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R2008-154 2008-12-08RESOLUTION NO. R2008-154 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF PEARLAND, TEXAS, DEDUCTING UNCOLLECTIBLE UTILITY ACCOUNTS FROM THE CITY'S FINANCIAL STATEMENT. BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF PEARLAND, TEXAS: Section 1. That the uncollectible utility accounts, attached hereto as Exhibit "A" and made a part hereof for all purposes, are hereby deducted and removed from the City's Financial Statement. PASSED, APPROVED, AND ADOPTED this 8t" day of December, A.D., 2008. REID MAYOR ATTEST: `,,~~GP.~LA,;~;~,,y 3..i ~"';rt~M Y NG I G, MC :~ I Y SE ETARY APPROVED AS TO FORM: ~_ DARRIN M. COKER CITY ATTORNEY Exhibit "A" Resolution No. R2008-154 MEMORANDUM TO: Mayor and City Council FROM: Bill Eisen, City Manager VIA: Claire Manthei Bogard, Director of Finance Meg McNulty, Utility Billing Supervisor DATE: August 20, 2008 SUBJECT: Utility Billing Amounts Outstanding In a previous memorandum, staff provided information on Utility Collections, amounts outstanding, and awrite-off procedure for consideration, which is shown below. A write-off of uncollectible accounts receivable from the City's accounting records does not constitute forgiveness of the debt and it is still payable by the debtor. This is an accounting function only and accounts should only be written off where it is unlikely or improbable that the amounts will be collected. Councilmember Owens requested additional information on the amount outstanding from Oct. 2000 to June 2005. It is provided as shown below: Amounts Outstanding Residential Number of Accounts Residential Amount O/S Commercial Number of Accounts Commercial Amount O/S $0 - $100 446 $15,318 281 $8,486 $101 - $250 185 $31,939 90 $14,329 $251 - $500 166 $59,512 52 $18,921 $501 - $999 120 $80,920 56 $37,781 _> $1,000 48 $73,067 33 $55,448 Total 965 $260,756 512 $134,965 Amounts Due b Year Residential Commercial Total 2000** $4,719 $1,213 $5,932 2001 $29,241 $18,520 $47,761 2002 $51,217 $28,744 $79,961 2003 $57,103 $28,985 $86,088 2004 $71,670 $41,927 $113,597 June 2005 $46,806 $15,576 $62,382 ** Accounts written off Sept. 2000. Accounts are left owing upon death, bankruptcy both commercial and personal, foreclosure, incarceration, and accounts that just walk away, which is the majority. In reviewing the accounts through 2005, we have been able to determine that 10 are deceased, 51 were commercial bankruptcies, 2 were personal bankruptcies, there were 6 foreclosures, and 1 is incarcerated. Also, if a business is sold or name is changed, with a new Tax ID number, we cannot pursue collection with the new owner for previous amounts due. The current Utility Billing Supervisor began in November of 2004. In January 2005, in an effort to reduce amounts outstanding, the City decided to do an amnesty program. If anyone were delinquent, they had until February 20`'' to either pay in full or sign up for a payment plan, otherwise they would be cut-off. The program was publicized in the papers and on TV. On February 21S` 2005, the City began cutting off accounts that were 30 days past due. The Utility Billing Department has strived to keep unpaid accounts to a minimum. INFORMATION PROVIDED IN PREVIOUS MEMORANDUM Utility Collections In the perfect business model, a business provides a service to it's customer for a fee and the customer pays in a timely fashion. However, delinquent customer payments can be prevalent and are an unavoidable aspect of doing business. Timely collection of revenues is important not only in order to pay the bills but also to keep rate increases to a minimum. Collections are one of the more challenging and frustrating aspects of utility billing. As such, through City Ordinance and internal collections, we strive to keep unpaid accounts to a minimum. As of July 31, 2008 there is $845,899.48 outstanding as follows: Time Period # of Accounts Amount O/S Revenue Billed %1 of Revenue Oct. 2000 to June 2005 1,532 402,785 $64.6 million .006% July 2005 to June 2006 396 65,294 $17.8 million .004% July to 2006 to June 2007 389 51,847 $23.0 million .002% Over 120 132,090 $19.6 million .007% Over 90 227 11,728 $2.2 million .005% Over 60 572 24,962 $2.5 million .010% Over 30* 3,114 157,193 $2.7 million .058% This represents an overall collection rate of 99.994%. The City last wrote-off outstanding balances in September of 2000. While the balance is written off, the debt is not forgiven. *The City is still in the process of receiving payments on these accounts and these accounts will be cut-off for non-payment. We anticipate collecting the majority of these outstanding amounts. Collection Procedures Pursuant to City Code, payment is due the 14th day following the date of the bill and disconnection for non-payment cannot be made until 20 days after rendition of the bill. Any amounts due are subject to a 10% penalty. Delinquent Accounts When a utility bill has not been paid 45 days after the due date, the account is processed for discontinuation of service. a. Account shows up on the delinquent list b. The City makes one attempt to contact the customer via phone based on information in the system warning disconnection for the location will occur on Monday. c. Utilities are scheduled for shut-off if full payment has not been received by 5:30pm on Friday. Night drops and on-line payments are checked first thing Monday am for payments before Field Technicians are given the cut-off list. Accounts for which service has been discontinued for non- payment are subject to a $25 reconnect fee which is payable prior to reconnection of service, in addition to the delinquent amount due. d. At any time, payment agreements can be made with the consent of the Utility Supervisor, not to exceed 90 days. Payment agreements that are adhered to will postpone any disconnection. Payment agreements must be adhered to or the risk of disconnection could result. Terminated Accounts If a customer has an unpaid balance on a terminated account, the City will: a. Transfer the amount to an active account b. Use the customers deposit against the amount due c. If balance due by a renter, contact the landlord for payment d. Mail the final bill to any forwarding addresses provided e. File Lien if not a homestead. Placement of Liens Pursuant to Sec. 30-25 (d) -the City can place property liens on those accounts with balances of $50 or more. The City cannot place a lien on a homesteaded property. The City does place liens on residential properties where the homeowner has moved out, the property has been foreclosed on, or the renter has left an amount owing and the property owner refuses to pay the bill. This year the City has placed 143 liens, of which 2 were commercial accounts, with 14 being paid when the property is sold. We continue to monitor accounts in light of the national mortgage and foreclosure crisis. Credit Bureaus The City currently does not report balances due to the credit bureaus. In surveying several cities and of those responding (Arlington, Carrolton, McKinney, League City), only League City submits information to the Credit Bureau only after City Council approves the write-off and on accounts with social security numbers with a balance of $20 or more. We have contacted 2 companies and learned that we can either submit monthly a minimum of 100 to 500 accounts, $0 to $60 a month, or we can submit once a year, if we so choose. The City would also need software ($395) to accomplish this. Staff is recommending that we pursue this option and report only those accounts approved by City Council for write-off as bad debt and submit to the Credit Bureau once a year. Write-Off of Account Balances As stated previously, the City last wrote-off accounts in September of 2000. While the amount is taken off the City books as a receivable, the debt is not forgiven and the City can continue to collect on those accounts. Staff would like to write-off receivables, based upon the following criteria: 1. Terminated accounts with outstanding balances of 2-years or more are written off the books after collection efforts are pursued with no results. (liens, where applicable, final letter of payment to last known address or a-mail address, balance transfers, etc.) 2. State Statute authorizing the release extinguishment, in whole or in part, of any debt, liability, or obligation, if applicable (Ex: bankruptcy) 3. Council approval to write-off accounts that meet the above criteria, once a year in September, prior to close of fiscal year. 4. If a customer returns for service with the City, the write-off amount must be paid in full prior to receiving service again. We've researched several city's write-off of doubtful accounts policies and they range anywhere from every 6 months to four years. Arlington and Carrolton - 4 years; Sugar Land and College Station - 3 years; McKinney - 2 years, Pasadena - 1 year; League City and LaPorte -every 6 months. Staff would like to bring awrite-off of receivables in September based on the above collection efforts and criteria for write-off.