Questions & Answers

Why was the MRC Draft Report so far off?
What was at the heart of the 1994 settlement agreement?
Why did Carl say he didn’t remember?
Did our schools lose out on millions of dollars because of this 1994 agreement?
Are the other El Segundo businesses subsidizing Chevron?
Is Chevron paying its fair share?
Why can’t you easily compare refinery revenues?
What makes Chevron unique from other businesses in town?
Do other cities exclude equity gas from UUT?
What about El Segundo’s overall taxation structure?
Why was the franchise fee for Chevron’s pipeline to LAX reduced?
What are Carl’s thoughts on our pools?

Why was the MRC Draft Report so far off?

The MRC report didn’t include any actual information from Chevron. It was based solely on estimations of other refineries and extrapolations from that. In a letter from MRC’s lawyer, Donald Maynor, to El Segundo City Attorney, Lee Dolley, Maynor stated “MRC and I were very pleased that the City and Chevron decided to share with us the essential components of their proposed settlement agreement. As I mentioned to you at that meeting, we found that the settlement was within the “ballpark” or the range of reasonableness of a good faith settlement.” “Chevron’s extremely low internal cost of “equity” gas was one of the primary reasons Chevron’s overall “cost of gas”, for purposes of calculating the City’s utility user’s tax, produced a much lower tax obligation than MRC’s initial tax estimate.” (return to questions)

What was at the heart of the 1994 settlement agreement?

Refineries use or repurpose almost all the raw materials that come into their facilities, utilizing their waste products to create energy sources and other products. The taxation structure of a refinery is unique because it uses its own source product to generate electricity. This electricity is subject to the same UUT taxation rates that other businesses pay. These facts can be seen when you read the 1994 Chevron Settlement Agreement. At that time the City had to review the concept of double taxation (Chevron uses the fuel they produce to burn in their cogeneration facility to create electricity). Both MRC and Chevron were ready to sue the City based on various positions they contended. When working to resolve the disputes between MRC, Chevron, and the City, the City Council, City Manager, and City Attorney had to address many small details, at which point the settlement was reasonable, based on the City's and Chevron's supporting documentation. The council unanimously approved the settlement in an open session. (return to questions)

Why did Carl say he didn’t remember?

I think my daughter answered this one quite well…

“KCET blindsided Carl in city hall on his way into a council meeting from closed session. (Closed sessions happen before almost all council meetings.) He had NO advance warning of the interview or what he was going to be asked. He would not have provided an interview until he researched the topic. He prefers to be prepared and informed before voicing opinions.

Do you remember where you were on Feb 1, 1994? Were you at the city council meeting voicing your opposition to a legal settlement that was “highly recommended” to the council by the City Attorney and Management of the City? If so, I wish you would have spoken during public communications, as not a single person spoke about the settlement agreement…for or against. Settlements come to council for final approval, but council isn’t intimately involved in the drafting of the settlements. That is done by the lawyers and city management, with only guidance from the council, which is why Carl didn’t have immediate recollection of the issue. The council unanimously voted in favor. It was a non-issue at the time. As noted by lawyer for MRC (aka bounty hunter), it was within “the range of reasonableness of a good faith settlement.” 18 years later, Carl agrees that all revenues need to be reviewed.” (return to questions)

Did our schools lose out on millions of dollars because of this 1994 agreement?

Since the MRC draft report was a pure estimate and the actual revenue numbers were significantly lower, the simple answer is no. Additionally, any money collected would have gone to the city and not to the schools. The city cannot directly support the schools, but I have been creative in finding ways to support our schools. In 1991, I was instrumental in the City-School library affiliation agreement that has the City operating the libraries in the 4 schools, allowing the school district to save their money and have a quality library program for each school. I also helped create the Joint Facilities Use Agreement which allows the city to use the various School facilities when not in use by the school district and the school district uses city facilities.

I have always tried to find ways to help the schools, both personally and in my council position. My daughters and now my grandchildren are going through our school system. My wife was a Kindergarten teacher in the ESUSD for 12 years. I was a charter member of the Ed Foundation Superintendent’s Roundtable. I was an active member on many of the successful bond committees that were for school infrastructure repairs. I have supported our schools for over 30 years and will continue to do so because our schools are integral to our community and our property values.

Chevron is one of our many fine businesses that understands the needs of our schools. This is why they were strong supporters of many of the school bonds, especially the ones that were for school infrastructure. In addition to the various donations they give, they also pay 60% of those school bonds. (return to questions)

Are the other El Segundo businesses subsidizing Chevron?

No they are not. 2/3 of the city budget disappeared when the California Public Utilities Commission (CPUC) required So Cal Edison to switch from fuel oil to natural gas in 1982. At that time, the tax that was generated from Chevron’s sale of this fuel oil all but disappeared. The city had to find a new way to generate funds since Prop 13 had frozen our property tax rate. Together, Business, Industry and Residents formulated a new business license tax that was based on building square footage and number of employees. This made sense for businesses such as Hughes Aircraft (what is now Boeing and Raytheon) who was only paying approximately $800/year. Yet while this was a good solution for many businesses, Chevron realized that this design didn’t fit their situation or that of Allied Signal, Air Products and other chemical company facilities because unlike other businesses, they had very little building square footage and not as many employees. Although Chevron may be the largest company in terms of acreage, today it is only the 7th largest company in El Segundo based on number of employees. Chevron suggested the acreage tax be added to the business license in order to have these unique businesses contribute their share. Additional information on this topic can be found below in "What makes Chevron unique from other businesses in town?" (return to questions)

Is Chevron paying its fair share?

I have said it before and I will say it again…I believe Chevron’s taxation needs to be reviewed. Chevron and the City of El Segundo need to collaborate and establish a thoughtful and balanced approach and not rush to a vote. We cannot simply compare our refinery tax revenue to other cities due to different taxation rates. The taxation structure of all refineries is unique to each community and will require an in-depth review. A city council sub-committee has been established to review the issue of taxation and this sub-committee is currently in discussions with Chevron. I am confident that the sub-committee will provide a thoughtful analysis that will be presented for review during open session at a city council meeting in the upcoming months. (return to questions)

Why can’t you easily compare refinery revenues?

People have been comparing the revenue El Segundo receives from Chevron to other cities’ refinery revenues. However, they aren’t looking at the entire picture. Other cities have higher tax rates. Torrance, home to an Exxon / Mobil refinery, has a User Utility Tax (UUT) of 6.5%. Richmond’s UUT is 10%. Los Angeles’ UUT is 10%. El Segundo's UUT is only 3% (except Telecommunication which is 2%). Measure O, which would have increased El Segundo’s rate to 4%, was voted down by a 10 point margin by the El Segundo voters on November 2, 2010. Additionally, there are many taxes and rates that go into the revenue cities receive from a refinery. The UUT is only one part of this total. (return to questions)

What makes Chevron unique from other businesses in town?

Chevron has over a third of El Segundo’s land area, yet our city does not have to maintain the infrastructure and services on this property. Chevron provides for its own lighting, roads, water mains, sewers, drainage, and day to day safety personnel. Thus the cost per acre should be different for Chevron than other businesses. Is Chevron paying the right rate? Once again, I believe Chevron’s taxation needs to be reviewed. I am happy that we have a sub-committee working with Chevron to reach a constructive solution. This is a complex task. It is extremely difficult to compare refineries. Each city's taxation structure varies. We have built strong relationships with our businesses and must ensure that we nurture those relationships with open communication. I feel confident that the sub-committee and Chevron will determine where there is a gap and what the fair and equitable solution should be. (return to questions)

Do other cities exclude equity gas from UUT?

Absolutely! Here is a letter from the City of Los Angeles explaining that Chevron’s equity gas is exempt from UUT in the City of Los Angeles also. (return to questions)

What about El Segundo’s overall taxation structure?

Being an elected councilmember is more than just fun items like Candy Cane Lane ordinances and Scout recognitions. It is about making the arduous decisions regarding resource allocations to competing priorities for the very fabric of our community. The soundness of our economic footing is driven by our city's revenues from all sources, both residential and commercial, and across all of the industries represented by businesses within El Segundo. We must look at the soundness of our city's revenue stream in an open and equitable fashion by examining the overall tax basis. We must balance the unfunded needs of the city with our business friendly initiatives. These initiatives enabled us to be presented with the Most Business-Friendly City award in 2006.

If additional revenues are necessary, we need to bring the public into discussions and get their buy-in. We do not want to repeat the 2010 election where a Utility User Tax increase was rejected by a large margin by our voters. Because all tax increases must be approved by our voters, we need the community’s involvement and assistance. (return to questions)

Why was the franchise fee for Chevron’s pipeline to LAX reduced?

A recent round of unfounded attacks on me center around the franchise fee that Chevron pays for a pipeline to LAX. Cities used to have the freedom to charge whatever fees they wanted on such pipelines. However, in the late 80’s, the CPUC enacted legislation (CAL. PUC. Code 6231.5) that severely limited the rates that cities were permitted to charge. When the Chevron franchise fee agreement came up for renewal, the city was required to utilize the new mandated rates. This did decrease the total amount collected from Chevron, Shell and Exxon / Mobil pipelines, but it was not something within the city’s control. (return to questions)

What are Carl’s thoughts on our pools?

I absolutely agree that the plunge is in need of repair, but I haven’t addressed it publicly because I want to determine a funding path first. The residents of El Segundo need to have somewhere to swim while the plunge is closed for repair, which will probably take approximately 18 months. I am working on funding opportunities that will allow the city to build another pool for citizens to use, preferably without taking out a loan. Once a new pool has been built, the Plunge can undergo its necessary repairs. I spoke at the council meeting a couple months ago when we were discussing infrastructure projects. During that meeting I stated that a location needs to be determined first so plans can start to get drawn. If the city has plans in the works, we will be in a better position to take advantage of grants and other funding sources that may require fast action. The final result will be two full length pools, which will dramatically reduce scheduling conflicts, allowing more residents from our community to enjoy our pools more often and at more convenient times. (return to questions)

Committee to Elect Carl Jacobson City Council 2012  ID # 1343817   708 Bungalow Drive, El Segundo, CA 90245