BP pushes back against county's tax assessment

Published on Thu, Mar 27, 2014 by Brandy Kiger Shreve

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Whatcom County’s two oil refineries are disputing their 2014 property tax assessments and putting millions of dollars in limbo while the county and the refineries sort out the numbers in what looks to be a lengthy appeals process.

Both the BP Cherry Point and Phillips 66 refineries, which are respectively the  county’s largest and second-largest taxpayers, have filed appeals with the Washington State Board of Equalization claiming that they have been overvalued and their property taxes are too high.

Phillips 66’s appeal seeks to have its 2014 assessed value of $459 million shaved down by $32 million while oil industry giant BP wants their $975 million assessment to drop by a daunting $275 million. 

That lower assessed value would reduce BP’s property tax bill from $10.34 million to $7.44 million.

Those are big numbers with big impacts for property owners who live in Whatcom County, and particularly the Blaine School District. 

“Property tax is budget-based,” said Whatcom County assessor Keith Willnauer. “The amount of property tax to be collected is set by the districts, and many of the districts overlap. The actual rates fluctuate based on the assessed value of the district and because BP is in the Blaine school district, historically [that district] has had low tax rates because BP pays a pretty healthy share of the levies in that district.”

Willnauer pointed out that in the past 20 years, 95 percent of property tax increases in Whatcom County have been because of voter-approved levies. Once the levies are set by voters, Willnauer divvies up the payments between property owners according to each property’s value and the total tax base available in each district. “If my property is assessed twice as high as my neighbor’s, I’m going to take on twice the burden,” he said. 

With BP balking at their assessed valuation, Willnauer said other property owners will be doling out more to cover the gap. 

“The other taxpayers in the district have to make up the difference,” he said. “No taxing district ever collects less money when someone’s assessed value decreases. It just means other people’s taxes go up.”

BP spokeswoman Pam Brady said the company filed an appeal after its 2013 assessment, which was used to determine 2014 tax payments, came in at $975 million. “It’s 18 percent higher than last year,” Brady said, “which the company views as over-assessed in the current climate.”

On the form used to appeal the valuation with the Whatcom County Board of Equalization, Houston-based BP senior tax representative Gavin Russo argued that if Whatcom County used the same formula Skagit County uses to assess its own refineries, BP’s assessed value would be about $710 million, not $975 million. 

To justify that claim, Russo asserted that the “assessor has ignored data on refinery sales in the U.S.; the current proposed value exceeds valuation on a per-barrel basis for similar properties in Skagit County and has ignored current market conditions.” He included an income statement for the refinery and a sales report listing recent transactions in Texas, California, Ohio, Delaware, Pennsylvania, Oklahoma and New Jersey going back to 2009.

Two of the transactions were refineries BP sold in 2013. 

Russo added that if the assessor were to look at just strictly market value, the appraisal would be more appropriately set at $450 million.

While appeals are not unusual, Willnauer said he was surprised to see both of the county’s largest revenue generators challenging their valuations by so much. “We’ve never had an appeal from them before,” Willnauer said, citing a fairly steady valuation assessment and increase over the past seven years.

Willnauer said that because the refinery properties are “complicated,” he and his staff rely on the Washington State Department of Revenue for assistance in valuing the properties. 

“The basis for determining a valuation is well-defined,” Willnauer said. “There aren’t a lot of refineries around in Washington state – but we use the advisory appraisal committee to apply the same uniform principles for determining the value of the different properties and to make sure everyone is getting a fair assessment. These numbers we are looking at now were determined by that advisory appraisal.”

While the state tries to figure out what the true value of the property in question is, Willnauer explained that under 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 tax districts would need to make big refunds if the property owner wins the appeal.

For 2014 tax purposes, the BP Cherry Point refinery will be valued at $700 million, and will pay only $7.44 million in property taxes – almost a million less than what they paid in 2013 taxes when the refinery was assessed at $824 million. 

If the state sides with the county’s assessment of the property, BP will be responsible for paying the difference along with interest. 

Squaring up the amount the refinery should pay will not be a quick process, since the state appeals board is currently backlogged. Willnauer said it may be more than a year before the issue is resolved.

“I’m not interested in anybody paying the wrong share,” Willnauer said. “My job is simply to get the value right so that the distribution is right and everyone is paying their fair share.”