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Tanker owners prepare for court fight against tax Valdez expects suit over assessment imposed by city to fill gap as oil and gas property taxes decline by The Associated Press
Owners of oil tankers that ply Prince William Sound are set to go forward with a lawsuit over Valdez’s city vessel tax.
Leon Vance, attorney for Alaska Tanker Co., Chevron Shipping, Polar Tankers (formerly ARCO Marine), and Sea River Maritime, said in July that he has not discussed a definite time with his clients to file litigation.
Earlier in July he told the Valdez City Council, which rejected an appeal by industry to alter its taxation formula, that the tax and its methodology were of nationwide importance.
“National interests are at stake here,” Vance said. “What Valdez is doing is not a purely a local matter.”
The city is preparing for a court fight.
“There’s nothing left to settle — they either can pay or pay under protest and proceed to litigation,” said city attorney Bill Walker. “I am anticipating that.”
Walker said he expects the tanker owners to file litigation before the end of the year.
Valdez says, as a municipality, it is permitted under state law to tax the tanker fleet, plus other boats longer than 95 feet, to replace property tax revenue that has dropped as the state-assessed value of the trans-Alaska oil pipeline and Valdez tanker terminal has dropped. Decline in property taxes City mayor Dave Cobb told a legislative committee during the last session that Valdez has experienced an annual 7 percent decline in oil and gas property taxes since 1990. He said the city has reduced its operating budget 24 percent over the last four years and cut 16 percent of its employees.
The city stands to reap $1.8 million in tanker tax revenues this year, and plans to store the money in the Valdez Community Hospital capital improvement project fund.
The specific tax methodology used by Valdez has not been tested in the courts, both Walker and Vance said. If Valdez’s tax were to stand, tanker owners could faces similar taxes in other ports of call.
Vance said his clients currently are not paying a property tax at any other location.
On July 11, Vance had asked that the city overturn the methodology used to assess 24 tankers.
The city’s apportionment formula takes the assessed value of a vessel and multiplies it by a ratio of days spent in the Port of Valdez, then divides that number by the total number of days spent in all ports in a tax year.
For example, if a vessel is assessed at $50 million, and spent 20 days in Valdez and 200 days in all ports for the year 2000, the ship owner would pay $100,000 to the city under a 20-mill property tax rate.
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