The Hollister City Council at Monday’s meeting will schedule a
hearing to consider a San Benito Foods appeal rejecting the city’s
final plea for an alleged $1.4 million debt.
Meanwhile, the deadlocked debt amount, allegedly owed to the
city for sewer services provided over the past three years, has no
immediate effect on the current budget or services provided to
Hollister residents, according to officials.
The Hollister City Council at Monday’s meeting will schedule a hearing to consider a San Benito Foods appeal rejecting the city’s final plea for an alleged $1.4 million debt.
Meanwhile, the deadlocked debt amount, allegedly owed to the city for sewer services provided over the past three years, has no immediate effect on the current budget or services provided to Hollister residents, according to officials.
Even without an immediate urgency – with no effect on the number of police officers or street sweepers employed right now – officials remain steadfast that recovering the $1.4 million is critical.
“We do need that money and we do need the money desperately,” City Manager Dale Shaddox said.
Each year, Hollister bills the area’s last remaining cannery for expenses to operate the industrial wastewater plant. But the city and the San Benito Foods, since 2000, have disagreed on those invoice amounts. The tomato canning company claims the billing amounts significantly, and unjustly, surpassed historically consistent figures.
The industrial plant was built in 1972 for use by the area’s two canneries at the time. But since 2000, the city, in dire need of additional sewer capacity, also started using the industrial plant for waste disposal.
San Benito Foods claims it is being asked to absorb more than its fair share of costs to run the plant. The city attributes the increasing expenses to depreciation at the plant, as well as reformed state and federal regulations, according to Shaddox.
The deflated sewer enterprise account, otherwise known as Fund 665, exists solely to balance out expenses and revenues involved with operating the industrial sewer plant.
Like numerous categorical funds maintained by the city, it is separate from the General Fund, which covers $15 million of a $35 million budget and pays for many basic services in Hollister.
And while the crucial General Fund would not be directly marred by the potential $1.4 million loss, it could eventually suffer.
“Whenever we have a deficit in any other funds, it’s the General Fund that gets asked to come to the rescue,” Shaddox said. “We can’t afford to have the General Fund bail out any other funds.”
The city, already strapped for money, dipped this year into its dwindling General Fund reserve for $730,000. Next year, the outlook is much worse, according to Shaddox, who has already started planning for July’s budget.
The debt in the sewer enterprise fund is actually about $2.4 million, according to figures from the 2002-03 budget. That debt also included the city’s portion of costs to operate the industrial plant.
Another sewer enterprise fund is also absent more than a couple million dollars, which is the result of an outdated – and evidently under-charging – structure for residential rates, according to Finance Director Barbara Mulholland.
Those fees for citizens include those for water use and impact fees to construct new buildings. City officials have planned an extensive overhaul of that fee structure, a process slated to begin this winter, Shaddox said.
“In the aggregate, we’re not receiving revenues for costs,” Shaddox said.
Clearly, the city is not standing on stable financial ground. And a loss of $1.4 million would further dampen the situation, according to city officials.
“It doesn’t matter how broke we are, or how much money we have; everyone knows and understands (the debt) is significant,” said Councilman Tony Bruscia, who vowed to maintain an “open mind” during the upcoming hearing.
John O’Brien, the attorney representing San Benito Foods, however, expressed pessimism about a hearing setting because of the relationship between city staff and the Council. It would be “difficult politically” for Council members to vote against the staff’s position.
“It puts us in a rather awkward position,” O’Brien said.
Since neither side has budged since closed-door negotiations began more than two months ago, some officials, including Bruscia, said proceedings will likely reach litigation.
And in a courtroom setting, Shaddox expressed confidence in the city’s case.
“We’re confident in any arena. The facts are just simply there,” he said.
