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Tesoro may be facing higher taxes this year Kenai refinery assessed at $124 million by borough, company put value at $60 million, may challenge decision in Superior Court The Associated Press
Tesoro may have to pay Alaska’s Kenai Peninsula Borough more taxes this year than it originally hoped in what has been a dispute over the value of its refinery.
The borough’s board of equalization decided in early August to uphold the assessor’s value of the refinery of $124 million. The amount equals $1.5 million in property taxes for the refinery alone, and does not include taxes for the plant’s land and personal property.
Tesoro fought the assessment saying the refinery is worth $60 million. That is $10 million more than Tesoro said the plant was worth last year.
The conflict lies largely in differing opinions on the future of the plant and how its bottom line was calculated.
“We’re disappointed with those decisions,” said Steve Hansen, vice president of refining for Tesoro Alaska. “I would like to have property tax stability.”
Hansen said the company is still deciding what its next course of action will be. He said they could either appeal the decision to the Superior Court or accept the ruling.
Tesoro is still appealing last year’s decision.
Every year, the borough assesses the value of the four industrial plants in North Kenai based on the fair market value.
The final value is used to determine the amount of property tax paid. If the borough’s value is different than what the company thinks it is worth, then the issue goes to the board of equalization, which makes a final ruling. Figures are used from the previous year to determine the property’s assessment. Property taxes up 83% since 2000 This is the fourth time since 1995 that Tesoro has appealed the refinery’s assessed value. The oil refinery’s property taxes have increased 83 percent since 2000, Hansen said.
When the refinery’s assessment was calculated, three factors were considered: the cost to replace the refinery, the income it generates and a comparison to other refineries.
Borough assessor Shane Horan said the income generated by the refinery played a big role in the borough’s final number this year.
Tesoro’s North Kenai refinery is sitting on its highest gross sales and profits in five years, according to the borough assessment.
The refiner’s gross sales topped $1 billion in 2004 — almost $400 million higher than they were the previous year, according to the assessment. Its profits were about $85.8 million in 2004, according to the assessment. In 2003, profits were about $39.2 million, according to the assessment.
“In the reconciliation of all three approaches, the income was felt to be the most reliable indication of value for that refinery,” Horan said.
This year the borough, with the help of a contractor, audited Tesoro’s North Kenai refinery. The audit concluded that the value of the personal property was about $6.4 million this year. Tesoro claims its personal property this year is worth about $431,000.
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