Consideration and Approval: Utility Accounts and Miscellaneous Account Receivable Write-offs: Delinquency and Uncollectable Accounts for Fiscal Year 2016.

Generally accepted business practices allow for the write-off of uncollectable accounts annually. City staff has exhausted collection efforts on the eligible accounts and will no longer actively collect on them. Where possible, any amounts due are applied to a customer's credit. As a result, debt that has previously been written-off is occasionally paid sometime later to clear a customer's outstanding debt. Pursuant to state law, delinquent account information is not subject to public release.

None. Each year, the City anticipates that there will be uncollectable utility accounts and miscellaneous account receivables and reserves an amount at year end for these accounts.

Improve effectiveness of notification, communication, and engagement with residents, neighborhoods and businesses and about City services, programs, policies, projects and developments

No.

• Authorize the write-off of uncollectable utility accounts and miscellaneous account receivables.
• Do not authorize the write-off of uncollectable utility accounts and miscellaneous account receivables and continue collection efforts.
   

Before any account is eligible for write-off, staff must initiate collection efforts on each account after it becomes delinquent. When collection efforts are exhausted, the account is eligible for write-off. If possible, any amounts due are applied to the customer's credit. If placed on the customer’s credit, the amount owed remains active for 7 years after the delinquency date. Application against the credit of the debtor may lead to the recovery of some of the delinquent amounts in the future. This often occurs when customers apply for credit via other avenues (i.e., mortgages, car loans, apartment rentals, etc.).

Total utility revenues in FY16 are estimated at $35.4 million and miscellaneous accounts receivables at $9 million. The write-offs are $89,421.85 for utilities or approximately .25% of the estimated total amount and $8,234.68 or .09% of the total amount for miscellaneous accounts. The number decreased in FY16 due to increased deposits and enhanced collection processes discussed in more detail below.

The first significant change was the approval by City Council in summer 2014 to increase the utility deposit for residential and commercial customers. This still continues to be a driving factor in reducing the number of utility write-offs. Residential customer deposits went from $25 to $150 and commercial customer deposits went from a time-intensive calculated rate to a flat rate of $300. When customers do not pay a past due bill and do not respond to collection efforts, the City is able to recoup a higher percentage of the delinquent amount by applying the higher deposit figure to the outstanding balance.  Additionally, the higher deposit typically covers the amount due on final bills, reducing write-offs from customers who have moved and have not provided an accurate forwarding address.

The other significant change is a revision in the collection process. Staff are contacting customers more timely after their account has closed and before postal delivery forwarding orders have expired. These notifications inform customers the intent to turn their account to a credit reporting agency if a final bill is not paid. 

Plans to further improve the collection processes include contacting customers via email and text messaging, when unable to contact them by phone.

Pursuant to state law, delinquent account information is not subject to public release.

Staff, using billing statements, letters, and telephone calls, has worked the write-off accounts. When customers fail to make payments, they may be denied access to future City services. If a customer opens a new account, the previous balance is transferred to the new account. If there is no new account and when possible the amount owed is reported to a credit agency.

It is sound financial management practice to reduce assets to reflect their true valuation. Failure to write-off accounts deemed uncollectable overstates the asset value of the City.

Improvement in collection processes, increased deposit amounts, and improved expediency in disconnects for delinquent accounts has contributed to lower amounts owed by customers who have fallen behind in their utility bills. This has resulted in their ability to establish payment arrangements and work cooperatively with the City to avoid a write-off situation.

~~Inform. Yearly write-offs ensure that the City is following generally accepted business practices.

None.