[September 06, 2008]

General Petroleum seeks deal

(Modesto Bee, The (CA) (KRT) Via Acquire Media NewsEdge) Sep. 6--A national oil and lubricant distributor that wants to coordinate its Northern California sales from Modesto is asking the City Council for a significant tax rebate.

The company, General Petroleum, estimates it could conduct as much as $200 million of sales out of the Modesto office each year.

In exchange for that business, General Petroleum wants Modesto to return an escalating portion of the sales tax the city would collect. It won't base its Northern California sales in Modesto unless the city agrees to the rebate.

That rebate would peak at 65 percent of the city's sales tax if General Petroleum's revenue hits $50 million each quarter.

A banner year with $200 million of revenue for General Petroleum would net Modesto $665,000 in sales tax under the proposal. General Petroleum would get $1.235 million rebated to it.

General Petroleum would not get any sales tax rebates unless it earns at least $25 million in a quarter. At that point, the city would return half of the local sales tax generated by General Petroleum.

Linda Boston, Modesto's business development division manager, said General Petroleum approached the city with the proposal.

"We just felt it was important to listen and ask the council to consider it," she said.

General Petroleum officials could not be reached for comment Friday.

Their proposal in many ways reflects a change in how it tallies its business rather than a major relocation for the company. It plans to keep its California offices open, but intends to record its sales in just two locations, one in Modesto and one in Southern California, according to a summary of the proposal.

Business lobbyists in Modesto said the proposal showed a flexible approach to recruiting companies.

"Sometimes that's what it takes," said Doug Sweetland, economic development director at the Stanislaus Economic Development and Workforce Alliance. "I never look at it as losing revenue as opposed to gaining revenue you otherwise might not get."

"You're locating the northern headquarters in Modesto," Modesto Chamber of Commerce Chief Executive Officer Joy Madison said. "If we don't take advantage of this, somebody else will."

The council will see the proposal Tuesday night at a time an extended decline in sales and property tax revenue has the city struggling to keep police on the street and park programs running.

Mayor Jim Ridenour last month said the city likely would have to cut $7 million to $9 million from its $122 million general fund this year. Those reductions follow budget cuts last year.

Boston said General Petroleum would have to pay the city's mil tax, which collects a fraction of a company's profits.

Otherwise, General Petroleum would find a sales tax rate that's nearly a full percentage point less than it would pay at its headquarters in Rancho Dominguez in Los Angeles County.

Modesto residents and businesses pay a sales tax rate of 7.375 percent compared with 8.25 percent in Rancho Dominguez.

The state keeps 6.25 cents on every dollar spent in the state. Modesto and Stanislaus County share 1 cent. (The remaining �-cent helps fund the county library system.)

Modesto keeps 95 percent of the 1 cent it shares with the county. That portion is what General Petroleum wants to split with the city.

General Petroleum likely won't have many employees in Modesto. It's looking to lease a 2,000-square-foot office downtown, according to a report Boston wrote for the council.

Boston said the city doesn't have other revenue-sharing agreements with companies. She likened the proposal to incentives Modesto offers for big employers, such as waiving building inspection fees.

General Petroleum is a sub- sidiary of Connecticut-based Maxum Petroleum. It distributes Chevron and Texaco products to businesses.

Bee staff writer Adam Ashton can be reached at aashton@modbee.com or 578-2366.

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