Court Scuttles Oxy Tax Decision

Bakersfield Californian ^ | 10/29/02 | Davin McHenry

[Kensei]

By DAVIN McHENRY, Californian staff writer e-mail: davinmchenry@bakersfield.com

Tuesday October 29, 2002, 11:17:45 PM

Kern County Assessor James Maples got an early retirement present Tuesday when a state appeal court overturned a multibillion-dollar assessment appeal by Occidental Petroleum Corp.

The ruling means the county and other local agencies could get back $27 million in property taxes they were forced to return to Oxy last year. The ruling, if it stands, could also set the stage for the county and other agencies to finally spend tens of millions they have been setting aside for other potential appeals.

Maples, who will retire at the end of the year, has been battling with Oxy for several years over the value of the corporation's Elk Hills property. Oxy has argued it paid too much in property taxes when it bought the massive former federal oil reserve in western Kern County.

Oxy bought the oil- and gas-rich land from the federal government in 1998 after submitting the top bid at $3.65 billion.

At the time, Maples' staff set the value of the land at $3.65 billion, the same as the sales price. That value was used to calculate the corporation's property tax bill.

But Oxy argued the that figure should have been $1.92 billion, the value of the proven oil and gas reserves.

Oxy has appealed every property tax bill since 1998, but has only pursued the first year in court so far. The remaining tax appeals are on hold until the precedent-setting first year is resolved.

Until Tuesday, Oxy had been undefeated, winning at the local assessment appeals board and in local courtrooms.

But on Tuesday the 5th District Court of Appeals overturned those decisions, saying the county assessor's office was correct. The court did compromise slightly on the price, lowering it to $3.53 billion, but not to the $1.92 billion Oxy had requested.

The latest ruling can be appealed to the state Supreme Court, if Oxy chooses. Oxy spokesman Larry Meriage, said the corporation will study its options.

"We're very disappointed with the appellate court's decision," he said. "We believe the court has made a mistake. We are now analyzing the court's opinion, which will take some time, and then will decide whether to appeal." . . .

The Oxy appeal forced the county to set aside $30 million earlier, in case it lost. That caused a high-profile budget crunch two years ago.

The county also had to return $8 million last year, which was its share of the $27 million in disputed property taxes from 1998.

The county's share is only a portion of the disputed taxes, which total more than $113 million plus interest. Local schools and special districts have also had to return millions. The school money was backfilled by the state, but water agencies, park districts and other special districts have had to find the money from their own budgets.

Despite Tuesday's ruling, county administrators warned the fight is not over. An appeal by Oxy is likely and could take more than a year if accepted by the Supreme Court.

And even if the court rules in the assessor's favor, the county could still face a fight in Oxy's other appeals, administrators warned.

"They have other issues in those appeals that are not related to the first year," said Jeff Frapwell, county budget director. . . .

Even if the county does get all $38 million back, administrators said they have no plans on how to spend it. . . .

[Kensei]

Occidental purchased Elk Hills for $3.65 Billion based on its estimate of the value of all oil and gas within the property but claimed that, under a California tax regulation, that most of that value was a mere expectancy and that the taxable value of the property was $1.9 Billion.

How would you like to buy a house for $100,000 and then get a serious hearing from the government on an argument that the house was worth $40,000.

While it is pretty clear that "taxation is theft," it would be nice if everyone was "held up" to the same extent.