Yesterday we reported on Valero Energy Corporation’s attempts to get a tax exemption from the state of Texas for upgrades it made to its refineries. The money comes in the form of a property tax exemption from local appraisal districts, which could mean money lost from already-short school and city budgets. Looking at the arguments for and against, we examined Valero’s financial earnings and concluded that one of the arguments against is that they might not need the money in the first place.
Today, Valero announced earnings for the third quarter of 2011, and they are having a banner year thus far. Their net income was reported at $1.2 billion, as opposed to $303 million for the same quarter last year. For this year so far, they have a net income of $2.1 billion. These were Valero’s best quarterly results in over four years, according to the company’s CEO and Chairman, Bill Klesse.
What is responsible for the company’s good fortune?
Higher gas prices, for one, in this case increased costs for the diesel and jet fuel the company refines and sells. The company also added refineries to its portfolio in Britain and Aruba.But with such positive financials and the potential for negative PR, why is Valero going after millions of dollars in tax breaks from local communities? “We’ve always paid our taxes, we have a problem overpaying our taxes,” says Bill Day, Valero’s spokesman. “Is overpaying our taxes in the interests of the community? Should the teachers in Houston overdonate their time?”
Day maintains that “the huge numbers people are talking about are false — they don’t take into account that Valero isn’t seeking a refund for past years, or that state is considering a partial exemption.” If the tax break were approved tomorrow, Day says, it would only be for the following tax year and tax years going forward. And the company claims that the assessed value of the equipment is going to be much lower than what they paid to purchase and install them. “It’s much, much lower,” Day says.
How much lower? We won’t know until the assessments are made, which would only happen after the TCEQ approves the tax breaks. So while opponents are coming up with numbers as high as $135 million, Valero expects to see a much lower number, though it won’t say by how much.
Tomorrow, StateImpact Texas will be reporting on a hearing at the Texas Commission on Environmental Equality (TCEQ) that will hear from parents, teachers, officials and environmentalists opposing the tax break. Will Valero be there? “We don’t expect a decision this tomorrow,” Day says, “so we don’t have anyone on the speaking agenda.”
But with all of the opposition, and a potentially minor financial benefit of the refunds themselves, is it worth Valero going to all the trouble? Day seems to think so. “We can handle the public relations aspect of this,” he says.