San Benito Foods owes Hollister more than $1 million in unpaid
sewer fees for the use of the city’s wastewater facilities during
the past three years, according to city officials.
San Benito Foods owes Hollister more than $1 million in unpaid sewer fees for the use of the city’s wastewater facilities during the past three years, according to city officials.
While scrutinizing Hollister’s finances for the 2003-04 budget, City Manager Dale Shaddox discovered the debt this week and said the company’s past due balance was $1.6 million.
That amount, however, may be inflated by several hundred thousand dollars because of invoice errors, according to Utility Manager Jim Perrine.
“I’m brand new in the chair,” said Shaddox, who started working for the city in early May. “If I see something, I have a responsibility to pursue it.”
San Benito Foods uses the city’s industrial wastewater plant from mid-July to September each year for disposal during its tomato canning season.
Hollister bills San Benito Foods annually for the added operations and maintenance of the plant. The money goes to a sewer enterprise fund, which is used to finance wastewater operations and expenses.
“It is extremely expensive all the way around to operate wastewater plant systems,” Shaddox said.
The city and the cannery, a division of Washington-based Northwest Packing Company, have disputed billing amounts for the past three years. San Benito Foods has paid only portions of invoices during that time, according to officials.
San Benito Foods General Manager Larry Pitts, who has been with the company for less than two years, said San Benito Foods has been over-billed. This year the city billed $600,000. San Benito Foods agreed to pay only $200,000, Pitts said.
He called Hollister officials’ appraisal of the debt amount “way out of line.”
“I’m pretty surprised to hear something like this today,” Pitts said on Wednesday.
San Benito Foods has been in Hollister since 1915. The city built the industrial wastewater plant in 1972 to accommodate the area’s two canneries at the time – San Benito Foods and Tri-Valley Growers, according to the original agreement between the city and food companies. The two businesses had historically split costs of the sewer plant.
When Tri-Valley Growers closed in 1991, San Benito Foods became responsible for the entire sewer bill since San Benito Foods has been the area’s only cannery.
The billing process for the cannery’s use of the wastewater plant is “subjective,” according to Pitts. In the late 1990s under former City Manager George Lewis, Hollister agreed to adjust the debt San Benito Foods owed Hollister on three separate invoices. The cutback totaled $450,000, according to records.
On Wednesday, Lewis said the city had continually negotiated with San Benito Foods during his tenure – up until Lewis’ retirement in January. Beyond that, he said, “I’d just assume not comment on that.”
Other current city staff members were also involved in the talks with San Benito Foods, including Finance Director Barbara Mulholland, Public Works Director Clint Quilter and Perrine. Shaddox expressed frustration that no staff members told him about the debt before he discovered it himself.
“It’s the responsibility of the staff to come forward,” he said.
City Council members were also unhappy about the debt and lack of communication by staff members.
“Disbelief. Shock. Frustration,” is how Councilman Tony Bruscia described his initial reaction.
Councilman Tony LoBue said he feels confident that Shaddox is examining city operations.
“I’m really happy we have a new city manager on top of things like this,” LoBue said, “that he is able to catch imperfections in accounting and with department heads.”
Mulholland declined comment about staff communication.
Council members have also recently expressed frustration at recently learning the city has been operating in deficit for the past three years. Council members say they were led to believe the budget has been balanced.
The city’s General Fund, its safety reserve, has diminished from $15 million to $9.3 million in three years. Officials expect a deficit again this year.
The San Benito Foods debt indirectly affects the General Fund budget, according to officials. Projects normally financed by the sewer enterprise fund, including operation of the wastewater ponds, have since been funded out of the General Fund, Mulholland said.
The city has not charged interest on the debt, which Shaddox called a “lost opportunity.” He said San Benito Foods’ debt total would currently be about $1.9 million if Hollister had assessed interest.
“Why we haven’t pursued it (the debt),” Shaddox said, “no one seems to have an answer to that at the present.”
San Benito Foods plans to offer a proposal for a debt adjustment “in the next couple days,” Pitts said. Perrine said San Benito Foods led him to believe Hollister would have received that offer “months ago.”
Aside from the financial issues, Perrine and Pitts said the relationship between the city and San Benito Foods remains strong.
