A new development over the proposed Costco Wholesale poultry processing plant surfaced this week when opposition to the proposal, emboldened by the support of Jane Kleeb of Nebraska Bold, pressured the City of Fremont with a lawsuit.
Kleeb narrowed the focus of the accusations to an issue concerning the legality of a monetary exchange between Costco Wholesale and the City of Fremont in the form of a reimbursement for services rendered. The issue primarily encompasses two components: a contract agreement and a reimbursement agreement that the opposition believes is the illegal use of tax dollars to pay for corporate expenses.
The first component addresses a contract existing between the Fremont Department of Utilities (DU) and HDR Inc., a design firm out of Omaha that specializes in engineering, architecture, environmental and construction services. The contract addresses the DU’s agreement with HDR Inc. to meet a timeline set for January of 2018 by Costco for the functional operation of its proposed facility. The DU plans to contract with HDR Inc. for consultation engineering and design services pertaining to the feasibility of establishing water and waste water utility services. The location of these services would lead south of Fremont to the approximately 400 acres upon which the Costco operation would sit, known as Hills Farm.
A staff report presented to the Fremont City Council Brian Newton, general manager of utilities, stated the fee estimate for the utility extension services comes to $195,825 to be paid by Fremont to HDR Inc. That sum includes costs such as project management, data gathering, documents, permits and also the construction phase.
The second issue, and the one that Costco opposition groups dispute, concerns a reimbursement and indemnification agreement between Costco and the City of Fremont. According to the staff report, that agreement – between Costco and the DU – obligates Costco to reimburse a total of $195,825 to the DU for the services provided by HDR.
Opposition accused the city of using tax dollars to cover the utility extension service. According to Kleeb, the use of tax payer dollars to fund corporate expenses is illegal. In an interview she stated that during Nebraska Bold’s fight with the Keystone XL pipeline, that specific topic played a key role in halting pipeline construction.
“Government agencies cannot use tax payer dollars to pay for corporate expenses even if they plan on getting reimbursed,” Kleeb said.
Kleeb informed the city that if the agreement between Fremont and Costco turns out to be the illegal use of tax dollars then the opposition will file a lawsuit against the city through the Domina Law Group out of Omaha, a firm that worked with Nebraska Bold in its opposition to Keystone.
However, according to Newton and Fremont Mayor Scott Getzschman, tax dollars do not serve as the financial source for the utility extension.
Getzschman specified that the agreement is between the DU and Costco, not between the City of Fremont and the Costco – clearly stated on the documents available on the city council agenda packet for May 31. The DU uses rates collected from water, gas and electric bills to cover the cost of all their projects Getzschman added, while only the city uses taxes. The only part the city council played in the agreement was the approval process.
“Truly, it is a distinction as to how it would be paid for,” Getzschman said. “No tax payer dollars will be spent.”
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“We don’t think there’s an issue,” Newton said. “I think (Kleeb) is mistaken because this (money) is rate payer money. The department of utilities is using money collected from (utility rates) … it is not tax payer money … it would be irresponsible to ask rate payers to pay for someone else.”
Newton described the agreement as consistent with the way a city utilities sector operates. He explained that as a city expands and grows it requires further utility districts to be established. Those improvements are funded by the department of utilities. In the future, as housing developments spring up or new businesses arrive, they will establish connection to those utilities. Newton clarified that the connection fee serves as the “reimbursement” to the department of utilities for the establishment of that infrastructure.
Newton also stated that the city continues to work with the Nebraska Department of Environmental Quality to make improvements in its waste water treatment plant. Currently, the city falls under a consent decree with DEQ to resolve issues related to an out of date treatment plant needing mandatory upgrades.
“We’ve been working with the DEQ for over a year now.” Newton said. “The state knows we need to make improvements and they’ve (imposed) a consent decree to give us time to make the appropriate improvements.”
Additionally, the indemnification agreement between the city and Costco clearly states that the construction of the water and sewer line extensions will be established for, and subsequently, owned by Costco. It states that should Costco back out of their plan to establish a large poultry facility in the area of the proposed utility extensions, they would owe the city any out-of-pocket expenses that accrued prior to their decision to discontinue. Costco will also compensate the city for any additional added costs should the corporation fail to provide the reimbursement; such costs would include legal fees, regulatory penalties, damages and fines.
“Yes (Costco) can cancel (the agreement) and then yes we would cancel the agreement with HDR,” Newton said. “And (Costco) would owe us any out of pocket services that we incurred. So it doesn’t cost the department of utilities anything.”
Kleeb maintained her reservations. She said she has witnessed the business practices of companies like HDR Inc. and Costco. Those practices give her cause to question such contracts and agreements between governments and large corporations. She also criticized Costco for the consistent curtain of secrecy it uses to divide itself from the community of Fremont. She highlighted the fact that most of the information received thus far trickles its way to the citizens through middlemen like city officials and other community organizations.
“If Costco is a good corporate citizen, they would be the one telling us. They would show their face, be on the ground and be the ones earning the trust,” Kleeb said.
Getzschman reiterated his support.
“A project like this is so exciting because Costco would be a large user of all utilities,” Getzschman said. “And because they would be such a large user it will help offset projects and other upgrades …it really allows us to keep utility costs and rates much lower.”