Leaders of San Antonio-based Valero Energy Corp. should consider forgiving Texas City Independent School District the $8 million it’s supposed pay in tax refunds over the next three years.
Doing so might turn out to be the most cost effective public relations campaign the company has ever mounted. It would also be in the company’s best interest from a practical business perspective.
At issue is a settlement agreement between Valero and the Galveston Central Appraisal District over the taxable value of the company’s Texas City refinery, 1301 Loop 197 S.
The settlement announced in June sets the taxable value of the refinery at $500 million. The property had been assessed on the tax rolls at between about $650 million and $700 million from 2013 to 2016.
The agreement was retroactive, meaning taxing jurisdictions that based their levies on the appraisal district’s assessment are obliged to refund part of what they collected in taxes during those three years.
That comes to about $15 million owed among Galveston County, the city of Texas City, the school district and College of the Mainland. The school district is by far the hardest hit, though, owing $8 million, 53 percent of the total. The district is expected to repay that over three years, a little more than $2.5 million a year.
This burden comes at a time when the financial burden on Texas public schools already is considerable, thanks to a flawed funding system the legislature so far has been unable to correct.
Texas City ISD is a case study in the problem, in that it stands to lose another $12 million or so if lawmakers fail to restore a program meant to supplement revenue losses incurred when the legislature ordered statewide reductions in school tax rates.
The legislature also has capped the tax rate so the people can’t tax themselves at higher rates to offset the declining property values, even if they wanted to.
There’s an argument that industrial taxpayers such as Valero Energy Corp., by routinely challenging taxable assessments, are abusing a provision in state law meant to protect workaday residential property owners.
Whether that’s true of not is beside the point in this case.
Valero’s corporate leaders should be asking themselves whether squeezing $8 million out of Texas City ISD will have been worth $8 million when all is said and done.
Just the idea of it already has created plenty of ill will among the people and leaders of Texas City. Unlike many industrial businesses, Valero conducts retail operations where ill will can have a measurable effect on revenue.
And there are other practical downsides.
The refining of petroleum products isn’t a transient business. Valero has a tangible stake in Texas City and Texas City ISD, which it must rely on for skilled workers. Its own employees have children in Texas City ISD schools. The best of those will leave if the school district declines. We’re willing to bet that a significant number of Valero employees have a spouse who works for Texas City ISD.
While no layoffs are planned for next year, they may be coming in a few years.
Is banking $2.5 million a year worth all that to a company reporting quarterly net income on the order of $600 million?
Valero is not alone in mounting appraisal challenges, of course, but it’s becoming the corporate poster child for that because it has been so aggressive about it. That’s odd because it has a good reputation compared to most other companies in the energy industry. Is another $2.5 million a year worth the brand corrosion alone? It’s hard to see that it is.
Valero leaders should celebrate their victory against the appraisal district and mark it down as a boon for future operations, but find a way to leave that $8 million where it is. Maybe call it a donation.
• Michael A. Smith