Consideration and Adoption of Ordinance No. 2014-17: An ordinance of the City Council of the City of Flagstaff, Arizona, amending the Flagstaff City Code, Title 7, Health and Sanitation, Chapter 7-3, City Water System Regulations, Section 7-03-001-0003, Deposit Required, to change water service deposits; providing for penalties, repeal of conflicting ordinances, severability, authority for clerical corrections, and establishing an effective date. (Changing the amount of water service deposits)

The City has charged a $25 deposit for residential accounts and a two month estimate for non-residential accounts for approximately 20 years. The proposed deposit adjustments will help realign the deposit amount to help mitigate the losses from customers that do not pay the final bill on utility accounts. This will also aid in reducing the total amount of write-offs per year.

The financial impact of the increase in utility deposits is the reduction in the amount of write-offs processed each fiscal year. Many times, the initial deposit is applied to the final bill on the customer's account, reducing the total amount owed on the final bill. However, there is often a balance remaining on the account after the deposit is applied. Customers often neglect to pay the final balance on the account and the account is eventually placed on the write-off list after collection efforts are exhausted. The increased deposit will help reduce or eliminate the balances left on the final bill, increasing the amount of money the City is able to collect on final bills. Based on FY14 write off data, the proposed deposits could have reduced the total amount written off by approximately $40,000.

Effective governance.

Public Hearing and first read of this ordinance was held on July 1, 2014.

1) Adopt the ordinance as presented with an effective date of September 1, 2014.
2) Do not adopt the ordinance as presented and do not establish an effective date of September 1, 2014.

As previously noted, the water service deposits for the City of Flagstaff have remained the same for approximately 20 years. The amount of the deposit has lagged behind increases in utility rates and fees.

The proposed increases will bring the City's deposits closer to the average of other municipalities throughout the state. With available data, staff was able to calculate an average residential deposit of $143.37, as of April 4, 2014. There is no exact average available for non-residential deposits due to the varying calculations used. However, a recommended ratio of non-residential deposit to residential deposit of 2.00 was derived using readily available information.

There are several steps a municipality must complete as required by state law to consider and adopt changes to its utility rates, fees and charges. All utility rates, fees and charges must be just and reasonable; and therefore a written report and/or data supporting the changes to utility deposits is required. This staff report along with the attached data are intended to satisfy this legal requirement. The following calendar provides a brief outline of the required steps and the dates identified by staff for the City to fully comply with Arizona Revised Statutes (A.R.S. § 9-511).
 
 
 

April 28, 2014	Notice of proposed changes placed on main City website page at least 60 days prior to Council action.
May 20, 2014	Written report and data supporting the utility deposit changes placed on file at the City Clerk's office. Council adopts "Notice of Intention" by motion - notice to the public that the City is considering a new or adjusted rate, fee, or charge and setting a public hearing date, time and place.
June 1, 2014	Publish Notice of Intention in a newspaper of general circulation in the area of the municipality with the date, time, and place of the public hearing.
July 1, 2014	Hold a public hearing and consider adoption of ordinance amending Section 7-03-001-0003 of the City Code; read the ordinance for the first time.
July 15, 2014	Read the ordinance for the second and final time.
On or about September 1, 2014	If approved, the new deposit rates become effective 30 days after adoption of the ordinance.

The current deposit the City charges is significantly lower than other municipal utilities throughout the state. With available data, staff was able to calculate an average residential deposit of $143.37, as of April 4, 2014. There is no exact average available for non-residential deposits due to the varying calculations used. However, a recommended ratio of non-residential deposit to residential deposit of 2.00 was derived using readily available information. With the proposed increases to the deposits, the City will also allow new customers to have the deposits billed in a maximum of three monthly installments, upon request.

The increase in utility deposits will reduce the final amount of accounts that are written-off each year.

Inform.