Whatcom County and BP Cherry Point refinery have settled a 3-year-long tax dispute over how valuable the refinery is, releasing millions in back taxes that other taxpayers had to make up for in the interim.
BP will wind up paying more than $4.6 million in back taxes, plus interest.
With the Aug. 9 settlement, the refinery wound up saving more than $4.8 million in taxes for that period, and any interest that would have accrued on that amount, according to county documents.
BP West Coast Products appealed its assessed value in 2013 (for 2014 taxes), when the Whatcom County Assessor’s Office increased its assessed value from $823.8 million to $975.1 million.
BP also appealed its assessed value the next two years while working through the appeal process. During that time, the refinery was paying taxes as if it were valued at $700 million, rather than the county’s higher assessed figures.
Whatcom County and BP were set to have a hearing before the state Board of Tax Appeals when they settled in early August.
Below are the county’s assessed values vs. the settled value:
▪ 2013 (for 2014 taxes): $975,095,347 assessed value, $795 million final.
▪ 2014 (for 2015 taxes): $1,083,695,347 assessed value, $905 million final.
▪ 2015 (for 2016 taxes): $1,077,662,304 assessed value, $840 million final.
“Each year had their own peculiarities,” said Keith Willnauer, Whatcom County assessor. “(BP) wanted to discuss market-relative conditions. That’s why the numbers look like they fluctuate. They do fluctuate because of changing and relevant market-based conditions.”
Many aspects go into those types of considerations, Willnauer said, but an example might be the difference between the cost of crude oil and the market price for gasoline.
While for residential properties, his office might look directly at the sales of comparable houses, Willnauer said that for commercial and income-producing properties such as the refinery, income plays a larger role in assessing the value.
“We spent a great deal of time in probably 30 or 40 different specific petroleum industry areas,” Willnauer said. “I would continually try to inject into the discussion that our refinery location here at Cherry Point, this particular location with its personality so to speak, has any number of desirabilities that you would find hard to match in a lot of other locations.”
There’s a deep-water port in a rural setting that is fully built with a pier and rail loop which make this a great place to be refining, Willnauer said.
“Then that began a discussion about community and governmental interference and whether or not it was all as great as I made it out to be,” he said. “And whether or not the future looked as good as I was implying that it did.”
Effect on other taxpayers
While BP was paying under the lower value, the levy rates on other taxpayers in those districts had to be adjusted, Willnauer said.
“The levy rates that are applied against taxpayers go upward in order to make up the difference that BP wasn’t paying during those years,” he said.
For a $250,000 property, taxpayers in the same tax area as BP would have paid $78 to $130 more per year on their taxes from 2014 to this year, while taxpayers in other districts would have paid a much smaller extra amount, maybe as little as a few dollars extra per year, Willnauer said.
Taxpayers’ rates will be adjusted to make up for the higher rate during the appeal, but the settlement still resulted in an 18 percent reduction for the refinery from what the county had asked for, so other taxpayers will still foot a larger bill than they would have.
The Assessor’s Office is working on the assessed values for next year’s taxes, and the value for the refinery next year was not included in the August settlement, Willnauer said.
But after the work that went into this process, Willnauer said he would like to think the parties walked away with a better understanding of each other, which could help avoid appeals in the future.
“Because we are discussing the value again, we’re starting right from where we left off from pounding for three years on all of those things,” he said. “It brings it all into perspective much more effectively and tends to crystallize the areas you can both agree need extra attention or consideration, which helps get to the bottom line quicker.”