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Monday, Feb 11 2013 09:00 PM

Agencies face one-two punch from Oxy devaluation

BY JAMES BURGER Californian staff writer jburger@bakersfield.com

Kern County school, recreation district, college and water officials are working to assess the impact that a $27.3 million cut in tax revenues will have on their agencies in the next fiscal year.

And they could face a double hit as Occidental Petroleum Corp. also challenges this year's tax assessments -- demanding 18 government entities refund another $27.3 million in taxes it paid during the current fiscal year.

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AGENCIES FACING A HIT

Estimated annual property tax refund due to Occidental Petroleum:

Kern County general fund: $7.4 million

County fire fund: $3.9 million

West Side Cemetery District: $141,054

West Side Hospital District: $268,936

West Side Mosquito Abatement District: $245,661

Buttonwillow Recreation & Park District: $147,765

West Side Recreation & Park District: $330,533

Kern County Water Agency: $264,429

Buttonwillow Union School District: $515,960

Elk Hills School District: $281,616

McKittrick School District: $217,679

Taft City School District: $701,661

Kern High School District: $3.4 million

Taft Union High School District: $1.7 million

Kern Community College District: $1.0 million

West Kern Community College District: $1.4 million

Kern County Superintendent of Schools office: $814,837

Educational Revenue Augmentation Fund: $4.6 million

Total: $27.3 million

Source: Kern County Auditor-Controller

The Californian broke news Saturday that Oxy saw the value of its Elk Hills property plummet by $2.5 billion in 2011, which translates to its annual property tax bill dropping by $27 million.

The Kern County Assessor-Recorder's office found out about the possible problem in July 2012, but it took months to investigate and find out if, indeed, a reduction in the tax rolls was needed, said Assessor-Recorder Jim Fitch.

In the meantime, Kern County passed a 2012-2013 budget in August that relied on $11 million in Oxy money that Fitch's office now says it, indeed, didn't owe.

And other government groups and special districts large and small -- from the West Side Mosquito and Vector Control District to the Kern County Water Agency to the Kern High School District -- were working off tax rolls that were millions of dollars too high.

Nancy Lawson, assistant county administrative officer for budget and finance, said her office didn't hear about the possible hit to the county budget until right before Oxy filed an appeal of its property tax assessment in November 2012.

Fitch said it took until early November to get all the information it needed from Oxy. He said he didn't believe Oxy was being intentionally obstructive.

"It was a confusing time for them to understand what their engineers were telling them," Fitch said.

But that delay, Lawson said, has put Kern County in a tough situation.

Oxy's appeal of its 2012-2013 tax bill has to be resolved within two years. Considering Fitch's assessment that the reduction in value seems valid, she said, it appears likely that the appeal will be successful.

So not only does her budget team and each county department head have to find a way to cut spending for next year by $11 million total, they will likely have to find a way to give back the additional $11 million the county overcharged Oxy this fiscal year.

And other districts could see similar double impacts.

Kern County has an assessment appeals fund designed to handle these kinds of property tax reversals, Lawson said, and so do school districts. But other districts and agencies don't.

Margy Tims, manager of the West Side Mosquito and Vector Control District, took the bad tax news with a stoic calm.

"The bulk of our tax revenue is oil. It's going to affect us. But we'll still be able to operate. It's not going to cripple us," she said.

According to the Kern County Auditor-Controller's office, the west side district -- which exterminates flies, mosquitos and other pests that pose a danger to public health in the oil-patch communities of Taft and Maricopa -- faces a loss of $245,661 in annual revenue from the Oxy devaluation.

It's nothing, Tims said, that the district hasn't seen before when the often volatile oil industry swings up and down.

"When oil was four, five dollars a barrel, our revenues weren't so good," she said.

Kern County Water Agency General Manager Jim Beck said the situation would be handled.

"Any reduction in property tax revenues represents a negative impact on the Kern County Water Agency," wrote Beck in a statement. "The Agency will manage its current budget for fiscal year 2012-13 accordingly and take appropriate measures. Additionally, the Agency will factor the estimated reduction into the budget development process for fiscal year 2013-14, which is currently under way."

Taft College Superintendent-President Dena Maloney said the West Kern Community College District will need to rely on state backup cash to keep its teachers teaching.

The district relies on property taxes, state funding and tuition fees to operate, Maloney said.

The Kern County Auditor-Controller's office has estimated the West Kern college district will face a $1.4 million annual blow from the Oxy valuation change.

Maloney hadn't yet heard that estimate. But she knows where any loss of revenue will have to come from.

"When property tax revenues drop, the state has to backfill," she said. "What that means is that our state apportionment has to increase by $1.4 million."

That puts a strain on the statewide system of community colleges, Maloney said.

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