Millions in tax dollars at stake as Whatcom oil refineries dispute property taxes

BP Cherry Point is county's top taxpayer

THE BELLINGHAM HERALDMarch 3, 2014 

BP Cherry Point refinery

BP Cherry Point refinery on Sept. 19, 2013 in Whatcom County .

ANDY BRONSON — THE BELLINGHAM HERALD Buy Photo

Millions of dollars in local tax revenue are at stake as Whatcom County's two oil refineries challenge their property tax assessments through a lengthy state appeals process.

By far the biggest potential impact is from BP Cherry Point. The giant oil company contends that the most recent property tax assessment of its local refinery - about $975 million - is at least $275 million too high.

The disputed $275 million is an amount of tax base roughly equivalent to nine Bellis Fair malls, and the property tax that would be collected on that $275 million totals about $2.9 million distributed to a variety of state and local government uses.

The tax dispute highlights the amount of public revenue that the refineries generate.

"BP is the county's number-one taxpayer, and it's a long way from number two, to boot," said Whatcom County Assessor Keith Willnauer.

Number two is the smaller Phillips 66 refinery, which got an assessed value of $459 million for 2014 taxes from Willnauer's office. Phillips is also challenging its current assessment and is seeking an assessment reduction of $35 million.

BP spokeswoman Pam Brady said the company filed an appeal after its 2013 assessment, used to determine 2014 tax payments, came in at $975 million. That is 18 percent higher than the previous year, "which the company views as overassessed in the current climate," Brady said.

In a short form used for filing its appeal with the Whatcom County Board of Equalization, Houston-based BP senior tax representative Gavin Russo argued that if Whatcom County used the same formula that Skagit County uses to assess its own refineries, BP's assessment would be about $710 million, not $975 million.

Furthermore, Russo's appeal states, the assessed value of BP Cherry Point would be only $475 million based on prices paid for other refineries in recent sales in the U.S. He contended that the county's original $975 million assessment "ignored data on refinery sales in the U.S ... .and has ignored current industry market conditions."

Russo backed that up with a list of eight sales of U.S. refineries going back to December 2009.

Today the question of a fair assessment for BP Cherry Point is in legal limbo. Assessor Willnauer explained that under the terms of state law, a property owner is entitled to have a property listed at a figure the property owner believes is fair while the issue is being appealed. That helps avoid a scenario in which the county and other property-tax collecting entities would have to make big refunds if the property owner wins the appeal.

So for 2014 taxes, the BP Cherry Point refinery is listed on the tax rolls at $700 million. The catch: If the county prevails on appeal and the assessed value is raised, BP would owe back taxes and interest.

It is also at least theoretically possible that the State Board of Tax Appeals could agree with Russo's contention that $700 million is still too high, based on the prices paid in recent refinery sales elsewhere. If the board were to decide to lower the assessment below $700 million, BP would be entitled to a refund from the county, the state, and other governments that get its property taxes.

At $700 million, BP's total property tax bill is about $7.44 million, which is $2.9 million less than the company would have owed at the original $975 million.

It is also about a million dollars less than BP paid in 2013 taxes, when the refinery's assessed value was pegged at about $824 million.

That million-dollar drop in overall property tax revenues pushed the property tax rate higher for other taxpayers in 2014, especially in taxing districts such as Fire District 7 and the Blaine school district, where the refinery's taxes make up a bigger portion of the tax base. The city of Ferndale is not inside the fire district, but the city contracts with the district for emergency services. Ferndale's bill for those services was up 8 percent in 2014, mostly because of the district's reduced property tax revenue from both refineries.

Don't expect the property tax dispute between the counties and the refineries to be resolved any time soon, even though the oil companies and Willnauer's office have agreed to bypass the local Board of Equalization and take the matter straight to the State Board of Tax Appeals to save time.

Willnauer said his office is prepared to defend its original assessments for both refineries when the state board schedules a hearing. He said those assessments are based on expert analysis from the Washington State Department of Revenue.

Stephen Saynisch, director of the state appeals board, said it may be a year or so before the hearing is scheduled, and several additional months before the hearing results in a ruling.

"We have a backlog of about 4,000 cases," Saynisch said. "Our funding has been cut and our personnel has been cut as well, so we are, as they say, sucking wind here."

Reach John Stark at 360-715-2274 or john.stark@bellinghamherald.com . Read the Politics Blog at bellinghamherald.com/politics-blog or get updates on Twitter at @bhampolitics.

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