Oil refineries seek huge tax refunds
Tuesday, September 27, 2011
PASADENA, Texas (AP) — Some of the nation’s largest oil refineries are seeking huge tax refunds that could force school districts and local governments across Texas to give back tens of millions of dollars they were counting on to pay teachers and provide other services.
The refineries want the tax breaks in exchange for buying pollution-controlling equipment. But the cost to public schools would be dear, coming only months after lawmakers slashed education spending by more than $4 billion.
If a three-member commission appointed by Gov. Rick Perry grants the refunds, nearly half the money would be taken from schools. Classrooms in cities with refineries would be hurt most.
“We were already cut at the knees as it is, but more cuts? It’s appalling,” said Patricia Gonzales, a single mother of twins at Park View Intermediate School in Pasadena, a refinery town just south of Houston.
She is president of the parent-teacher organization, which was created this past summer after budget cuts left the school without basic supplies such as pencils and paper towels.
The Texas Commission on Environmental Quality is evaluating 16 refund requests that could add up to more than $135 million, according to county tax data and application documents analyzed by The Associated Press.
What’s more, if the commission grants the requests, at least 12 other refineries that have not sought a refund also could qualify.
On Monday, about a dozen community activists handed out fliers in Pasadena as they conducted a mock bake sale offering $10,000 cookies, brownies and cupcakes to draw attention to the problem.
Gonzales lives near a miles-long stretch of refineries, where massive pipes and stacks light the night like skyscrapers do in other cities. An intense odor of burnt chemicals hangs over the town.
“There are days when we can’t go out because our children’s asthma is that bad,” she said. “And then they want money back?”
The state commission expressed some support for the refund last year, raising speculation that it is preparing to side with the industry.
Beginning in 2006, the Environmental Protection Agency began requiring refineries to remove sulfur dioxide from diesel and gasoline, and many refineries had to either upgrade existing “hydrotreater” units or purchase new, more effective equipment.
San Antonio-based Valero Energy Corp. argues that the units should qualify for a tax exemption under an amendment to the Texas Constitution that says industrial plants don’t have to pay taxes on equipment purchased to reduce on-site pollution.
Valero first asked for the refund for six of its refineries in 2007. Since then, at least four other companies have asked for the same retroactive refund.
Valero’s initial request was denied. The company appealed, and the panel’s chairman, Bryan Shaw, said last April that the Legislature probably intended a broader interpretation of the law. He instructed his staff to research whether they could award partial exemptions to Valero.
Shaw declined to comment, saying it could present a conflict because the issue will be brought before him again.
Valero could potentially get a refund of more than $92 million, but company spokesman Bill Day said executives believe the final refund would be much smaller. He said appraisers will probably estimate the value of refinery properties below the amount submitted by the company.
There is no timeline for a ruling. The slow pace of the decision has put municipalities and school districts in the position of collecting and spending money they could be forced to return.
Schools alone could be forced to fork over $62.8 million, according to data compiled by the AP.
In smaller, more rural counties — where property taxes from heavy industry provide a big chunk of funding for schools and government services — the effect could be even greater. For example, in Moore County, where a Valero refinery is seeking two exemptions, a $15.8 million refund would amount to more than $720 per person.
“If it was a good year and property values were up, it wouldn’t be so bad,” said Hugh Landrom Jr., president of Hugh Landrom and Associates, an engineering firm that does industrial appraisals for Galveston and other counties that are home to large refineries and chemical plants.
But the pain is “compounded by the state budget cuts that are being passed down to everybody,” Landrom said.
If the abatements are approved, all Texas schools would be affected. Refinery towns would be hurt the most.
“The dollars that are lost by these school districts directly affect the children of the employees that help make these companies what they are,” said David Hodgins, consultant and attorney for the Texas Association of School Administrators.
The Pasadena schools will have to refund $11.3 million to two refineries, according to the AP analysis.
The school where the Gonzales children attend class has laid off eight staff members and is asking parents to donate money to pay for basketballs, volleyballs and even gloves for the science teachers.
The Valero spokesman insisted the refund would not “be a disaster.”
“I guarantee you, it’s not a surprise to the school districts,” Day said. “Yes, they spent the money. Yes, we’re asking for an abatement on our pollution-control equipment. ... But this is really no different than a homeowner appealing their property tax, just on a larger scale.”
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