Loading...
ITEM 53601 Thurston Avenue N, Suite 100 Anoka, MN 55303 Phone: 763.231 .5840 Facsimile: 763.427.0520 TPCTPO� Plan ni ngCo. com MEMORANDUM TO: Otsego Mayor and City Council FROM: Daniel Licht, AICP DATE: 20 November 2012 RE: Otsego — City Code; Water Shut-off TPC FILE: 101.01 — 12.04 BACKGROUND The City Council is considering the implementation of a shut off procedure noting that it is regularly the same accounts that are not paying their utility bill and that stopping service may cause the bill to be paid by the due date. The Administrative Subcommittee discussed this issue at their meeting on 14 November 2012 providing direction to City staff. A follow up discussion with the Administrative Subcommittee occurred on 19 November 2012 at which time they recommended City staff bring this information forward to the full City Council for discussion. Exhibits: A. Delinquent account assessment summary B. Draft ordinance amendment ANALYSIS Current Policy. The City's current practice regarding delinquent accounts is to annually impose penalties and interest and assess accounts more than 60 days past due for payment with next years' property taxes. This approach guarantees that the City receives payment for utility services provided, imposes appropriate penalties onto those not paying their utility bills and provides that the City recoups its administrative costs. The current policy also minimizes the City becoming involved in the personal finance issues of the account holder or stopping service in a situation where a family is in difficult circumstances. The Finance Department provided a summary of the assessment of delinquent accounts for 2008 to 2011. This information illustrates the current assessment policy is effective at collecting on almost all of the delinquent accounts quickly and the outstanding balance will ultimately be paid over with property taxes. In 2011 the penalties and interest generated $32,146 and the administrative fee added at the time of certification generated and additional $10,600 (106 accounts). Through the October, 2012 billing, the penalties and interest have generated $24,614 and the administrative fees added to those accounts the will be certified totaled $11,200 (112 accounts). These additional revenues are deposited into the sewer and water operating funds. A change to shutting off utility service for non-payment will result in a decrease in these revenues from interest and administrative fees although the City will still collect a penalty amount and $250.00 in fees per account if a service is shut off and turned on. This approach will also require staff time in terms of dealing with customers or having City staff go to the field to shut-off/turn on services. Delinquent Accounts. There are 2,418 utility customers and, of that total, there were 440 accounts were more than 60 past due when the certification process started in September (including the 112 accounts assessed at the 22 October 2012 City Council meeting that will be removed in December). The Utility Department indicates that the number of past due accounts increases in the summer months when water bills are higher due to irrigation usage. With the current process of assessment in place, the Utility Department mailed notice of a proposed assessment of all 440 delinquent accounts more than 60 days past due on 28 September 2012. By the time the assessment roll was adopted by the City Council on 22 October 2012, 328 accounts had paid in full and 112 properties were assessed. To this end, the assessment process is effective at addressing the delinquency issue annually as the notice in September generally prompts most to pay and leaves a consistent number of accounts that remain unpaid for whatever reason. Surrounding Cities. Utility Department staff contacted surrounding Cities regarding their utility shut off practices: Dayton. Late payment penalty is $10 or five percent of the unpaid balance, whichever is greater. The administrative fee of $50 is added to all unpaid accounts certified to the county for collection. The City Code does not include provision for shutting off utility service. Rogers. This policy mirrors the existing language in the Otsego City Code and further states "The City does charge a penalty for late payments. Any annual unpaid utility bills are assessable and will be applied to Hennepin County Property Tax statements with interest and possibility of additional fees." There is an administrative fee of eight percent of the unpaid balance certified to the county. Rogers does not shut off utility service for non-payment. 2 ■ Albertville. The City adds a ten percent penalty as a late payment fee. The unpaid balance is charged the ten percent fee, which is slightly different than Otsego's current practice to charges a ten percent penalty on only the current charges. All delinquent accounts over 60 days may be disconnected. The City must send the tenant or owner a two week notice to pay. If the account is not paid in two weeks, the City issues a 48 hour shutoff notice. With no payment for the service, the water service may be disconnected. The City charges a $35 shutoff and a $35 reconnect fee. The unpaid delinquent accounts are certified to the County for collection. The administrative fee added, when certified, is ten percent of the unpaid balance. Monticello. Monticello bills the utilities on a quarterly basis. Late payment penalties of 10% are added the day after the due date has passed. Property owners are notified after 60 days if they are delinquent and have not made satisfactory arrangements for payment. If the payment is not made the service may be shut off and the bill and a $25 shutoff fee and a $25 reconnect fee must be paid prior to service being restored. In actual practice however, the city does not shut off service for nonpayment. All accounts 60 day or more past due are certified to the County for collection along with an administrative fee of $75 to defray the cost of preparation and certification of the assessment roll. City Code. Section 6-2-5 of the City Code addresses delinquent utility accounts. The Section is summarized as follows along with recommendations by City staff for implementation of a shutoff policy.- Section olicy: Section A adds a late payment fee of 10 percent on all accounts with a past due balance. City staff recommends that the 10 percent late payment fee be calculated on the total past due balance and not just the current billing period charges. For rental housing, both the Utility Billing Ordinance and Rental Housing Ordinance state that the utility bill is the responsibility of the property owner. Utility Department and the City Clerk will coordinate when issuing a shut off order to also include a Citation for violation of the Rental Housing Ordinance imposing an additional $200 fine for each month the account is past due but the service would not be shut off as it would be the tenant penalized for the property owner's failure to pay the utility bill as required by the City Code. ■ Section J of the City Code states that the City will assess past due accounts for the first occurrence once within a 24 month period and any subsequent non- payment is to be subject to shut off procedures. Section C outlines the process for the Utility Department to issue a shut off notice. City staff recommends that these two sections be combined to provide that: o The City Code specify a minimum number of days an account is to be past due before the amount would be assessed or Utility Department will issue a shutoff notice. A 60 day period would be consistent with the current practice regarding assessment of delinquent accounts. However, a 90 day period would reduce administrative demands and reduce the number of delinquent accounts subject to the policy significantly. o The first occurrence of a past due account within a 12 month period would be subject to assessment plus penalties, interest and administrative fees as has been the current practice. Subsequent delinquencies for the same account occurring after an assessment would trigger a shut off process. o For a shut off procedure, City staff will prepare a notice that advises the account owner that the utility bill is past due and must be paid within 10 days or the City may shut off service at any time beyond this period for non-payment. The number of accounts currently past due may require a regular schedule for shutting off and turning on service be established until there is awareness of the City's revised approach to delinquent accounts. Access to the shut off valve must also be considered in allowing the Utility Department to schedule the actual disconnection as the City may be unable to do so immediately due to winter conditions or the valve being located beneath the driveway surface. Likewise, reconnection of service would be scheduled at the determination of the Utility Department and the proposed language would allow for up to ten days from the date of payment for the City to act. ■ Section E states that a disconnection and reconnection fee of $75 each must be paid before water service is restored. City staff further recommends this section be expanded to include a $100 delinquent account administration fee, payment of the past due amount, current service bill in addition to the disconnect/reconnect fees. City staff further recommends that such payment must be in the form of a credit card, cash or cashiers' check. Section F states the unpaid charges may be certified to Wright County together with penalties, interest and administrative charges ($100) as set forth in the fee schedule. Under the new policy of shutting off service to delinquent accounts, City staff anticipates that assessment of unpaid utility bills would be limited to those past due amounts that remain unpaid even after the City has shut off service, such as in the case of a vacant building. 11 ■ City staff recommends including language in Section 6-2-6 requiring provision of the curb stop and that the City reserves the right to access the curb stop in administration of the utility billing ordinance. This section would also address that the property owner is responsible for maintaining the curb stop in an operable manner, as well as being accessible, that the City is not liable for any damage (either to the curb stop or in accessing the curb stop) resulting from a need to disconnect/restart service in accordance with the City Code or property owner request. CONCLUSION City staff has drafted a proposed ordinance amending the City Code regarding delinquent utility accounts based on the information and recommendations outlined herein. The City Council is to discuss this matter at the Special Meeting on 26 November 2012 related to the water and sewer operating budget. C. Lori Johnson, City Administrator Tami Loff, City Clerk Gary Groen, Finance Director Andy MacArthur, City Attorney 5