ITEM 4. 7
CITY MANAGER' S REPORT
AUGUST 14, 2023 CITY COUNCIL REGULAR MEETING
ITEM: APPROVE WRITE- OFF OF UNCOLLECTIBLE UTILITY
AND MISCELLANEOUS CUSTOMER ACCOUNTS FOR
FISCAL YEAR 2022/ 23
RECOMMENDATION: Adopt Resolution to Approve Write- Off of Uncollectible Utility and Miscellaneous Accounts for
Fiscal Year ( FY) 2022/ 23
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 $ 193, 475 to be uncollectible for FY 2022/ 23 as detailed in Table 1 below:
Table 1
FY 2021/ 22 FY 2022/ 23 Increase/ No. of
Customer Account Type a pproved Recommended ( Decrease) Accounts to Write- Offs Write- Offs be Written- Off
Utility Customers
Residential and Commercial 56 601 180 434 218. 87% 192
Miscellaneous Customers 25 662 13 041 49. 18% 12
Totals 82 263 193 475 204
On March 4, 2020, Governor Gavin Newsom proclaimed a state of emergency to exist in California as a result of the threat of COVID- 19. That proclamation established policy of the State under Water Code section 106. 3 that every human being has the right to safe, clean, affordable and accessible water adequate for human consumption, cooking, and sanitary purposes. The Governor signed executive order N- 42- 20 on April 2, 2020 that established a moratorium on water service disconnections statewide.
The total uncollectible amount consist of past due balances that have accumulated since March 2020 when water service shut off was suspended due to the pandemic.
In order to prevent large unpaid balances from accumulating, the City utilizes water shut off procedure on balances unpaid after 60 days. Water service shut ofFs resumed on October 18, 2022.
The recommended utility write- offs represent 0. 85% of the annual water and sewer charges billed to customers in FY 2022/ 23. The utility write- ofF amount in FY 2022/ 23 has increased by $ 123 thousand or 218. 87% from the prior fiscal year.
CITY MANAGER' S REPORT PAGE 2
AUGUST 14, 2023 CITY COUNCIL REGULAR MEETING
UNCOLLECTIBLE UTILITY AND MISCELLANEOUS CUSTOMER ACCOUNTS The recommended miscellaneous write- off amount of $ 13, 041 include charges rendered by: Finance, Animal Services, 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.
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.
Tonight staff is requesting Council' s approval to write- ofF $ 193, 475 of uncollectible utility and miscellaneous charges.
BAC KG ROU N D:
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.
CITY MANAGER' S REPORT PAGE 3
AUGUST 14, 2023 CITY COUNCIL REGULAR MEETING
UNCOLLECTIBLE UTILITY AND MISCELLANEOUS CUSTOMER ACCOUNTS Utility Customer Accounts
During FY 2022/ 23, Golden State Collections, LLC, received claims for further collection processed on 198 delinquent utility customer accounts totaling $ 184, 313.
Of the $ 184, 313 assigned to Golden State Collections, LLC, the agency recovered 4, 658 from 27 customer accounts recorded on the current and prior year claims.
This represents a 2. 52% recovery rate ( see Table 2) from the total referred. In addition, Table 2 includes accounts with balances of less than $ 5, which are not assigned to the collection agency. During FY 2022/ 23, there were no accounts with a balance less than $ 5.
Table 2.
Total Utilit Customers 8 266 9 379 9 895
Accounts Sent to Collection Agency 97 162 198
Amount Assigned to Collection Agency 42 081 56 601 184 313 Amount Recovered by Collection Agency 3 621 1 110 4 658 Recovery Rate 8. 60% 1. 96% 2. 52%
Account < $ 5. 00 5 2 0
Total Write- Offs 42, 081 56, 601 180, 433
The utility write-off amount in FY 2022/ 23 has increased by $ 123 thousand or 218. 87%. Of the 192 utility customer accounts, there are 84 residential accounts with past due balances of $ 500 or more. These accounts total approximately $ 144 thousand and makes up for 77. 96 % of the overall utility write off amount. The high balances are attributed from the financial impacts of the COVID- 19 pandemic on Lathrop residents.
During the pandemic, water service shut ofF was suspended across the state. The City utilizes the water shut off procedure to prevent customers from accumulating large past due balances. The City resumed water service shut offs in October 2022.
The City received 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$ 180, 433 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. In addition, the Finance Department conducts a review of all new customers prior to establishing service to ensure there are no outstanding balances.
CITY MANAGER' S REPORT PAGE 4
AUGUST 14, 2023 CITY COUNCIL REGULAR MEETING
UNCOLLECTIBLE UTILITY AND MISCELLANEOUS CUSTOMER ACCOUNTS Miscellaneous Customer Accounts
Miscellaneous customer accounts referred to collections for FY 2022/ 23 totaled 13, 041 from 12 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.
Accounts Sent to Collection 6 4 0 2 12
A enc
Amount Assigned to Collection 1, 013 $ 5, 378 0 $ 6, 650 13, 041 A enc
Amount Recovered by Collection 0 0 0 0 0
A enc
Accounts < 5. 00
Total Write- offs 13 041
REASON FOR RECOMMENDATION:
The Finance Department has conducted a thorough review of the utility and miscellaneous customer accounts and recommends $ 193, 529 to be considered uncollectible.
FISCAL IMPACT:
Decrease customer's outstanding balances due to uncollectible debt as follows:
Utility customer accounts: 180, 434
Miscellaneous customer accounts: 13, 041
Total amount of uncollectible accounts: 193, 475
ATTACHMENTS:
A. Resolution to Approve Write- Off of Uncollectible Utility and Miscellaneous Accounts for Fiscal Year ( FY) 2022/ 23
CITY MANAGER' S REPORT PAGE 5
AUGUST 14, 2023 CITY COUNCIL REGULAR MEETING
UNCOLLECTIBLE UTILITY AND MISCELLANEOUS CUSTOMER ACCOUNTS APPROVALS:
n' 7 '. `', 3
Chia Lor Date
Senior Accountant
y 7//
Cari J e Date
Directo - F nance
31 J
Salvador Navarrete Da e
City Attorney
8•3• Z3
St en J. Salvatore Date
City Manager
RESOLUTION NO. 23-
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF LATHROP
APPROVING THE WRITE- OFF OF UNCOLLECTIBLE UTILITY AND
MISCELLANEOUS CUSTOMER ACCOUNTS FOR FISCAL YEAR 2022/ 23 WHEREAS, Generally Accepted Accounting Principles ( GAAP) and Governmental Accounting Standards Board ( GASB) require municipalities to evaluate and write- ofF delinquent accounts that are deemed uncollectible; and WHEREAS, 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; and
WHEREAS, After a thorough review, staff has determined $ 193, 475 to be uncollectible for FY 2022/ 23 as detailed in Table 1 below; and Table 1
FY 2021/ 22 FY 2022J23 Increase/ No. of
Customer Account Type Approved Recommended ( Decrease) Accounts to Write- Offs Write- Offs be Written- Off
Utility Customers
Residential and Commercial 56 601 180 434 218. 87% 192
Miscellaneous Customers 25 662 13 041 49. 18% 12
Totals 82 263 193 475 204
WHEREAS, on March 4, 2020, Governor Gavin Newsom proclaimed a state of emergency to exist in California as a result of the threat of COVID- 19. That proclamation established policy of the State under Water Code section 106. 3 that every human being has the right to safe, clean, affordable and accessible water adequate for human consumption, cooking, and sanitary purposes. The Governor signed executive order N- 42- 20 on April 2, 2020 that established a moratorium on water service disconnections statewide; and
WHEREAS, the total uncollectible amount consist of past due balances that have accumulated since March 2020 when water service shut off was suspended due to the pandemic. In order to prevent large unpaid balances from accumulating, the City utilizes water shut off procedure on balances unpaid after 60 days. Water service shut offs resumed on October 18, 2022; and
WHEREAS, the recommended utility write- offs represent 0. 85% of the annual water and sewer charges billed to customers in FY 2022/ 23. The utility write- off amount in FY 2022/ 23 has increased by $ 123 thousand or 218. 87% from the prior fiscal year; and
WHEREAS, the recommended miscellaneous write- off amount of $ 13, 041 include charges rendered by: Finance, Animal Services, 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; and NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of Lathrop approves the write- off of uncollectible accounts in the amount of $ 180, 434 in Utility Customers and $ 13, 041 in Miscellaneous Customers for Fiscal Year 2022/ 23.
Page2of3
The foregoing resolution was passed and adopted this 14t'' day of August, 2023, by the following vote of the City Council, to wit:
AYES:
NOES:
ABSENT:
ABSTAIN:
Sonny Dhaliwal, Mayor
ATTEST: APPROVED AS TO FORM:
e
Teresa Vargas, City Clerk Salvador Navarrete, City Attorney