ITEM 4. 5
CITY MANAGER' S REPORT
SEPTEMBER 12, 2022 CITY COUNCIL REGULAR MEETING
ITEM: UNCOLLECTIBLE UTILITY AND MISCELLANEOUS
CUSTOMER ACCOUNTS
RECOMMENDATION: Approve Write- Off of Uncollectible Utility and Miscellaneous Accounts for Fiscal Year ( FY)
2021/ 22
SUMMARY:
Generally Accepted Accounting Principles ( GAAP) and Governmental Accounting Standards Board ( GASB) require municipalities to evaluate and write- off delinquent accounts that are deemed uncollectible. As part of the annual audit process and in compliance with both GAAP and GASB requirements, the Finance Department has reviewed unpaid delinquent accounts assigned to collections. After a thorough review, staff has determined $ 82, 263 to be uncollectible for FY 2021/ 22 as detailed in Table 1 below:
Table 1.
j FY' } 20f 21 t321 Z _ - In reaseJ I I io, af j
I Custo er Account' fyp Pproverl Recommended ( Decrease) Accaunts to I Write- Offs Write- Qf€s 10 be Written- O€f Utility Customers
Residential and Commercial 42 081 56 601 34. 50% 162
Miscellaneous Customers 1 993 25 662 1 187. 00% 15
Totals 44 074 82 263 177
The recommended utility write- offs represent 0. 29% of the annual water and sewer charges billed to customers. The utility write- off amount in FY 2020/ 21 has increased by almost $ 15 thousand or 34. 50% from the prior fiscal year. Collecting a security deposit, requiring occupants to provide rental agreement or purchasing agreement before establishing service and offering assistance programs has proven to be effective means in maintaining low levels of uncollectible accounts.
Even though these accounts will reflect as ' written off" in the City' s financial system, there are further collection measures in place to seek repayment. For instance, the collection agency will continue to pursue repayment efforts on these accounts and forward any recovered payments to the City. Additionally, the Finance Department conducts a review of all new customers prior to establishing service to ensure there are no outstanding balances.
Tonight staff is requesting Council' s approval to write- off $ 82, 263 of uncollectible charges.
CITY MANAGER' S REPORT PAGE 2
SEPTEMBER 12, 2022 CITY COUNCIL REGULAR MEETING
UNCOLLECTIBLE UTILITY AND MISCELLANEOUS CUSTOMER ACCOUNTS BACKGROUND:
On May 19, 1998, the City Council of the City of Lathrop adopted Resolution 98- 664 regarding the approval and implementation of a revenue collection policy. On October 18, 2010, Council authorized the execution of an agreement with Golden State Collections, LLC.
The collection policy was put in place to help decrease the number of delinquent accounts ( 60- 90 days). After unsuccessful collection attempts by City staff, the collection procedures allow City staff to refer customers' accounts that remain unpaid for 60- 90 days to the collection agency for collection proceedings. The collection agency works on a commission- based structure. Their fee is 30% of the total amount collected.
Currently, there are two types of customer accounts referred to the collection agency.
They are utility and miscellaneous customer accounts. The utility customer accounts include charges for water and wastewater. Miscellaneous customer accounts include charges rendered by: Finance, Animal Control, Community Development, Police, Parks & Recreation, and Public Works. Charges include animal impound, unpaid business license and programming fees, court ordered restitution, materials/ equipment, and checks returned for insufficient funds.
Utility Customer Accounts
During FY 2021/ 22, Golden State Collections, LLC, received claims for further collection process on 162 delinquent utility customer accounts totaling $ 56, 601. Of the $ 56, 601 assigned to Golden State Collections, LLC, the agency recovered $ 1, 110 from 6 customer accounts recorded on the current and prior year claims. This represents a 1. 96% recovery rate ( see Table 2) from the total referred. Also included in Table 2, are accounts with balances less than $ 5, which are refrained from the collection agency. During FY 2021/ 22, there was two account with a balance less than
5. Table 2.
e e,,,, , r, , ,. s.
Total Utilit Customers 7 368 8 266 9 379
Accounts Sent to Collection Agency 167 97 162
Amount Assigned to Collection Agency 38 155 42 081 56 601 Amount Recovered by Collection Agency 770 3 621 1 110
Recovery Rate 2. 02% 8. 60% 1. 96%
Account < $ 5. 00 1 5 2
Total Write- l
ffS 38 15'S 42 0$1 56 601
CITY MANAGER' S REPORT PAGE 3
SEPTEMBER 12, 2022 CITY COUNCIL REGULAR MEETING
UNCOLLECTIBLE UTILITY AND MISCELLANEOUS CUSTOMER ACCOUNTS The utility write- off amount in FY 2021/ 22 has increased by almost $ 15 thousand or
34. 50%. Of the 162 utility customer accounts, there are 30 residential accounts with past due balances of $ 500 or more. These accounts totaled approximately $ 31 thousand and makes up for 53. 93% of the overall utility write- off amount. The high balances are attributed from the financial impacts of the COVID- 19 pandemic on Lathrop residents.
The City of Lathrop recently applied for funding from the State Water Resources Control Board ( SWRCB) to assist residential and commercial customers who incurred utility debt as a result of the COVID- 19 Pandemic. Residential and commercial customers with outstanding balances were conditionally eligible to have credits applied to their utility account. The credits were posted to all eligible, active and inactive, accounts. The recommended write off of $ 56, 601 for utility customers would be significantly higher if the SWRCB assistance funding was not available.
Staff will continue to re- enforce current programs that offers payment assistance, such as extending payment due date or granting payment arrangement, to utility customers carrying past due balances will contribute to reduce the overall total number of accounts and dollar amounts to be written off.
Miscellaneous Customer Accounts
Miscellaneous customers' accounts referred to collections for FY 2021/ 22 totaled 25, 662 from 15 accounts related to Animal Services, Public Works, and Parks and Recreation billings, as summarize in Table 3. Animal Services billings included emergency call costs, veterinary costs, impoundment, and shelter fees. Billings for Public Works included city property damages, material, and equipment replacement costs. Parks and Recreation billings included non- sufficient fund returned check fees and unpaid programming fees.
Table 3.
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6 % i... '/
i: .,' r'',,'..''', s fi :.,,
Accounts Sent to Collectiona 9 6 0 0 15
A enc
Amount Assigned to Collection 985 $ 24, 678 0 0 25, 662 A enc
Amount Recovered by Collection 140 0 0 0 140
A enc
Accounts < 5. 00
Total Write- offs 25' 662
CITY MANAGER' S REPORT PAGE 4
SEPTEMBER 12, 2022 CITY COUNCIL REGULAR MEETING
UNCOLLECTIBLE UTILITY AND MISCELLANEOUS CUSTOMER ACCOUNTS REASON FOR RECOMMENDATION:
The Finance Department has conducted a thorough review of the utility and miscellaneous customer accounts and recommends $ 82, 263 to be considered uncollectible.
FISCAL IMPACT:
Decrease customers' outstanding balances due to uncollectible debt as follows:
Utility customer accounts: 56, 601
Miscellaneous customer accounts: 25, 662
Total amount of uncollectible accounts: 82, 263
ATTACHMENTS:
None.
CITY MANAGER' S REPORT PAGE 5
SEPTEMBER 12, 2022 CITY COUNCIL REGULAR MEETING
UNCOLLECTIBLE UTILITY AND MISCELLANEOUS CUSTOMER ACCOUNTS APPROVALS:
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Chia Lor Date
Senior Accountant
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Thomas Hedegard Date
Deputy Finance Director
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Cari ] ames Date
Director of Finance
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Salvador Navarrete Date
City Attorney
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Ste en J. Salvatore Date
City Manager