Report to Mayor and City Council
Tuesday, October 18, 2016
Discussion
SUBJECT:
Title
OIL PIPELINE FRANCHISE AUDIT RESULTS (CITY COUNCIL)
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I. SUMMARY
The City Council for the very first time commissioned a study of unaccounted and outstanding oil pipeline franchise payments. The pipeline audit disclosed $403,800 in unaccounted and outstanding franchise payments. The study also identified several revisions to the City's Oil Pipeline Franchise Ordinance and recommends increasing pipeline fees. Staff is currently working with the City Attorney on a comprehensive revision to the ordinance.
II. RECOMMENDATION
Recommendation
Council should direct staff to contact the eight pipeline operators that were identified as delinquent and request payment of their outstanding balances. Until the ordinance revisions are completed, Council should consider placing additional conditions on pipeline franchise agreements as they are being renewed to implement the intent of the ordinance.
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III. ALTERNATIVES
Council may direct staff to take other appropriate actions.
IV. BACKGROUND
The City has faced budget deficits in seven of the last ten fiscal years. Council grew concerned that oil pipeline franchise revenues were under-reported, and requested that staff complete an audit of the franchises and to review pipeline fees assessed in surrounding communities. The City retained Municipal Petroleum Analysts (MPA) to complete the audit and the fee survey.
Under-Reported/Unaccounted Pipeline Fees
MPA concluded that the City had for a number of years lost revenues from eight pipeline companies, which resulted in the under collection of $403,800 in pipeline franchise revenue. The following companies were identified:
Company Amount Uncollected
Tesoro $88,000
Dow Chemical $3,800
Kinder Morgan $46,000
Mobile Pacific Pipeline $8,500
Shore Terminal $13,000
Tosco (Phillips 66) $193,000
Paramount Petroleum $46,000
Equilon Pipeline $5,500
To...
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