Error when attempting to migrate to postgres database on Heroku from Sinatra app - ruby

Question

I have deployed my Sinatra application to Heroku. I have a sqlite database but since Heroku requires postgres, I needed to change this. To do this I setup a Postgres database on Heroku and specified separate development and production databases in my database.yml file.
development:
adapter: sqlite3
database: db/development.sqlite
pool: 5
production:
adapter: postgresql
database: production
pool: 5
I also changed the code in my environment file:
require 'bundler/setup'
Bundler.require
configure :development do
ENV['SINATRA_ENV'] ||= "development"
require 'bundler/setup'
Bundler.require(:default, ENV['SINATRA_ENV'])
ActiveRecord::Base.establish_connection(
:adapter => "sqlite3",
:database => "db/#{ENV['SINATRA_ENV']}.sqlite"
)
end
configure :production do
db = URI.parse(ENV['DATABASE_URL'] || 'postgres://localhost/production')
puts "db is: #{db}"
ActiveRecord::Base.establish_connection(
:adapter => db.scheme == 'postgres' ? 'postgresql' : db.scheme,
:host => db.host,
:username => db.user,
:password => db.password,
:database => db.path[1..-1],
:encoding => 'utf8'
)
end
require_all 'app'
The error message that I receive is as follows:
PG::ConnectionBad: connection to server at "127.0.0.1", port 5432 failed: Connection refused
Is the server running on that host and accepting TCP/IP connections?
I'm not sure why it appears to be attempting to connect to localhost? I have tried specifying the host listed in my heroku database credentials but I still receive the same message. I can see the application deployed in heroku, I just can't log in. This application does work locally.
Any advice is appreciated.