In an effort to avert what some were predicting would soon manifest into a managerial disaster and public funding misdirection/diversion scandal and public relations nightmare, the Ontario City Council this week made a public show of appreciation toward City Manager Scott Ochoa, a little more than five-and-a-half years after he arrived in the city.
Ochoa had gone for more than three years without a substantive raise, even as the city council was conducting multiple reviews of his performance while city operations were expanding and complexifying in parallel with a massive increase in the city’s finances.
In October 2017, Ochoa, then the city manager of 203,054 population Glendale, had been lured to 172,996-population Ontario to serve as city manager. Ontario offered him a roughly $45,000 raise over the $274,901 annual salary Glendale was then paying him along with some benefit enhancements.
Ochoa made an earnest effort to fit in and made no waves during the first two to two-and-a-half years of his tenure in Ontario.
Nevertheless, there were elements of the situation Ochoa had walked into in Ontario about which he had no inkling when he signed on for the city manager assignment which would turn out to be highly problematic for him personally. Among those were the venal motivations and deep-seated personality flaws of several of his political masters on the city council, the accompanying accommodations throughout the municipal structure that had been made over the years and a lack of financial discipline that had beset the city.
Hands down, Ontario is San Bernardino County’s wealthiest municipality. For a variety of reasons – historical, geographical, jurisdictional, administrative and plain serendipitous, Ontario has for the last three decades and more had revenue that dwarfs that of every other city in the county and roughly double to that of the second best financially-fixed of the other 23 cities and incorporated towns. Ontario had annually budgeted for some of its single departments – the police department and fire department among them – more money than some of San Bernardino County’s cities and towns used for the entirety of their operations in a single year.With that wealth came, inevitably, a lack of financial discipline. Expenditure comparisons demonstrate that Ontario, in many or almost all cases, for years and yet today, pays more for certain things, its employees among them, than does virtually every other city or town in the county. A recurrent gripe of local elected officials in San Bernardino County outside of Ontario is that they must compete against Ontario in the public employee remuneration sweepstakes. They need to, those officials say, expend ever greater amounts of money in terms of employee salaries and benefits to simply retain what established and trained employees they have, or those employees will leave when Ontario has a vacancy for a like position.
A factor in that reality, just as much as Ontario’s greater financial resources, is the vulnerability of Ontario’s political leadership to those in the know – in the know about the political corruption, backroom maneuvering, patronage in which city contracts are awarded to those providing those politicians with campaign donations or kickbacks, the favors that are given and how they are delivered. Those in the know include city officials and employees at the highest and even medium levels. Their silence has been purchased by salary increases, benefit enhancements and perquisites, some of which are creatively derived. To keep that hush money from becoming obvious, employees down the chain of command in Ontario, virtually all of them, have been given pay raises that make them the envy of their counterparts in other Inland Valley cities.
As Ochoa settled more fully into the role of city manager he began to take stock of the appalling lack of fiscal discipline within the city, the projects or programs which, while deserving and worth pursuing, were overfunded, and the complete lack of effort with regard to other needs in the city, circumstances or situations left unaddressed because the city either did not have the money to redress them or had prioritized money elsewhere, sometimes for far less critical needs.
It was out of the question, however, for Ochoa to so much as contemplate an across-the-board overhaul of the manner in which Ontario was run. Such a reform effort would result in his immediate termination as city manager, if not his arrest and potential prosecution, given the political connections and reach of the city council. Whatever reform effort he was to undertake, Ochoa recognized, would have to be measured. Also, he understood, it could not be undertaken with any sort or fanfare or publicity, as doing so might cast the mayor and council members in a poor light when questions were asked about how it was that the underlying practices being redressed had been allowed to go on for so long.
One depredation layered into Ontario’s municipal operations for nearly a decade by the time Ochoa arrived in the city that had become institutionalized was the city’s looting of its water fund.
Cities keep separate and independent accounts for their general funds, defined as cities’ general operating accounts, and their so-called special purpose funds. Special purpose funds include enterprise funds such as water, sewer or sanitation funds, which are used to operate a given city’s utility divisions which provide, i.e., sell, services to that city’s residents. In California, under state law and the State Constitution as well as the California Municipal Utility District Act, cities are restricted from turning a profit on the provision of public utility services but must charge no more than the reasonable amount required to acquire the commodity such as water or electricity being delivered or provide the service such as sewage handling or trash disposal residents require along with the cost of maintaining the infrastructure, appurtenances and the system involved in the delivery of the service.
Modern accounting standards have developed such that local governments have the ability to and are obliged to keep all of their varying funds – from the general fund to the water fund to the sewer fund to the electrical utility fund to gas tax funds passed along by the state to revenue enhancement funds obtained from voter-passed measures for specific purposes to state or federal grant funds to funds obtained from services rendered to the public to internal funds to asset seizure funds to money used for internal city services dedicated to special policing, special fire protection and suppression, the operation and maintenance of flood and storm protection, specialized recreational programs, special library, special museum and special cultural facility services, the maintenance of parks, the maintenance of parkways, the maintenance of open spaces or facilities in specific neighborhoods or districts supported by levies of fees exclusively applied in those subareas of the city, also known as community facilities districts – in separate and sequestered accounts. In Ontario, which owns and operates an international airport, the number of funds it oversees is substantially greater than virtually all other cities in San Bernardino County. The accounting functions and accounting mechanisms are therefore more sophisticated and more convoluted.
Interplay among and between a local government’s different funds are not absolutely prohibited and can take place with certain limitations that are meant to ensure the ultimate integrity of the funds. Loans from one fund to another can be made and sustained as long as the department of the city doing the loaning has the available financial resources within its fund or funds and does not have any immediate need to make use of that money and the department using the money needs the money and will have, or prospectively has, the ability in the future to pay the money back. Generally speaking, those loans are made at an interest rate that matches what is available from California’s Local Agency Investment Fund, a collective overseen by the California State Treasurer’s Office which makes low-interest loans among local governmental agencies. By borrowing from itself at a bargain basement interest rate when it has a need for money, a local agency such as a city can spare itself substantial expense on financing costs, most notably interest rates. In making such loans, strict accounting procedures are supposed to be applied and ironclad agreements in place as to the terms and length of the borrowing, as well as the use to which the money that is loaned is to be put.
Thus, surplus money sitting in a city’s enterprise account, such as its water division funds kept for water division operations or water system expansion or maintenance, can be temporarily transferred to another city fund in time of need, pursuant to agreements being put in place ensuring the money is eventually to be paid back with interest. Challenges against a city doing so have been turned back by the California Supreme Court.
In the fall of 2007, there was a severe downturn in the American, California and local economy, precipitating what was eventually dubbed “the great recession,” economic doldrums which persisted for some six years.
To tide the City of Ontario over, a strategy applied by then-City Manager Greg Devereaux was borrowing from municipal utility funds and/or enterprise funds, specifically the city’s water utility fund, to shore up the city’s general fund. This was intended and initially planned as a temporary solution to a cash flow problem considered to be fleeting, one that was to last only a short time, essentially just as long as the recession continued. Upon the onset of an economic recovery, the borrowing would end and as the economy normalized, the money that had been taken out of the water department’s account would be repaid, or so was the stated intention.
In early 2010, San Bernardino County lured Devereaux away from Ontario to install him as the county chief executive officer, and the Ontario City Council elevated the city’s fire chief, Christopher Hughes, to the city manager’s position. Hughes, while well-versed in running the fire department, had no real experience in managing a municipality, and the task of overseeing a city as large, complex and variegated as Ontario was a challenge on multiple fronts, not the least of which was maintaining its financial integrity. Initially, the idea had been to keep Hughes in place as city manager just long enough for the city to seek out a municipal managerial professional more accustomed to the intricacies of keeping all of the moving parts of a city in harmonious motion. That effort was sidetracked, and Hughes remained as city manager more than three-and-a-half years. Since he inherited a budget that was dependent upon the augmentations from the city’s water fund, Hughes maintained similar arrangements in the 2010-11, 2011-12, 2012-13 and 2013-14 budgets prepared under his watch. So, too, when then-Assistant City Manager Al Boling transitioned into being Ontario’s city manager in October 2013, the city had grown accustomed to using water fund money as part of City Hall’s operating budget. Boling continued pulling out at or around $10 million per year from the water department to finance basic city operations. Boling lasted four years as city manager, and in November 2017, he was replaced by Ochoa.
Under Ochoa, in fiscal 2018-19, 2019-20 and 2020-21, the transfers of money – at an average clip of nearly $10 million per year – from the water fund to the city’s general fund continued. That “borrowing,” as it were, was no longer justifiable. The 2007 economic downturn had proven abnormally persistent, lasting until 2013 as measured by some indicators. By 2014, the financial stagnation had ended, and in the public sector, among county and municipal governments as well as virtually all governmental agencies, the healthy revenue levels of 2006 had been restored and in virtually all cases surpassed. Not only had the time to discontinue the transfers out of the water fund come about some four years before Ochoa arrived, but it was high time, as had been intended by Devereaux and the municipal management team that surrounded him in 2008, that the flow of money be reversed such that the city’s general fund began to reimburse the city’s water utility all of the money that had been taken from it over the course of the previous six years, along with the modest 2.75 percent annual interest that was the Local Agency Investment Fund’s standard cost of money when capital was being transferred from fund to fund.
Nevertheless, for three years, Ochoa did not have the gumption to confront his political masters on the city council and strongly suggest that the city end the practice of looting its water department of money that by the rule of law and code of common decency should have been used all along to maintain the infrastructure required to deliver water to the city’s residents and businesses.
In 2021, Ochoa at last plucked up the courage to take action to assuage his conscience and overcome his increasing concern that delapidating pipelines, cisterns and contaminated wells would converge on the city along with state and federal environmental and financial regulators.
Matter-of-factly, Ochoa let the mayor and city council know that the city could not go on misspending the city’s water division money. He told them that sooner or later, and quite possibly sooner, someone with authority and maybe even someone with the power of prosecution was going to take note of what was going on. With Ochoa informing the council more than asking their permission to do so, and by action rather than through dialogue, with the 2021-22 budget, the diversion of water funds under Ochoa’s watch and at his direction came to an end, 13 years after it had begun.
What Ochoa did was a gutsy move, one he paid for.
As a city manager of a large Southern California city, under the standards of the day Ochoa should be able to count on being well-remunerated. Given his position at the epicenter of Ontario governance and politics – being, if not indispensable, to the city’s operation then key to it, in a capacity of trust with regard to the confidences of ongoing and pending litigation, the performance of virtually every city employee up and down the municipal chain of command and his knowledge about the individual city council members’ separate and intrigue-filled vulnerabilities – Ochoa seemingly had the ability, as the saying goes, to “write his own ticket.” But even as Ontario’s budget hovered at around half of a billion dollars early in his tenure as city manager, reaching $547 million through all of its municipal funds in 2020-21, jumping to near two-thirds of a billion dollars in the two years thereafter with $650 million in 2021-22 and $661,615,132 in 2022-23 and then nearly a billion dollars in 2023-24 at $979 million, Ochoa’s salary and compensation package remained static.
In 2018, Ochoa was provided with a base salary of $320,229.00, add-ons and perquisites of $31,633.00 and benefits of $74,332.00 without the inclusion of the contribution toward his retirement fund, for a total annual compensation of $426,194.00.
In 2019, Ochoa was provided with a base salary of $331,706.32, add-ons and perquisites of $33,932.04 and benefits of $76,885.03 without the inclusion of the contribution toward his retirement fund, for a total annual compensation of $476,437.68.
In 2020, Ochoa was provided with a base salary of $337,038.08, add-ons and perquisites of $44,295.28 and benefits of $122,495.01 including a contribution toward his retirement fund, for a total annual compensation of $503,828.37.
In 2021, Ochoa was provided with a base salary of $338,566.16, add-ons and perquisites of $43,229.09 and benefits of 106,996.55 including a contribution toward his retirement fund, for a total annual compensation of $488,791.80.
In 2022, Ochoa was provided with a base salary of $339,778.89, add-ons and perquisites of $50,114.57 and benefits of $84,895.51 including a contribution toward his retirement fund, for a total annual compensation of $474,789.27.
Despite scheduling numerous performance reviews for Ochoa going back to 2021, the city council never made a definitive finding or declaration of whether it considered Ochoa’s performance exemplary, satisfactory or inadequate, and it provided him with no raise.
It has been suggested by city insiders that Ochoa’s boldness in using his own authority in ending the diversions of money out of the water enterprise fund to the general fund had sent a wrong signal to the city council, which collectively considers itself to be Ochoa’s boss and not the other way around. The council’s authority, as far as city policy goes, is absolute. If Ochoa felt that looting the city’s water fund was unjustifiable, he should have explained that in private to the city council, the council’s advocates maintain. If the council was convinced by Ochoa’s assertion that the diversions should stop, the council could give Ochoa such a directive. Still, Ochoa’s unilateral action to discontinue the subsidization of the general fund by the city’s water utility was, insofar as the mayor and council were concerned, an overstepping of Ochoa’s authority as city manager. With his willingness to challenge the mayor and city council on that score, what assurance did the mayor and council have that he would not make further showing of independence by alerting federal or state authorities about other city deviations from what are considered best practices or providing them copies of internal audits that would show the city in a bad light?
With the city’s budget having nearly doubled from half of a billion dollars to a billion dollars in the span during which Ochoa acted to end the city’s diversion of water operation money to the general fund, knowledgeable entities around City Hall came to believe the mayor and city council were considering cashiering the city manager in favor of someone else they would have greater confidence in to march to their beat.
In 2022, the City of Ontario, which already had the highest level of revenue among all cities and towns in San Bernardino County, placed on the November ballot Measure Q, calling for a one percent sales tax override within city limits. The measure, which the city’s finance department estimated would generate an added $96 million in sales tax yearly, passed by a margin of 15,972 or 53.24 percent in favor and 14,030 or 46.76 percent in opposition.
In July, the city council imposed on the city’s residents and businesses a 6.67 percent water rate hike, which comes on top of a 3.6 percent water rate hike put in place in 2021 and a 5 percent water rate increase in 2022.
While Ochoa succeeded in discontinuing the diversion of water department money into the city’s general fund some two years ago, he has not made it through the next logical chapter, which is to make arrangements to have the general fund return the approximately $127.6 million that was diverted out of the water fund during the 13-year span accompanied by the fair amount of interest – estimated at $40,837,597 that should have accrued over those years. He has not pressed the council, as some thought he might, to have the city’s general fund refund that $168,437,597, consisting of principal and interest, to the water department.
Inconveniently for the mayor and city council, in the weeks running up to the council’s vote on raising the water rates this year, the issue with regard to the diversion of money out of the water fund to shore up the general fund all those years was raised. It was improper of the city’s elected officials and highest-ranking staff members to impose higher water rates on the city’s residents. Given the money that had been looted from the water fund over a 13-year span, the water infrastructure additions, maintenance and improvements that had therefore not taken place and the city’s failure to refund the water account from the general fund, it was improper to be calling upon the city’s residents to pay more for water, residents animated about the issue protested. Moreover, they said, it was unconscionable for the city council to gouge the city’s residents with regard to what they were paying for water in the aftermath of their generosity to the city in approving the sales-tax increasing Measure Q.
The attention thus generated gave Ochoa the perfect opportunity to press for the $168,437,597 correction to the city’s water fund. He did not, however. When he was publicly pressed about the diversions, he stated, “The City of Ontario certainly does not ‘loot’ enterprise funds. Any ‘borrowing’ of enterprise funds is for specific purposes, features specific terms that are compliant both with State law and generally accepted accounting principles, and does not impact day-to-day utility operations.”
He justified the removal of money out of the water fund by asserting, “The city did not borrow funds from the utility for general fund operations. Interfund transfers – as applied in government accounting – are not ‘borrowings.’ Any interfund transfers, historically and in the present, were and are based on costs incurred by the city’s general fund on behalf of the utility. As definitions of ‘cost’ have evolved over time as a result of expert review and case law, the city’s cost allocation plans have become more detailed, precise and, generally, smaller than what they were a generation ago.”
Members of the council roundly interpreted Ochoa’s loyal support of their city ruling approach – with regard to the sales tax, the multiple increases in water rates and his abandonment of the crusade to refund the water enterprise fund with the money diverted from it to the city’s general fund – as an indication that he stands foursquare with them.
Feeling that a decent interim had passed by which they could now raise Ochoa’s salary and benefits without being accused of having done so because he went along with them on the water rate increase, the council this week took up making an upward adjustment to Ochoa’s compensation package.
At Tuesday’s meeting, City Attorney Ruben Duran said, “The city council instructed the mayor to negotiate with Mr. Ochoa on Mr. Ochoa’s compensation in light of a unanimously positive performance evaluation, which the council will recall had been conducted over some time. The final conversation in that process was had this evening and based on that conversation the council and Mr. Ochoa have agreed to the following adjustments to his compensation for the coming three years. This is adjustments to total compensation. The council would like to adjust Mr. Ochoa’s compensation upwards, total comp, by 9.5 percent for the coming year, the first coming year of his contract term, by an additional 9.5 percent in the second coming year of his contract term and then for the third coming year of the contract term, 6.5 percent upwards adjustment in total compensation.”
Duran said effective August 13, 2023, Ochoa’s monthly base salary was set at $31,062.55. Effective July 14, 2024, Ochoa’s monthly salary will jump to, Duran indicated, $31,722.49, although he later said that number was inoperative. Based upon the Sentinel’s mathematics, that number should be $34,013.49. Duran further stated that effective July 14, 2025, Ochoa’s monthly salary will jump to $34,084.80, although Duran subsequently indicated that number was not operative. The Sentinel’s calculation was that in 2025, Ochoa’s monthly salary will increase to $36,224.36.
Based upon the Sentinel’s running of the numbers, Ochoa’s annual salary has now been boosted to $372,750.60 and will reach $408,161.88 in July 2024 and $434,692.32 in July 2025.
Duran said that Ochoa’s total compensation, involving salary, deferred compensation and fringe benefits, now stands at $43,996.34 per month, will reach $48,176.75 per month in July of next year and $52,751.23 per month in July 2025.
Thus, Duran’s current total annual compensation at present is $527,956.08. As of July 2024, it will be $578,121. In July 2025, his total annual compensation will eclipse $600,000, that being $633,014.76.
Mayor Paul Leon in his remarks inadvertently acknowledged that Duran’s compensation increase had been withheld from him for an extended time.
“When we hired Scott, he came in at a lower salary than someone might expect for his position and it was somewhat because we just didn’t know him, and you’ve got to get to know somebody,” Leon said. “We had consistently been paying our city manager more than what he came in at. The belief was that as we started to find ourselves more confident in his abilities, we would compensate him accordingly. In the years that he has been here, as far as I am concerned, he has been doing a spectacular job. Not only in dealing with staff, all of the things that have happened since he’s been our city manager, the growth of Ontario, including that we jumped from a half-billion-dollar to a billion-dollar budget this year. His job is growing significantly just this year and the projections of Ontario before he’s gone [entails a] massive amount of work. I related this to him: There’s a lot coming your way. Instead of saying, ‘Yeah, I want more than you’ve offered,’ he actually said, “You’ve given me the help, the ability to hire more people,’ to hire the staff that he wanted to be able to help him achieve the goals that we set before him and make them come true for us and the residents of the city. I wanted to make sure that he was the best compensated city manager in the region and in like cities. He rejected some of the things that I recommended because he didn’t want to show some kind of dominance over his staff. In offering staff compensation, they’re stuck at a certain percentage, and he didn’t want to go above that. I find that very commendable. He wanted to be fair and honest with his staff. As far as I’m concerned, if we have a state of the city and we present Ontario as being the premier city in this Inland Empire, then our staff needs to be taken care of and our city manager has to be the recognized premier city manager, and I believe he is.”
He lauded Ochoa as a “visionary” and “a man who has connections who is bringing those connections to our city that probably would have not even known we were here.”
Councilman Alan Wapner said, “The city council sets policy, sets a vision and it’s up to the city manager working with staff to implement that. I don’t think anyone could argue driving through Ontario the impact Mr. Ochoa has had in the short amount of time, six years. We’ve always had great city managers. This city has always been well-governed. If you look at what I call the renaissance of what’s going in Ontario right now, all the exciting projects that we’ve talked about for many, many years and you’ve seen them come to fruition especially here in the downtown area, the entertainment district around the arena, the development of the Ontario Ranch area, a lot of it is due to Mr. Ochoa and obviously his staff and the relationship he’s had in bringing in new developers and investors in Ontario that have helped spur the development we have. I serve on a lot of regional boards, and I see what CEO, executive directors, general managers make, and I’ve always been a bit bewildered why Mr. Ochoa who has much greater responsibility, a much larger budget and many more employees seemed always be paid less, not that these other folks did not deserve what they got. It isn’t like we never offered more money to our city manager. He has always stood behind the feeling that ‘I don’t get anything until my staff gets it.’ He has basically refused to accept any further compensation. So, I’m happy you’re taking something from us. And you made it very clear you’re happy to be here. You’re doing a great job, and I won’t say money doesn’t mean anything to you, but certainly money isn’t the driving force behind you being here. We all recognize that, and we all appreciate it.”
Councilwoman Debra Dorst-Porada said, “People forget we’re a 50 square mile city, 185,000 people. This year we’ll have almost a billion-dollar budget. Tonight, our city manager stands number seven in comparable salaries with cities around us. Rancho [Cucamonga’s city manager] is making more money than him. [The city manager of] Santa Ana is making more money than him. He has done so much in the past six years. He definitely deserves this. He really believed in Measure Q, a lot more than a lot of people. So, it’s because of him and his drive to make sure that Measure Q happened that we have now the extra money to do a lot of the things that we’re going to be trying to do.”
Councilman Ruben Valencia told Ochoa, “You lead by example” and he complemented him for moving to the city when he became city manager. He said the city had to consider that it might lose Ochoa, given that there are six other cities paying their city manager more than Ontario is paying Ochoa.
Ochoa returned the compliments.
Noting that he had been a city manager since 2004, Ochoa said, “I can tell you what makes the difference – where the money always matters, sure, that helps in terms of lifestyle, what have you – but in this business of public service what makes the biggest difference is having community support and having meaningful work from policymakers that know what they want to achieve. I can tell you across three cities, particularly my last one, that having the five of you be able to give clear direction and then back it up with the courage of conviction to make decisions, without fear creative decisions, makes my job infinitely easier than it otherwise could be. Then, with an amazing staff and an amazing exec team, it really is the best of all worlds. I can’t imagine doing anything else. I can’t imagine doing it with[out] a council that I will tell you pound for pound is the best I ever had.”