Local government

Water billing miscue costs Ontario millions and leaves a trail of unanswered questions

ONTARIO – Dan Cummings was baffled.
As the interim city manager for Ontario last summer, he was finalizing an agreement between the city and J.R. Simplot Company regarding how much water the firm would use from the city.
The Idaho firm was the new owner of the Kraft Heinz Company processing plant in Ontario. J.R. Simplot Company took control of the facility in February.
As Cummings and Simplot officials worked through the paperwork, they discovered Kraft Heinz had underpaid the city by more than $2 million for the water it used.
“In 2018 our ordinance was changed and everybody paid the same rate,” said Cummings.
Under the new criteria established by the 2018 ordinance, Kraft Heinz Company was undercharged and instead of paying the city $1.63 per 1,000 gallons of water used the firm was charged $1.16 until recently.
“I could not find out why Kraft was not brought up to the $1.63 rate in 2018,” said Cummings.
Cummings also discovered the last water contract between the city and Kraft Heinz expired in 2009.
The discovery meant the city – for an unknown reason – lost out on $2.3 million in potential revenue over four years, said Cummings.
Suddenly the city and Simplot faced a problem.
“When I found all of this out, I called and had a meeting with Simplot about a month and a half ago,” said Cummings.
He said the company would have to pay the correct rate, not what Kraft Heinz was charged.
“I wanted to give them a heads up because that’s a big chunk of change,” said Cummings.
Cummings said the company suddenly faced the prospect of paying the city $500,000 more each year in water fees.
He said he told the company officials that “I understand you just bought the facility and that this will be hard to absorb.”
Cummings said he and company officials negotiated a new deal where the company would be brought up to the $1.63 rate gradually per year over a span of three years.

“The first year they would pay, based on current consumption, $176,000. The next year it goes up 33 percent more. So, the second year they will pay $351,000. The third year we will be collecting the $530,000 a year,” said Cummings.
The Ontario City Council approved the plan last month.
Riley Hill, Ontario mayor, said former city manager Adam Brown should have paid closer attention details to avoid the miscue.
“There were too many contracts that were not reviewed. The previous city manager worked hard, but didn’t work hard in the right places,” he said.
Brown, said in an email last week, that he remembered Kraft Heinz “not getting the increase applied,” but thought it was corrected.
Cumming said he initially expected to find an agreement or a city council-approved resolution between Ontario and Kraft Heinz regarding the lower rate.
He didn’t.
“That is a lot of money that should have been caught and negotiated back then. But I’ve done a ton of research. There was no resolution recorded,”
Cumming said if some type of pact was ironed out by city officials and Kraft Heinz outside of the 2018 ordinance it was wrong.
“You just can’t override your ordinances and fee resolutions. But I can’t find any agreement in writing,” he said.
Cumming said he was shocked when he discovered the disparity in fees.
“Whether the ball was dropped I don’t know. But it should have been done in writing. What they should have done is done some kind of negotiation and get Kraft caught up to that rate,” said Cummings.
Cummings said he is satisfied with the agreement the city worked out with Simplot.
“They were a brand-new company just taking over and they did their business plan and this was not brought to their attention by anybody until just recently,” said Cummings.
Cummings, who was selected to be Ontario’s new city manager this fall, said the discovery of the water rate gap was fortunate as the city was reviewing whether it needed to raise water rates.
“Catching this and getting these guys up to speed may help us out now with not doing that. The amount will definitely help in not having to raise rates any higher,” said Cummings.

News tip? Contact reporter Pat Caldwell at [email protected].

EXCELLENCE IN JOURNALISM – Available for $7.50 a month. Subscribe to the digital service of the Enterprise and get the very best in local journalism. We report with care, attention to accuracy, and an unwavering devotion to fairness. Get the kind of news you’ve been looking for – day in and day out from the Enterprise.