA ran into Chevron-Man on the streets of Martinez soliciting more cash for the corporation, we asked him to tell his side of the story:
Chevron USA, Inc. needs help. Here's our hard-luck story.
Everybody who owns a property, a home or rents, pays property taxes. So do we, only we need our money back 'cause we are hurting for dough.
Granted, we're the richest corporation in California. Granted our profits have soared for each of the past years. Granted for eons we've gotten the benefit of the loopholes in Proposition 13. Granted we sit on some of the most valuable real estate in the bay.
Our expert "cost segmentation" experts from "corporate" in San Ramon will gladly tell you that our Richmond refinery is actually losing money.
So we're asking for a refund on our property taxes for 2004 to 2010 that will only amount to only, say, $168 million dollars.
If we win, the City of Richmond, Contra Costa County, the WCCUSD, and special districts like fire, health and Community College will have to cough up, I mean, contribute to our economy.
Speaking of donations, do you realize that last year Chevron gave away $3.7 million to charities? What we're asking back from you is a measly 25 times that amount.
Here's the good news, our $168 million tax refunds will result in leaner, smaller government and many public workers will get to spend a lot more time at home with their families.
These are tough economic times and somebody has to suffer. You don't expect a world player like Chevron to, do you? You've heard the motto - too big to fail? Meet its friend - too big to pay.
So do not attend the tax assessment appeal hearings in Room 107, Board of Supervisors room. (It's closed to the public anyway.)
Do not discuss layoffs with your union. (It's such a downer.)
Above all, I hope you ignore these resolutions and protests asking us to drop our appeal. (Bunch of whiners.)
And thanks for putting our CEO, John F. Watson, ($13,987,263) over the top.
Your Pal at the Pump,
Richmond City Council Resolution asking Chevron to drop its property tax appeals
Whereas, Chevron Corporation. (formerly Standard Oil) has successfully operated an oil refinery in Richmond since 1904, thus contributing to the corporation’s high profitability for over 100 years; and
Whereas, Chevron declares that it wants to be a good neighbor to Richmond and Contra Costa County residents; and
Whereas, Chevron has posted record profits in each of the last five years, and its profits of $7,830,000,000 ($7.83 billion) for the third quarter of 2011 are double its profits for the third quarter of 2010; and
Whereas, the Chevron’s charitable contributions to worthy local organizations in 2010 amounted to $3.7 million, which represents a mere 0.047% of the profit it made in just three months (July – September) in 2011; and
Whereas, Chevron is currently trying to get a refund of approximately $50-$60 million on its Richmond refinery property tax payments for 2004-2006 through litigation in the courts, in addition to the $18 million refund it already received for that time period as ordered by the County’s Assessment Appeals Board; and
Whereas, Chevron is currently trying to get a further refund of approximately $100 million on its Richmond refinery property tax payments for 2007-2009 through a claim to the County’s Assessment Appeals Board; and
Whereas, the total potential refunds for 2004-2009 of approximately $150 million that Chevron is seeking represents only 0.15 % of its profits of $97.3 billion for those six years; and
Whereas, considering Chevron’s consistently high rate of profits and the prime location of the Richmond refinery, we believe its claims of significantly declining property values are baseless; and
Whereas, if Chevron were nonetheless to prevail in both cases (2004-2006 and 2007-2009) and the City and County are ordered to pay refund of over $150 million to Chevron, there would be drastic consequences, including the cuts in public safety, basic services and social uplift by the City of Richmond, Contra Costa County, the West Contra Costa Unified School District and other special districts, and
Whereas, these cuts would fall most heavily on our most vulnerable and disadvantaged populations: seniors, youth, people living in poverty, people with disabilities and people without access to health care; and
Whereas, these cuts would inevitably result in the layoffs of city, county, school district, fire and water, etc. workers at a time when we are already experiencing record unemployment and the worst recession since the 1930’s Depression; and
Whereas, these layoffs would result in less income available to purchase goods and services contributing to a downward economic spiral damaging our business community; and
Whereas, Chevron has stated it wants to maintain good a good relationship with Richmond and that it specifically wants to help ameliorate the very problems that the cuts triggered by its potential refunds would exacerbate; and
Whereas, if Chevron were to withdraw all of its property tax appeals it would remain a highly successful and profitable corporation and would experience no negative consequences;
Be it therefore resolved, that the Richmond City Council respectfully asks Chevron Corporation. to withdraw and dismiss all of its property tax appeals on past years’ assessments and pay the full amount due on current and future property tax assessments for the Richmond refinery.
Be it also resolved, that the City Council place on the closed session agenda for November 22 consideration of directing the city manager and city attorney to enter into negotiations with Chevron and other parties to seek a negotiated settlement that would leave Richmond whole with respect to past and future Refinery property taxes.
Resolution passed by Richmond City Council, November 15, 2011. All For except Booze out of room
Putting Chevron's "Generosity" Into Perspective
We all know that times are tough. Unemployment soars, families lose homes to foreclosure, and the City and County are constantly squeezed for funds to provide even the most basic public services. Times aren't tough for everybody, however, as we watch income and wealth inequality increase. In other words, the rich get richer, while the rest of us get poorer, exacerbating a host of social ills.
How does this happen? Because people let it happen. We see this phenomenon unfolding right here in Richmond, where an already super-wealthy corporation claims that it paid too much in taxes in recent years and wants to get a refund, all the while mounting a PR campaign to portray itself as a "good neighbor".
As if Chevron weren't already making enough money with it's billions of dollars in profit every three months, the Richmond refinery is currently attempting to require the City of Richmond and Contra Costa County to write a check made out to Chevron for $168 million dollars in refunds on its property taxes from 2004-2009, through multiple claims it has submitted.
While one hand of Chevron boasts about the small donations it makes to local organizations, the other hand is directing it's high-priced lawyers to find a way to rob cash-strapped local government's blind. Chevron's grants in the thousands of dollars to struggling non-profits may seem generous to some, but such amounts are clearly insignificant to this multi-billion dollar corporation. These amounts are also miniscule in comparison to the millions of dollars Richmond will have to pay if Chevron gets its way. In the worst case scenario, City services would be severely disrupted--much worse than the crisis of 2004--likely resulting in massive lay-offs in public safety, library, recreation, public works, as well as termination of service contracts with local businesses and non-profits. It could bankrupt the City.
Do major corporations who say they care about the community go out of their way to cause irreparable financial harm to that community? Chevron does.
Let your elected officials know that you are aware of what Chevron is trying to do and that it's not acceptable. Urge them to continue to pursue every means at their disposal to uphold Chevron's original property assessments and insist that it pay its fair share of taxes to protect jobs and essential community services.
Statement of RPA Steering Committee 9/30/11
Good Neighbor Chevron
Everybody knows that good, healthy, decent paying jobs are required to move Richmond forward. Yet right now Chevron has brought in more than 1600 workers to work a six to eight week period on a "Turnaround" at the Richmond Refinery. A Turnaround is a period where a section of the refinery is shut down and drained for intensive maintenance work. Most of the work pays well and usually includes considerable overtime. It could have meant a big boost to the local economy.
Instead, Chevron chose to use contractors who are hiring much of their labor from well outside the area. By Chevron's figures about 40% come from beyond 50 miles. And the 50 miles for the other 60% is a pretty long way to go.
When there is so much unemployment locally, why does good neighbor Chevron have to go so far for its hiring? It is not because of the lack of skilled workers locally. Rather, it is because Chevron would like to weaken local unions.These unions protect workers in dangerous occupations and keep wages and benefits at levels so these can be considered good jobs.
It takes lots of jobs to keep a refinery operational.
Don Gosney, a frequent advocate for the local building trades unions, put it this way at the September 27 City Council meeting.
Chevron may tell you that the Bay Area can't supply qualified workers . But that is nothing but bull doogie ... They may try to tell you that out-of-area workers cost them less but that is not true either especially when you factor in the travel and lodging costs The real reason is that Chevron doesn't like unions and their staff wants to micromanage their workers as though they are children and don't know what they are doing.
Chevron, after inquiries from City Council members about this un-neighborly hiring policy, responded that they were providing the visiting workers with lists of Richmond restaurants.
photos by Don Gosney
Why This is a Very Big Victory
We have been in a battle with the fifth largest corporation in the world, one noted for its aggressiveness in building its operations and profits. Our aim in this battle was not to wipe Chevron out but to force them to pay a “fairer” share of taxes to the community. We accomplished that. Did we make them pay enough? I don’t think so.
But that doesn’t take away from the victory that we did win. What can be accomplished in negotiations has to take into account what the alternatives are. Let’s consider the best case. Assume that in November we were to win our ballot measure to End Chevron’s Perks. and we were to defeat Chevron’s cynical “Utility Tax Reform.” At this point Chevron could again tie up Richmond in court for years at great expense to the city already strapped for funds and laying off city workers.. Further given the court’s friendliness to business, particularly after years of rightwing appointments, there is a good chance we could lose.
So why did Chevron settle. First the voting process has some risks for them. The community could become so mobilized that some judges would not rule against a democratic decision. Perhaps more importantly the battle was costly to Chevron in other ways. Chevron spends a lot on their public image because they fear all kinds of regulatory intervention. In Richmond when they decide to move on any major changes in the refinery they need to get approval by the city council.
How much did we win?
What we won was not small change. It is easy to say that $7 million a year is petty cash to a corporation that made $4.5 billion in the last quarter. But that is Chevron as a whole. We are dealing with one refinery in one city. There are other ways to think about it. $7 million is a third of what Chevron spends on lobbying the Federal Government and three times what it spends on lobbying the state of California.
Put this another way. Chevron has perhaps more than a 140 major refining, piping, drilling, and chemical locations around the world. If each of those communities organized and demanded a fair share from Chevron and each won $7 million that would be $1 billion won from Chevron. No tears for Chevron--it can afford it and we deserve more. But it is not chump change either.
Some of the issues
Measure T. In 2008 Richmond voters passed this measure which would change the way business license fees are calculated. The effect was to raise Chevron’s fees, based on the value of raw materials used, to $10-15 million per year. Chevron challenged the measure in court and won the decision based on a number of technicalities The city voted to appeal. In the settlement agreement, the city withdraws its appeal and Chevron withdraws its claim for $1.2 million interest on money it had been paid.
End Chevron’s Perks Initiative. The city had scheduled a measure for the fall ballot that would remove the cap on the utility tax that Chevron could choose, and require Chevron to pay the same percentage as everyone else and pay it on all energy products used at the refinery. The city withdrew this proposed measure as part of the settlement.
Chevron’s Utility Tax “Reform” In response to the above ballot measure and to threaten the city, Chevron was financing a measure which would allow it to keep its Perk, cut the utility rate in half and exempt seniors and poor from utility taxes. The net effect would be to slash the city’s general fund income by $10-26 million. Chevron claims to have collected sufficient signatures but agreed to not submit the signatures as part of the settlement.
Why they belittle the victory
For Chevron and the corporate media the biggest danger in what happened in Richmond is that people will learn that we have the power: when we organize and stand-up, we can beat back the corporate domination of our communities. Chevron does not want the 140 or so communities around the world demanding what Richmond residents demanded and won. The Corporate media and establishment don’t want people to get the idea that if we mobilize to close the loopholes in state taxes that we can actually win. They don’t want people thinking to themselves “We beat Chevron, what else can we can do if we act together?”
So all the shills for corporate power in our state have different messages but with the same theme: People power did not win anything: we got this agreement because Chevron was willing to bail out the city, or because we had good negotiators, or because we really didn’t win very much, or because we folded. All of these messages are designed to tell people that they really have no power and to reinforce the defeatism in people which allows the tiny corporate minority to run things.
Chevron a partner?
Does this agreement make Chevron a partner or good neighbor? No, Chevron is still basically the same corporation it always was. Its bottom line is still profits. Hopefully it means better relations in the city because perhaps Chevron now knows it has to treat the community with respect since it will not rollover for every Chevron initiative.
It’s not a question of the character of the refinery managers but of international corporate policy driven by profits.
Locally, Chevron is still trying to get its county property taxes reduced, shifting the burden onto homeowners and other businesses in the city. It has still refused to negotiate its flawed EIR so that the expansion project can be made safe for the community and it can start up the jobs again. Internationally its devastation in some countries is only limited by the developing opposition. Following the logic of the oil industry, it is shifting to the cheaper, cruder, more polluting, oil sands and resisting attempts to increase controls on carbon emissions.
Chevron represents in every way an institution that must change if the world will survive. We must end our use and dependence on huge quantities of fossil fuel. We must end the system where the world’s natural resources are used for private profit and the real costs are shifted to those who can least afford them with polluted communities.
So Chevron is neither a friend nor a partner in creating a better Richmond or world, but our victory and our recognition of our power may also allow the community to solve more problems in negotiation with them as we move forward.
Our hands are not tied
This agreement was very specific. What we won from Chevron, and committed the city to, covers the next 15 years. But this only applies to certain city taxes (excluding sales and property). Nothing stops us from fighting Chevron on its property tax appeal. Nothing stops us from challenging Chevron’s polluting our community or its attempts to break the construction unions or manipulate its workforce. Nothing stops us from campaigning for a state oil severance tax, an increase in the top level of the state income tax or and end to the corporate perks in Prop 13.
Most importantly it does not stop us from remaking the City Council so it no longer is a patsy for whatever Chevron wants.
While appreciating the relief this settlement will definitely bring in the next five years, my enthusiasm is tempered by two trade-offs that came along with it:
1) the fact that there was essentially no public input in shaping this negotiation or reviewing its conclusion, since one of the implicit terms of the deal was that it had to be voted on by the City Council just three days after it was first announced to the public, or else Chevron would back out.
2) the fact that beyond the additional $114 million (averaging $7.6 per year but with most of it up front), it will not be possible to raise Chevron's taxes in Richmond for the next 15 years, no matter what circumstances might arise 5 or 10 years from now.
Yes, we struck a deal, but did we find common ground? To me finding common ground implies some shared values and a level of mutual respect that I don't see here, since the ultimate objectives of Chevron and the City remain so divergent: maximizing profits even if it means hurting Richmond residents vs. meeting the needs of Richmond residents via the democratic process. The City has always acknowledged Chevron's right to own property and operate its business within our city, but Chevron has shown little regard for the City's right to set reasonable rules and expect compliance.
What we have is an agreement on a price as a result of cut-throat negotiations. Cut-throat because one party tried to cut the other party's throat half way through with its signature campaign that could have bankrupted Richmond.
Chevron agreed to pay $114 into the City's general fund over the next 15 years in exchange for protection from any additional tax increases during that time. Is that a good price? Maybe it is, but I'm not sure. It is quite a lot less than splitting the difference between the opening bids. We've been told that Richmond initally asked for $300 million over 15 years and Chevron offered $40 million, so $170 million would have been right down the middle.
Was frontloading the payment schedule the wisest thing to do? It seems so now, but what about 10 years from now, when the revenue stream will have nearly dried up and it's so unpredictable what our needs and Chevron's activities will look like then (it's ironic that this deal is touted as providing "predictability"). Only time will tell.
Could we have done better with more public input I wonder if some level of public process could have started before the first negotiating session in early March, so that our team could get input not from the community about what the City's initial ask should be. Clearly the fact that negotiations were happening, though not widely publicized, was not confidential.
I'm not sure why the City's initial ask of $20 million per year wasn't higher. In order to leverage the full power that our movement and the voters had already demonstrated, it seems to me the City could have started out asking for the absolute maximum we would get if everything went our way (Measure T appeal and our End Chevron's Perk UUT ballot measure), namely something like $40 million a year.
If the City had started out higher, I wonder if the the price ultimately agreed upon could have been a lot higher. Or would Chevron have walked away if the City had started out asking for a substantially higher price? I tend to doubt it, because my sense is that they really didn't want our UUT measure to pass at the polls. Chevron's eagerness to settle the confidential UUT audit question in 2009 leads me to believe they would be vulnerable in the courts in trying to challenge a requirement that they pay 10% of all their gas and electricity use.
Could Chevron afford to pay a price higher than the $114 million that we got? I'd say yes, in spite of their lamenting about not doing so well on downstream activities (refining), while making a killing upstream. Note that the settlement agreement that the City signed is with "Chevron U.S.A. Inc., a Pennsylvania Corporation" (not the Richmond refinery).
Could our team have insisted on taking a full week or two to check in with the community at the end of negotiations when it looked like a deal had been struck? I wonder how much of a priority it was to have the price include some time for public review, in addition to the dollars.
I don't have experience in negotiating high stakes financial issues on behalf of a large constituency, like with labor negotiations, so I don't want to second guess those who do. Left on my own, I doubt if I'd be any good at it, as I'd probably start out with a price that seems fair and reasonable, which could then be taken advantage of by a savvy and calculating counterpart. That's where it seems to me the power of the collective comes in--having the community give our most skilled negotiators a steady stream of feedback and support so that they can hang tough. Especially when our counterpart is a corporation with limitless resources and no scruples.
With this agreement and thanks to our grassroots efforts, we're getting a huge profitable corporation that has been taking advantage of us for the last 25 years (with its UUT perk) to take advantage of us less for the next 15 years, which will give some welcome relief to Richmond residents, mostly in the next 5 years.
While we have achieved something here, we still have a long ways to go. In interactions with our corporate neighbor, we have to be fully aware of what we're up against, remind our leaders to always include the community in the conversation, and step up our organizing efforts to harness the full power of informed and engaged Richmond residents to stand firm in insisting on acceptable behavior from that neighbor, just as we would from any other neighbor in our city. I invite all of you who read this to join with the RPA in mobilizing for a better Richmond!
RPA Statement on Chevron - City Tax Deal (when it was first announced)
A Big Step Forward for the Richmond Community -- A Victory for Democracy
Negotiators for the city of Richmond and Chevron have reached an unprecedented agreement that settles several major tax issues. Chevron has agreed to pay millions of additional dollars to the city if the city will drop its appeal of Measure T and proposed changes in the Utility Users Tax. (See below for details.)
The settlement goes to the City Council next Tuesday where the Richmond Progressive Alliance expects and supports its adoption. As in all settlement agreements, the city did not win everything it rightfully deserves. But we did win a substantial increase in financial support for the city from Chevron and we can move on to other issues that we need to deal with like crime, jobs, education, public health and the environment.
No one fought for this victory like the RPA; No one put the pressure on Chevron for fair taxation like we did. We receive this victory reaffirming our commitment to fairness, justice and health for all Richmond residents and we expect our city to put a significant part of the income from this victory into programs our citizens need, determined by democratic process. Those were the goals of our succesful Measure T and of the End Chevron's Perks Campaign.
As Mayor Gayle McLaughlin says. "This agreement shows that the Richmond community can be succesful in gaining more fairness when we stand strong and together. The people of Richmond organized and mobilized to pressure Chevron to do better. Chevron realized it could not defeat the people of Richmond. It gave in to many of our demands.Not everything we wanted, but this partial victory marks the beginning of a new phase in our ongoing struggle for a better, more just, and healthier Richmond."
This agreement does not resolve all issues with Chevron. Chevron has still not agreed to come to the table to resolve environmental protections on its expansion project and get workers back on the job on those projects. We expect that the fifth-largest multi-national company whose bottom line is profits will be at odds with communities that its refining facilities dominate.
Chevron is still attempting to get reductions in its county property tax. Chevron benefits from Proposition 13 loopholes for all corporations, and the failure of California to have an oil severance tax like other oil producing states.
Some of the lessons of recent events are: It is possible to stand up against the power of a multi-national company. The additional money for vital city services comes in part from voters challenging Chevron's money, power,and public relations by passing measure T in 2008; from the City Council's placing the End Chevron's Perk measure on the ballot for this fall; and from the community mobilization against Chevron's cynical plan to try to strangle the city with its own ballot measure to slash city income. It helped that the entire City Council on May 4th (Nat Bates was absent) strongly denounced Chevron's actions. Standing up and organizing makes the difference. It levels the playing field and makes possible settlements and outcomes that promote the community's wellbeing.
Councilman Jeff Ritterman: "This is a real advance for the City of Richmond. In the current economic downturn we have won significant new financial support for the city, which will prevent layoffs of city workers. It will enable us to work harder on the many other problems that face us."
Jovanka Beckles, RPA nedorsed candidate for City Council: "There is no power like the People's power! It does not quit. I'm proud of this step forward that we have achieved and even when I know that the road ahead is long today I am hopeful and joyful. How do we get justice for the Richmond residents? How do we change our City into paradise? One struggle, one victory at the time. I'm happy today with this progress."
The city had a negotiating team consisting of City Manager. Bill Lindsey; City Attorney, Randy Riddle; Finance Director, James Goins; and three council members Jeff Ritterman, Jim Rogers, and Tom Butt. They met with Chevron using professional mediation over a period of months.
The agreement calls for Chevron to pay the city $114 million (with no inflation adjustment) in revenue over the next 15 years on a "front-loaded" schedule.
Chevron will guarantee its level of Utility Tax payments for the next 5 years. Chevron affirms certain CBA obligations like support for the Bay Trail and Ground Level Air Quality Monitoring.
Chevron agrees to drop its campaign for cutting the utility tax.
The agreement calls for the city to drop its appeal of the Measure T decision, and withdraw the proposed End Chevron's Perks measure. Chevron's payments in this agreement cover any increases in city taxes (other than sales or property) that would be applied to Chevron.
More details can be seen in the unofficial report here. The full package should be available on the City's website
Richmond Progressive Alliance Statement
To protect its special perk:
Chevron's New Dirty Trick
For 25 years Chevron has paid a lower rate of utility users tax than we all pay.
Every household and small business pays a 10% utility users tax that supports basic services in Richmond. To avoid paying its fair share, Chevron is trying to put a measure on the ballot that will devastate Richmond's schools, streets, parks and
police. Chevron calls it "The City of Richmond Utillity Users Tax Reform Act."
The Richmond City Council had scheduled a ballot measure for the fall which will end Chevron's Perk. It simply says that Chevron has to pay the same tax rate on its utilities that everybody else pays. (It ends a special flat rate that only Chevron can use). Knowing that it can not beat this measure which calls for simple fairness, Chevron is trying to ride the hardship Richmond voters are facing by proposing to cut everybody's taxes a little in order for Chevron to save big. Chevron's measure will cut the Utility Tax in half and exempt poor and seniors from paying any utility tax at all. All of us will save a few dollars a month while Chevron saves millions.
But we will all pay the cost because this will force cuts in our schools, our roads, our parks and our police protection.
Chevron hopes at least to confuse voters to get them to vote both measures down.
Chevron will have to get the measure on the ballot by paying a petition firm two to five dollars a signature. (The actual signature gatherers only get a small part of that.)
Don't sign Chevron's Petition
How you can help.
- If you see petition circulators, try to convince them not to help Chevron hurt Richmond.
- Call the RPA at 510-595-4661. We will be sending out truth squads to provide information to people in any signature gathering location.
- Help us let people know. We will be leafleting shopping areas and going door to door.
- Drop us an email with your name, phone number, and times you are available.
Remember the only answer to Chevron's money and PR is when we all participate.
--Illustration: David Moore www.sinceredesign.com
4/5/10 flyer added 4/12/10