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.
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■ 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.
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■ 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
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