PHOENIX — The operations of a company that has taken in millions of dollars in utility money from residents of San Tan Valley and Florence are a mystery, apparently even to the family that owns it.
The Johnson Utilities hearings at the Arizona Corporation Commission have revealed that the utility diverts half of its revenue to subsidiary company Ultra Management, based on testimony from Queen Creek officials and financial documents. That amounts to $15 million in payments every year.
From the witness stand, Johnson Utilities owner George Johnson was not able to identify what that company does or why it exists.
In testimony similar to his father’s, Chris Johnson had few answers on Tuesday when it came to Ultra Management.
He said he could not remember how much money he makes as the owner of Ultra Management, could not recall if it was five or six figures and could not say how much money he makes from all Johnson Utilities subsidiaries, of which he is the owner.
He said he did not know how much of the $15 million paid to the company flows out of Ultra Management, was not aware of how much was paid to Hunt Management, did not know why Ultra Management was created and could not remember what attorneys created it.
“It was formed on the advice of our attorneys. I’m not sure I can answer you much better than that,” Chris Johnson said.
That answer did not appear popular in the court.
“It sounds like in regards to the agreements we have had you look at, you don’t really recall how they came about and you have relied on your attorneys to tell you what was good for you to do,” said Sara Harpring, the administrative law judge presiding over the case. “It is surprising you would have that level of confidence in your attorneys, yet you don’t recall now. Don’t you think?”
He did not agree.
Chris Johnson was able to remember with certainty that he is paid a $120,000 salary by Hunt Management, and that he has had no conversations about Johnson Utilities with his father since the latter was forced to step down as manager due to an FBI investigation into possible schemes of bribery at the Arizona Corporation Commission. He was also able to remember that Ultra Management has no employees, and he does not have any job duties associated with Ultra Management.
Town of Queen Creek Finance Director Scott McCarty testified that the utility was not investing properly in the infrastructure.
For example, in 2017 the company spent $308,348 in repairs and maintenance while it logged equipment depreciation of $2,144,509 in the water division. In the wastewater division, it spent $578,698 while logging depreciation of $4,674,086. Similar or larger discrepancies can be seen for 2016 and 2015.
“If payments to Ultra were being made in a lower amount, there would be enough money to address infrastructure problems.” McCarty said.
Given the depreciation, McCarty said he would expect $1.5 million in reinvestment and more given the condition of the system, which Queen Creek Utilities Director Paul Gardner previously testified failed to meet municipal standards and required at least $160 million in improvements.
“Not only have they not been investing, but the money is not with Johnson Utilities,” McCarty said.
This is a critical point for those seeking to have an interim manager appointed to run the utility.
When asked what value customers got from the $15 million Johnson Utilities pays to Ultra Management, Chris Johnson replied he thinks they provide good service to customers, through Hunt Management.