Cotati City Council
Agenda Staff Report
Item type: REGULAR CALENDAR (ACTION)
To: City Council
Subject: APPROVAL OF AGREEMENT WITH ONLINE
INFORMATION SERVICES, INC. FOR UTILITY APPLICANT
SCREENING AND COLLECTION SERVICES
Date: October 13, 2026
Written by: Angela Courter, Director of Administrative Services Recommendation
It is recommended that the City Council adopt a resolution approving an agreement with Online Information Services, Inc. for utility applicant screening, identity validation, and outside collection services, for an initial three-year term with two optional one-year renewals and a total amount not to exceed amount of $6,000 per year.
Background
The City issued an RFP on August 3, 2026, to improve verification of new utility applicants and recovery of unpaid water and sewer accounts. The most common scenario where this occurs is when people leave and don’t pay their final bills. Online Information Services submitted the sole proposal and met the RFP criteria. The firm provides utility screening and collection services and offers an existing interface with our ERP System - Tyler ERP Pro 10/Incode10. Formal outside collections have been paused since 2020 due to COVID and then the evolving statutory requirements for payment extension and plans with public water systems.
Analysis/Discussion
Staff recommends applicant screening and identity validation when customers establish service, which would improve the ability for outside collections to recover unpaid balances from eligible accounts. Screening can identify concerns and existing unpaid utility balances from other participating utilities. Staff, with the support of Online Information Services, will work to establish best in service procedures and possible policy updates along with training employees for implementation.
Council direction is requested on settlement discounts. Staff proposes allowing the vendor to reduce an eligible referred collection balance by up to 20 percent to obtain payment. The vendor would begin with a smaller discount and increase it only as needed for the customer’s circumstances, within the Council-approved limit. Staff will define settlement terms in writing and require reporting of the original balance, discount, payment, and collection fee. Discounts above the approved limit require further City approval under applicable authority.
The City will use the screening color flags to determine whether an additional signer is needed.
A customer with a red result will be asked to provide a second account signer with a green or yellow flag. The City will not charge a different deposit based on the screening result. Screening the additional signer adds a cost to the City, but staff recommends this approach to improve payment collectability.
For applicants without a Social Security number, the City will continue to collect a driver’s license or state identification number. If the applicant cannot provide a Social Security number or a driver’s license or state identification number, staff will request an additional account signer who can provide the needed information. A separate screening system for customers without Social Security numbers is available, but staff are not proposing it at this time and may consider it in the future.
For business accounts, staff will collect the Social Security number of a business owner signing to establish the account. The optional business verification system is not proposed at this time and may be considered in the future.
Customer Information and Privacy
The applicant’s screening uses a soft credit check and does not affect the customer’s credit score.
Separately, the proposal allows appropriate credit bureau reporting of delinquent accounts referred for collection, which may affect credit. Staff will clearly explain this distinction to customers.
Social Security numbers will be collected; however, they are redacted within both our ERP system and the reporting system for Online Information Services to protect our customers. The vendor provides encryption both in transit and at rest, plus multifactor authentication, and access controls to protect customer information. Staff will limit access to authorized employees and document secure handling procedures.
The vendor offers a letter mailing service for $1.50 per mailing. Staff is not proposing this optional service at this time but may consider it if it would benefit customers. Staff will coordinate with the City Attorney on required notices associated with screening decisions, including a second-signer requirement, and provide those notices regardless of whether the optional mailing service is used.
Financial Considerations
The City records an expense each year to account for utility bills it estimates may not be collected. This accounting estimate does not cancel the customer’s obligation to pay. The expense was approximately $12,910 for the fiscal year ending June 30, 2026. During the COVID-19 pandemic, when changes in procedures prevented service shutoffs and shifts to other standard collections processes, this expense increased to approximately $127,480 in fiscal year 2021 before declining to approximately $27,470 in fiscal year 2022. The City did recover some of these funds directly through the California Arrearage Payment Program (CAPP) totaling approximately $168,000 in 2022.
Staff have increased collection efforts and encouraged automatic payments, including offering reduced deposits for customers enrolled in automatic bank drafts. Despite these efforts, unpaid utility invoices currently total more than $120,000. This amount includes all historical unpaid accounts maintained in the City’s financial system and represents accumulated unpaid bills, rather than a loss from a single year.
Older balances may be more difficult to recover, and some collection options may be limited by the age of the debt. However, additional collection efforts may still recover a portion of these funds. The proposed services would support those efforts while helping prevent future unpaid balances through improved applicant screening and staff review of account procedures.
Recovering any balance from these unpaid bills helps support the cost of providing water and sewer services. The Utility Exchange screening report costs $3.15 plus a $0.22 regulatory recovery fee, totaling $3.37 per screening. The identity validation report costs $1.95 plus $0.22, totaling $2.17 per report. Web access costs $30 per month. At approximately 360 to 400 primary applicant screenings annually, Utility Exchange screening and web access would cost approximately $1,573 to $1,708 per year, before additional signer screenings, separately ordered identity validation reports, or any Tyler interface charges. Staff are not proposing to change any fees at this time. However, staff may reevaluate administrative service-start fees for accounts requiring an additional signer or property owner's consent for a possible future fee update. No fee change is being requested with this action.
Applicant screening costs are intended to be supported by the existing service-start fee. Outside collections cost 35 percent of the amounts recovered, leaving the City 65 percent before other applicable costs. For example, a $1,000 recovery would result in a $350 collection fee and $650 returned to the City. Staff will monitor all charges within the proposed $5,000 agreement limit and annual utility appropriations.
Additionally, to allow more flexibility to obtain collectability of funds more efficiently, Online Information Services can offer a discount up to an amount agreed upon with our contract. Staff are suggesting a 20 percent maximum discount. With that type of discount, if a $1,000 balance is settled, the customer would pay $800. The vendor’s 35 percent fee would be $280, leaving $520 for the City. Discounts reduce the amount recovered and may help resolve accounts that otherwise remain unpaid.
Environmental Issues
This action is exempt from the California Environmental Quality Act (CEQA) because it is not a project which has a potential for resulting in either a direct physical change in the environment, or a reasonably foreseeable indirect physical change in the environment, pursuant to CEQA Guideline section 15378.