Oil helped this Bay Area town grow into a wealthy suburb. Now it's facing a fiscal crisis

San Francisco Chronicle​

2 days ago

As Benicia Mayor Steve Young guided his metallic blue Toyota Venza through a long-shuttered military base on his city's eastern outskirts, he pointed at the towering stacks billowing steam along a cloudless horizon.
'I can't tell you how much I've thought about that place over the past month,' Young said.
Perched atop the north bank of the Carquinez Strait, about 35 miles north of San Francisco, the Valero oil refinery was a driving force behind Benicia's transformation from tiny blue-collar town to wealthy midsize suburb. With many locals now concerned that Valero will follow through on its threat to close that refinery next spring, this bucolic burg of roughly 26,000 residents must begin to brace for life without its largest employer, taxpayer and charitable giver.
A slew of unknowns make that tricky. Among Benicians' most pressing questions: Will the city really need years, like some experts predict, to know how many of the refinery's 900 acres are usable for other purposes? Even if officials can develop that land into housing or commercial property, how many more years would they need before they finally see the area generate revenue? And, in the meantime, what can Benicia do to avoid a full-blown fiscal crisis?
'Sometimes, the not-knowing keeps you up at night,' said Young, a retired government administrator with a white beard and raspy voice. 'The stakes feel high.'
Not long ago, Young was one of Valero's more formidable adversaries — a proud progressive who once helped scuttle the petroleum giant's plans to transport oil to Benicia by rail. Now, just six weeks after Valero announced its intention to 'idle, restructure or cease' operations at its Benicia refinery by next April, he is advocating for the company to stay at least another couple of years.
Nestled at the mouth of the Sacramento-San Joaquin River Delta, with a quaint downtown, easy access to nature and sweeping waterfront views of the Carquinez Bridge, Benicia is no typical 'refinery town.' But after 25 years of soaring inflation and minimal economic growth, its financial situation has become tenuous, at best. Many Benicians worry that without more time to prepare, their scenic bedroom community could struggle post-Valero.
On a sunny Friday afternoon in mid-May, while driving toward Valero's collection of stacks and holding tanks, Young conceded that he has heard plenty of locals express fear that Benicia might become 'another Vallejo.'
Despite being separated only by a short commute along Interstate 780, Benicia and Vallejo often feel worlds apart. In addition to being five times Benicia's size, Vallejo has more crime, more empty storefronts downtown, more poverty and more negative news articles.
Yet, as Valero's recent announcement reinforced, even tony communities like Benicia aren't immune from major setbacks.
Nearly half of its homeowners have lived there for at least 45 years. Many of them tend to dislike change. With little new infrastructure in recent decades, Benicia has had a harder time keeping up with rising costs and staying in the black.
Over the past few years, city officials had to slash $6 million from their $60 million operating budget. In the process, Benicia laid off city employees for the first time in four decades, consolidated several city departments and even reduced its police force.
All that cost-cutting reminded some Benicians of what Vallejo once endured.
At the height of the housing crisis in 2008, 12 years after the closure of the Mare Island Naval Shipyard rocked its economy, Vallejo filed for Chapter 9 bankruptcy. Huge police department cuts ensued, exacerbating public-safety concerns and further deterring business development.
As Young now tries to convince Valero to keep its Benicia refinery open, he can't shake the feeling that the community he loves could soon experience its own financial catastrophe. That oil plant is responsible for about 20% of the city's tax base. If Valero does leave in 10 months, Benicia would have no simple way to fill the economic void.
City leaders might need to ask voters for another tax increase. And, even if one is approved, residents could still experience a decline in their standard of living.
Young is already preparing to make daunting decisions about deeper cuts to city services. Possibilities include limiting library hours, closing Benicia's public pool, gutting community center programming or even canceling its popular summer concert series.
'We're getting to the point where we're running out of fat to trim,' city manager Mario Giuliani said. 'The amenities that people were enjoying for a long time, well, they might not be able to do that as much anymore.'
Roughly six months before Valero published its now-infamous news release, state and regional air regulators fined the San Antonio-based oil giant a record $82 million for secretly exceeding toxic emissions standards at its Benicia refinery for 15 years. Then, just three weeks ago, that same refinery prompted surrounding neighborhoods to briefly shelter in place after a large fire ignited at its facility.
To refinery critics, both incidents underscored the inherent pitfalls of having an oil plant so close to town. At a time when California is implementing some of the most aggressive climate-change policies in the nation, including a goal to achieve 90% clean energy by 2035, the Benicia refinery has become notorious for being one of the state's largest emitters of greenhouse gases.
Such backlash is the biggest reason Valero, which faces increased oversight from city leaders should the refinery remain in Benicia, wants out of California. During a recent earnings call, Valero CEO Lane Riggs blamed the state's tough 'regulatory and enforcement environment' in explaining the company's intent to shut down the Benicia refinery.
'I get the desire for renewable-energy sources, but cities have to figure out a way to work with these oil companies,' said Danny Bernardini, business manager of a group of 15 unions that represent hundreds of tradespeople, many of whom work at the Valero refinery. 'As long as people need gas in their cars, communities like Benicia will depend on these jobs.'
Young recognizes as much, which is why he is lobbying for Valero to stick around while the city plots what's next. Part of his pitch is the matter of national security. As the sole provider of jet fuel to nearby Travis Air Force Base, Young argues, the Benicia refinery's shutdown could pose a serious threat to public safety.
To buoy Benicia's chances of keeping the plant open, he might even petition the state to ease some of the regulations Valero finds so oppressive. Few can fault residents who are confused about Young's pro-Valero stance. When he ran for mayor in 2020, that company spent about $250,000 in ads and mailers attacking his campaign.
One of the more memorable pieces of propaganda, Young said, was an ad that depicted his face looming over a baseball field. The accompanying tagline — 'Who votes against kids playing ball? Steve Young did' — was a reference to Young being the lone City Council vote against a proposed $1 million renovation to youth baseball fields during the pandemic.
By then, Young was already well acquainted with Valero's tactics. In 2016, four years after the UC Berkeley grad had moved with his wife to Benicia from Costa Rica, he helped lead the city planning commission's opposition against Valero's proposal to begin bringing oil in by train.
Many locals remember those contentious meetings as the turning point in Benicia's relationship with Valero. Finally, after 16 years of largely kowtowing to the company's demands, city leaders had sent a strong message: Watch out for Benicia's best interest — or else.
When Young meets with Valero executives these days, he tries to strike a more compromising tone. Like many other Benicia residents, he stresses about all that could be lost if Valero leaves town: the jobs, the tax revenue, even the sense of place.
Benicia has long taken pride in its status as a 'full-service city,' meaning it provides the gamut of municipal services directly to residents. With a park for every thousand residents, A-rated public schools, bustling downtown storefronts and a postcard-worthy waterfront, some locals lovingly call it a 'Poor Man's Sausalito.'
Its Fourth of July parade is so well-attended that residents joke that late arrivals risk being involved in another 'chair-gate.' Along Benicia's public beaches, white signs with illustrations of squatting dogs implore visitors to 'PLEASE BE RESPECTFUL.'
'Every service we have, from the festivals to the dog-poop dispensers, helps make Benicia special,' City Council Member Kari Birdseye said. 'Could we survive without those things? Sure. But if we have to go without them because Valero is gone, people would definitely feel the difference.'
Unlike nearby Richmond, where Chevron's refinery is a prominent feature of the city skyline, many Benicians can go entire days without seeing Valero's stacks and holding tanks. But regardless of whether they know it, Benicians' day-to-day life has been shaped in some way by that oil plant. With 428 permanent employees, and hundreds more contract workers, the Valero refinery accounts for well over twice as many jobs as Benicia's next-biggest employer.
Mark Felsoci spent the past 28 years as a crane operator contracting at the refinery. In that time, he has made lifelong friendships with some of his co-workers, raised a family in a peaceful Benicia neighborhood, and helped put a daughter through cosmetology school and a son through college.
Now 63 with a full pension, Felsoci plans to retire in July and move to his hometown of Allentown, Pa., where the cost of living is about 35% cheaper. As his last day on the job nears, he sometimes gets emotional listening to younger colleagues fret about what's next.
Like Felsoci, many of them spurned college to hone the specialized skills of their chosen trade. If the Valero refinery shutters next spring, they will likely have to swap Benicia's stable hours and lucrative pay for long commutes, cheaper wages and shorter-term contracts.
As more and more oil companies flee California's stringent regulations for easier operating conditions elsewhere, refinery workers often feel caught in an odd sort of limbo. About 90% of cars sold in the U.S. still rely on gasoline. Yet, with fewer oil refineries in America's most populous state, workers here must settle for whatever they can find.
Then there are all the hotels, restaurants and shops that have long catered to refinery workers. If their primary clientele suddenly vanishes next year, what will become of those Benicia-area businesses?
Local nonprofits figure to also feel the strain. Just within the past decade, the refinery has donated more than $20 million to various community investments, including hundreds of thousands of dollars a year to children's charities.
'The American dream is being ripped apart at the seams,' Felsoci said. 'Well-paying jobs like this are hard to come by. The more these oil companies take away, the less people can do with their livelihoods and for their families.'
Some Benicians see things differently. Dirk Fulton, a lifelong resident and former City Council member, has spent much of his free time the past couple of weeks papering his hometown with blue-and-red signs that urge city leaders to 'SHUT DOWN THE REFINERY!'
In two recent columns posted to a local news site, Fulton downplayed concerns about Valero's likely departure, calling the potential financial repercussions 'exaggerated' and touting the opportunity for a new economic identity.
'I'm trying to retire, but this is too important to just sit on the sidelines and not do what I can to help create a modern vision for the town without an oil refinery,' said Fulton, 71, who has owned several successful businesses in the area, including a couple of gas stations and convenience stores. 'I think it'd be a great day, maybe even a glorious day, for Benicia if we can achieve that.'
Young just wants more time. Though Oakland-based real estate firm Signature Development Group announced last month that it's in talks with Valero about potentially building on the refinery site, any such initiative would have to overcome numerous obstacles.
There's the costly cleanup process Valero is legally required to complete, which could take as long as a decade. Even then, due to the refinery's half-century of soil and groundwater contamination, Benicia has no guarantees that the site could be fully redeveloped.
After having lunch at a Burmese spot on First Street and catching up with a few of his supporters on that recent Friday, Young climbed back into his Toyota and drove to the Benicia Arsenal. Once one of the U.S. Army's most critical stations along the West Coast, that 440-acre facility was Benicia's economic hub for much of the 20th century.
As Young drove past the commanding officers' mansion that's now a visual arts center, he reflected on the city's resilience.
Many locals had assumed that the Arsenal's shutdown in 1964 would spell the end of Benicia. Yet, thanks largely to the economic boost the refinery's arrival provided a half-decade later, the community didn't just survive — it thrived.
In 1970, Benicia was a rural industrial community of about 7,000 residents. Over the next 25 years, Benicia added about 1,000 people per year as its median household income steadily ballooned. It is now Solano County's most affluent city.
'If they could rebound from the loss of their biggest employer back then, why can't we do it now?' Young said. 'We're not going to declare bankruptcy like Vallejo did. We're not going to devastate the police department. Ultimately, everything will be OK. We just have to get through the next few years.'