Counties face paying energy company millions

August 8, 2006

Valero Energy Corp. is suing appraisal districts nationwide arguing that assessments for properties ranging from convenience stores to refineries are overvalued. Valero is the largest independent refining company in North America, with six refineries in Texas and about 5,000 retail stores nationwide. Valero reported second quarter net income of $1.9 billion for 2006.

The company pays millions in property taxes, but property appraisers have doubled the value of several properties, and that's not fair, the company says.

San Antonio-based Valero's appeals cover several years of property assessments, with millions of dollars in already-paid tax revenue at stake and the prospect for county governments of paying millions more in legal expenses.

The 150 lawsuits filed against 42 Texas appraisal districts have been brewing for years. But the cases are heading to court at a time of record Valero profits and an unprecedented number of corporate and individual taxpayers protesting their assessments.

Contesting property appraisals is a national trend among companies, but it has grown stronger in Texas during the past decade because of the state's increasing reliance on property taxes to fund the state budget, said J. Andrew Hansz, professor with the finance and real estate department in the College of Business at the University of Texas at Arlington.

Valero, which reported a profit of $3.6 billion on $82 billion in revenue last year, paid more than $138 million in property taxes nationwide in 2005, up from $113 million in 2004, according to spokeswoman Mary Rose Brown . More than half its total property taxes are paid in Texas, she said.

Property appraisers across Texas say Valero is taking an aggressive, hard-nosed approach that borders on abusive because of the low valuations Valero is seeking.

Brown said, "We are taking the same approach we have used since the inception of the property tax code in 1982. I believe most folks would consider it 'abusive' if their property tax appraisals jumped fivefold in a single year."

"Some people might be tempted to say that gas prices are up, so our property values should be up, too," Brown said. "But you have to remember, this is supposed to be a property tax — not an income tax."

"There is a lot at stake," said Robert Mott, attorney for the Bexar Appraisal District and a dozen others in Texas. "Basically, if Valero prevails, somebody has to pay that refund. And above all, someone has to pay the cost of litigating these things, and that's other property owners."

During the past two years, Valero has taken five cases regarding its property to jury trials — four in Harris County and one in Beeville. Valero won the Beeville case and got some favorable results in Houston.

"It is important to note that we are not alone in our belief that we have experienced overly inflated evaluations," said Brown, adding that juries reduced the value of Valero's property in four of the Harris County trials by as much as 76 percent.

Texas courts have historically held that wholesale or book cost does not equal market value for property taxes, Brown said.

"This is all about corporate greed," said Ken Nolan, chief appraiser in Dallas County, where Valero is contesting the value of more than 80 gas and convenience stores from 2002 to 2005. "It's about corporations not wanting to pay their fair share."