Special Email – Doug Willmore tried to convince the next City Treasurer Chris Powell to support his proposed $10 million tax hike on Chevron

[ NOTE: This released email was missing the preceding text. ]

them more and having them subsidize Chevron’s obligation to pay a fair share for the operations of the City).

For a variety of reasons, CA tax structures for many cities are all over the map. Cities across CA have created all sorts of different taxes to compensate for Prop 13’s impact on commercial property. As a result, you end up with taxes that inversely impact some businesses and not others. That’s what we have here in El Segundo.

According to the analyst I spoke to at Oppenheimer, CA refineries as a whole are the most profitable in the US, and this one is the highest volume and, in their opinion, the most profitable refinery in CA. I don’t buy at all the pulling up stakes and moving or shutting down argument. The CA market is a huge market and Chevron will be a player here regardless of whether their tax burden in El Segundo is $5M or $15M. The business model here in El Segundo, given the marine terminal and given the pipeline to LAX among other things, can’t be beat. The same threats of closing were made in Richmond 2 and 3 years ago. And yet, despite being the highest volume refinery in the state, their taxes here in El Segundo, by almost any meaningful measure or ratio are half of the next lowest refinery, and in some cases ¼ of other large refineries. Rod’s response to me is that he can’t verify the numbers.

I have not yet heard any argument from anyone that sincerely makes a case that the tax burden shared by Chevron and the rest of our business community is a fair split. If there is an argument that someone has to make supporting the current arrangement, I’d love to hear it. All I have heard is that we need more time to talk. Which is fine if there is a commitment to a resolution. However, Eric never heard back from Frank if there was a commitment to a resolution from Chevron on this. If there is no commitment to a resolution, where does that leave us? It takes two to tango.

Doug

From: Chris Powell [mailto:CPowell@washingtoniron.com]
Sent: Wednesday, January 04, 2012 3:01 PM
To: Willmore, Doug
Subject: RE: How does this look?

Thanks Doug. I will take a look at it. This is definitely a better comparison than comparing different general plan zones within the city. Have you also been comparing M 1 zone acreage rates in various surrounding tax jurisdictions? I wasn’t sure if that was a valid comparison as well.

Chris J. Powell, CFO
Washington Iron Works
310-217-9130

From: Willmore, Doug [mailto:dwillmore@elsegundo.org]
Sent: Tuesday, January 03, 2012 7:16 PM
To: Chris Powell
Subject: FW: How does this look?

Chris,

Attached is a summary of the five largest refineries in municipalities in CA and their resulting revenue ratios. As you can see, El Segundo lags far behind the rest when you look at their relative contribution to the city.

Let me know if you have any questions.

Doug

From: Cullen, Deborah
Sent: Tuesday, January 03, 2012 6:05 PM
To: Willmore, Doug
Subject: How does this look?

Deborah Cullen
Director of Finance/Human Resources
City of El Segundo

Note by Michael D. Robbins on March 23, 2012:

Doug Willmore is taking the approach of “Chevron has money, and I want it, so I am going to take it from them!” That is plain thievery, and if it can be done to Chevron, it can be done to any individual or business.

Willmore wrote in this email thread, “According to the analyst I spoke to at Oppenheimer, CA refineries as a whole are the most profitable in the US, and this one is the highest volume and, in their opinion, the most profitable refinery in CA”.

Compare this with the Los Angeles Times article, “Refinery business is a drag on Chevron earnings”, by Ronald D. White on January 27, 2012, 9:02 a.m.:

“If you are in the upstream part of the business, drilling for oil, you are making money,” said James L. Williams, an energy economist and owner of WTRG Economics, based in London, Ark. “If you are downstream, in refining, you are losing.”

Chevron’s downstream refinery business lost $204 million in the fourth quarter, compared with a profit of $475 million a year earlier. The losses were occurring even as several U.S. refiners scrambled to find overseas customers, logging record U.S. export totals.

You can read the full article at either of the two following links:

Los Angeles Times article, “Refinery business is a drag on Chevron earnings”, by Ronald D. White on January 27, 2012, 9:02 a.m.

http://www.latimes.com/business/money/la-fi-mo-chevron-earnings-20120127,0,6382390.story

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