Are Chevron’s Taxes Too High?

By Michael D. Robbins
March 15, 2012

Are Chevron’s taxes too high? Possibly.

Fired City Manager Doug Willmore gave a PowerPoint slide presentation at the December 20, 2011 regular meeting of the El Segundo City Council. He claimed that Chevron was not paying enough taxes, was not paying it’s fair share of taxes, and that the other businesses in the city were paying higher taxes to subsidize Chevron.

However, Slide 7 of Willmore’s presentation, titled “General Fund Revenues by Segment”, exposes Willmore’s big lie.

Here is Slide 7:

Slide 7 shows an aerial photograph of El Segundo, with color overlays to mark the massive Chevron oil refinery property in the south-west quadrant of the city in blue, the remaining commercial/industrial business properties mostly in the east area of the city in red, and the residential properties in the north-west quadrant in yellow.

Willmore labeled the blue Chevron property with “$4.7 million from Refinery” and the red area containing the remaining business properties with “$41.9 million from remaining acreage (Residential Excluded)”. He did not provide any label or comparison for the yellow area containing the residential properties. That is not surprising, because all the voters live in the yellow residential area, and Willmore planned to ask them to approve his $10 million per year tax increase on the Chevron property on the April 10, 2012 city election ballot.

Were Willmore’s analysis and claims bogus? The simple and obvious answer – yes – was staring everyone in the face, but nobody else saw through Willmore’s charade.

Willmore performed a biased and deceptive one-sided benefits-only analysis, rather than a true and complete cost-versus-benefits analysis. He only compared the benefits of tax revenues generated by Chevron with those generated by all the other business properties, but he completely ignored the cost to provide and maintain city infrastructure and services on the massive 951-acre Chevron property (zero cost) versus in the land areas occupied by the other business properties (large cost) and the residential properties (even larger cost) in the city.

Look at Slide 7 and study it carefully. Look at all the streets everywhere except on the massive Chevron property. Now imagine all the other city infrastructure and services provided along those streets. There are no such streets on the Chevron property, and there are no residents living on the Chevron property. There are no students living on the Chevron property, yet Chevron pays lots of taxes to support the El Segundo schools, while the other business properties east of Sepulveda Blvd. don’t pay any taxes for the El Segundo schools. Their property taxes go to the Wiseburn school district instead.

As you can see in the aerial photograph, no city infrastructure and services are provided within the outer boundary of the massive Chevron property, but the rest of the business and residential areas in the city are provided with large amounts of city infrastructure and services that cost the city a fortune in taxpayer money.

However, Doug Willmore omitted all information about what the city has paid over the years and continues to pay to provide and maintain city infrastructure and services on the massive Chevron oil refinery property (zero), on the land area containing the remaining business properties (very large), and on the land area containing the residential properties (even larger) in El Segundo.

The City does not pay to provide the many miles of streets, curbs, gutters, sidewalks, alleys, storm drains, water pipes, sewer pipes, parks, recreational facilities, trees, landscaping, street sweeping, residential trash collection, and police patrols that it pays to provide for the other business and residential properties in the city.

Why should Chevron be forced to pay for massive amounts of city infrastructure and services that it does not receive? If the answer is because they have the money and someone else wants to take it from them, then that is plain thievery and should be rejected. Otherwise, nobody is safe from such thievery.

The South Bay and beach cities are mostly residential with some commercial development. If the Chevron oil refinery never existed, that property would most likely have been developed as mostly residential with some commercial, like the north-west quadrant in the city. That has been the historical development pattern in the South Bay and the beach cities. In that case, the city and the El Segundo Unified School District, to which the city provides financial assistance, would have to pay to provide infrastructure and services to twice as many residents and students. The school district would have to double its budget to pay for twice as many schools, teachers, and administrators.

But there was even more deception perpetrated by fired City Manager Doug Willmore (and by Mayor Eric Busch who put him up to the Chevron Shakedown).

Mayor Carl Jacobson was correct when he said at the City Council meeting that comparing the amount of tax revenue generated per acre for different types of businesses is a farce. Under that standard, we might not have any farms and agriculture production in California. Clearly, using an arbitrary and artificial standard of tax revenue generated per acre would promote the type of high-density development that El Segundo residents have rejected in the past. In 1992, El Segundo voters elected three slow-growth City Council candidates – Carl Jacobson, Michael Robbins, and Richard Switz at a time when the 20-year re-write of the City’s general plan was a hotly contested issue due to excessive development densities.

It is not fair, not reasonable, and not good public policy to charge businesses taxes such that every business must generate the same amount of tax revenue per acre as the highest tax-generating businesses. Otherwise, many types of businesses could not exist. If a very popular fast-food restaurant moved into the city, and generated much higher sales tax revenue in a small land area compared to all the other restaurants and businesses, would it be fair, reasonable, and good public policy to increase taxes on all the other restaurants and businesses in the city, and possibly tax them out of business or out of the city? Of course not.

Business taxes should be based on the fair market value of the city infrastructure and services demanded and used by the businesses, and not on the insatiable appetite of the city employee unions for wildly excessive and unsustainable salaries, benefits, and pensions given to them by city council members whose campaigns they supported.

The city cannot justify raising any taxes or fees when it has not been fiscally responsible with the taxes and fees it has already collected, and in any case, should not be raising taxes during a recession.

Mayor Eric Busch, Mayor Pro-Tem Bill Fisher, and fired City Manager Doug Willmore have put Chevron through a lot of misery, dragging their good reputation through the mud after Chevron created this city, El Segundo, named after Chevron’s second oil refinery in California. They did this to find money to pay for the wildly excessive and unsustainable firefighter and police union compensation and pensions, which have been consuming General Fund revenue that was supposed to pay for routine infrastructure maintenance and capital improvements.

If a true complete and accurate cost-versus-benefits analysis shows that Chevron’s taxes are too high, will the City Council reduce Chevron’s taxes, possibly pay Chevron a refund for taxes it has overpaid, and issue an official public apology?

I explained this line of reasoning and I asked that question repeatedly at multiple City Council meetings, but I never got an answer.

After all, Mayor Busch, Mayor Pro Tem Fisher, and their City Manager, Doug Willmore, raised the question about Chevron’s taxes. Therefore, they should be willing to live with the honest answer, whatever it may be.

Michael D. Robbins
Former El Segundo City Councilman
Director, Public Safety Project

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