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The release of flammable vapor leads to a fire at the Chevron refinery in Richmond, Calif., on Monday, Aug. 6, 2012. (Courtesy of the Chemical Safety Board)

RICHMOND -- Last summer's massive fire at Chevron's refinery here is expected to cost the city and West Contra Costa school district millions of dollars in property tax revenues because the lost business income caused by the blaze has resulted in a huge decline in the facility's assessed value.

City and West Contra Costa schools officials said they were blindsided by news this week of a 14.61 percent decline in the assessed value of properties in Richmond for 2013-14. Richmond City Manager Bill Lindsay estimated that the lowered assessment will cost the city $6.1 million in tax revenues this fiscal year.

Richmond's decline was driven largely by the change in the refinery's valuation. County Assessor Gus Kramer said his office valued the Richmond refinery at about $2.75 billion in 2013-14 compared with around $3.75 billion the previous year. The city as a whole was given a net assessed value of $10.89 billion, a decline of more than $1.86 billion; every other city in the county saw an increase in assessed value.

Kramer said business income is the largest factor his staff considers in assessing the value of industrial properties. The refinery's income went down when the fire knocked out a main crude unit for eight months, he said.

Richmond passed a $144 million budget last week that will have to be re-evaluated in light of the change, Lindsay said.


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Councilman Tom Butt was more emphatic after hearing the news.

"This will destroy the budget we just adopted," Butt wrote in an email.

The news for West Contra Costa schools was brighter despite initial concerns, said district trustee Charles Ramsey.

Richmond comprises about half of the district's total assessment, but the lower Richmond figure will be balanced by increased assessments in the other four cities and the unincorporated areas served by the district, he said.

The total assessed property value in the county as a whole rose 3.45 percent, or almost $5 billion, according to Kramer, reflecting the strengthening of the real estate market. Cities with the largest increases were Brentwood (8.45 percent), Clayton (8.24 percent), Oakley (7.44 percent), Walnut Creek (7.38 percent) and Antioch (7.34 percent).

Lindsay said Richmond was "at a balanced (budget) number, within a few hundred thousand," before the assessment was released.

"We will definitely have to make some adjustments, and the council will have to approve whatever changes we make," he said. "Depending on how much we have to do, it could take until September."

Lindsay said he also wants to know more details about how Kramer arrived at the assessment and why Richmond was the only city in the county to experience a decline.

Richmond council members have been discussing in closed session whether to sue Chevron for damages to the city from the blaze, Lindsay said. More than 15,000 people sought medical treatment after the Aug. 6 fire.

The assessor said he can't reveal how much income Chevron received from the refinery because the figure is confidential.

Chevron spokeswoman Melissa Ritchie wrote in an email that the company believes Kramer's valuation "to be a much more reasonable assessment of the value of our facility."

Ritchie said Chevron does not reveal income or property tax figures for the refinery. The refinery's property tax bill for 2012-13 was $40.1 million, according to county Treasurer Russell Watts.

Despite the current accord, the oil giant has tangled with Kramer in the past.

A county assessment appeals board ruled that the refinery's taxable value as set by Kramer for 2004-06 was too high, and Chevron received a $17.8 million refund but sued anyway, arguing it wasn't enough. Chevron also sought a $73 million property tax refund for 2007-09, but that time the appeals board decided it paid too little, a ruling that cost the company $27 million. Chevron sued in response.

Councilwoman Jovanka Beckles on Tuesday said she was "disheartened" by the news that Chevron may get a tax break that will further strain the city's budget.

"We wouldn't be in a tight budget situation in the first place if Chevron would just pay its fair share rather than fight us and litigate," Beckles said. "And now, to find out that Chevron's willful negligence results in a tax break for them and slashed public services for us is just disgusting."

Ramsey said school district financial advisers have told him that the lower assessment for Richmond will have no effect on the district's plans to issue $120 million in new school bonds this year.

"There were good upticks in the rest of the district, so we'll be fine," Ramsey said.

El Cerrito's assessed valuation is up 5.4 percent, Hercules' 1.85 percent, Pinole's 4.58 percent and San Pablo's 3.75 percent, while unincorporated West Contra Costa's, including Kensington and El Sobrante, is up 4.95 percent, according to Kramer.

Ramsey said he's taking heart in the fact that the Chevron fire probably won't be repeated soon, so the tax effects will probably be reversed in a year, particularly with the housing market rebound.

District officials had said earlier they think Kramer owes it to them to keep them better informed about factors affecting assessments, but the assessor said this week officials should have anticipated the Chevron news.

"Everybody who didn't see this coming was being delusional," Kramer said. "It was a major disaster causing (Chevron) to lose income and value."

Contact Robert Rogers at 510-262-2726 or rrogers@bayareanewsgroup.com. Follow him at Twitter.com/roberthrogers.