HomeMy WebLinkAbout1995-10-03; Municipal Water District; 292; Adopt Customer Deposit for New Utility AccountsCARLSBAD - JNICIPAL WATER DISTRICT - AGENDA BILL’
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AB# 449s TITLE:
MTG. Jhf~~ Adoption of a Customer Deposit
For New Utility Accounts
DEPT. CMWD
RECOMMENDED ACTION:
Approve Resolution No. 9 I\ adopting a utility account deposit procedure.
ITEM EXPLANATION:
When establishing a utility account with the District, all customers must currently sign
an application for service and provide proof of identification. Customers are not
required to pay a deposit. If a customer does not pay his utility bill, the District
discontinues water service until payment is made. However, service cannot be
terminated until proper notices are given, which takes approximately 60 days from the
date of default. If, after service is terminated, the customer leaves without paying, the
District has the following three collections options.
1. Place a lien on the properly. This option is only useful if the customer owns the
property. Additionally, the District can only collect the payment upon sale of the
property. This option is somewhat time-consuming and not. very practical for
obtaining payment in a prompt manner.
2. Requesf payment from property owners. The District currently holds property
owners responsible for their tenants’ utility bills in the event the tenant does not pay.
This practice has been somewhat successful in the past, but has generated
numerous complaints from property owners.
3. Turn the account over to a collections agency. Although the District has access
to the collections agency contracted by the City of Carlsbad, no accounts have yet
been turned over to them.
These three options, while relatively effective, are difficult to administer and enforce,
particularly the second one. In order to shift responsibility for payment to the customer
who has signed for service, staff is recommending that a deposit procedure be
implemented. Customers who are determined to be the biggest credit risks would be
required to pay a deposit equal to an average two-month utility bill of that service
address before service is provided. The most common occurrences of non-payment
are with single-family residential customers, who are therefore determined to be the
biggest credit risks.
Government Code 5 60375.5 states that a district can “require a new residential
applicant to deposit a sum of money with the district prior to establishing an account
and furnishing service based solely on the credit worthiness of the applicant as
determined by the district.” Also, Public Utilities Code § 12822.6 provides that “the
decision of a district to require a new residential applicant to deposit a sum of money . . .
shall be based solely upon the credit worthiness of the applicant.” Staff has determined
that the customers whose credit worthiness would most necessitate a deposit
requirement would be the following:
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Page 2 of Agenda Bill No. d9&
l New customers to Carlsbad for whom the District does not have a two-year credit
history.
l Past Carlsbad customers whose payment history has been unsatisfactory.
l Current customers whose service has been terminated for non-payment.
Staff is proposing that all single-family residential customers who fall into one of the
previous categories be required to submit a two-month deposit prior to establishment of
a utility account or provision of service. In the case of customers with a late payment
history, the deposit would be required whenever they open a new account, for instance
at a new address. After surveying eight local water agencies, including four cities, staff
found that half of them require deposits from customers prior to providing service. The
amount of the deposit is most often based, on two months of service, although the City
of San Diego requires a three-month deposit. For the District, a two-month deposit will
work well with the billing procedure, since a customer’s service is not terminated for
non-payment, following the government code and public utility code notification
requirements, until two months after the payment due date. The two-month deposit will
help offset outstanding balances if a customer leaves without paying the final bill.
In order to protect the interests of the District, a deposit will be returned to the customer
only after two years (24 months) of timely payments on the account. At that point, the
deposit will be refunded to the customer in full. If a customer holds an account for
fewer than 24 months, the deposit will only be returned after final payment on the
account has been cleared.
The District will still have the ability to turn over unpaid accounts to a collections agency
as well as having the option of placing a lien against property for nonpayment of the
utility bill. However, due to the lengthy and potentially expensive process of collecting
payments via a property lien, staff is recommending that owners as well as tenants who
fall into one of the three credit risk categories submit a deposit.
FISCAL IMPACT:
The establishment of a two-month deposit for utility service may decrease the District’s
uncollectible accounts, and therefore, provide additional revenue. In fiscal year 1994-
95, the District wrote off approximately $25,000 (of a total $30 million billed annually) in
bad debt expenses. Moreover, the District will earn money on the deposits while they
are being held in an interest-bearing account. The District is not required to pay
interest to customers when the deposits are refunded.
EXHIBITS:
1. Resolution No. 9 1 1 adopting a customer deposit procedure for single-family
residential utility accounts.
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RESOLUTION NO. 911
A RESOLUTION OF THE BOARD OF DIRECTORS OF THE
CARLSBAD MUNICIPAL WATER DISTRICT,
CARLSBAD, CALIFORNIA, ADOPTING A CUSTOMER DEPOSIT
PROCEDURE FOR SINGLE-FAMILY RESIDENTIAL UTILITY ACCOUNTS
WHEREAS, Government Code § 60375.5 and Public Utilities Code § 12822.6
allow districts to require new residential account applicants to deposit a sum of money
prior to establishing an account and furnishing service; and
WHEREAS, the District’s previous policy of holding property owners responsible
for unpaid utility bills by their tenants is no longer necessary with the deposit
requirement; and
WHEREAS, the District must protect the financial interests of the City and its
customers by ensuring payment from all customers for whom service is provided; and
WH’EREAS, single-family residential customers have, based on past history,
posed the biggest credit risk as determined by the District; and
WHEREAS, customers with a delinquent payment history and those whose
service has been terminated for non-payment also pose a credit risk as determined by
the District; and
WHEREAS, a two-month deposit is a just and reasonable sum for potential
payment toward an unpaid utility account because the District does not terminate
service until 60 days after the bill has been assessed.
NOW, THEREFORE, BE IT RESOLVED, as follows:
1. That the above recitations are true and correct.
2. That a deposit procedure is hereby established that requires single-family
residential customers with no service history .and therefore no credit history with the
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District or who are past Carlsbad customers whose utility payment history is
unsatisfactory, to submit a deposit equal to a two-month utility bill prior to establishment
of service.
3. That all customers, regardless of customer classification, will be required
to submit a two-month deposit if their service is terminated for non-payment, prior to re-
establishment of service.
4. That deposits will be returned to customers only after a 24-month period
of timely payments or after the utility account has been closed and the final payment for
service has been cleared, whichever comes first.
PASSED, APPROVED AND ADOPTED at a special meeting of the Carlsbad
Municipal Water District held on the 3rd day of OCTOBER , 1995, by
the following vote, to wit:
AYES: Board Members Lewis, Nygaard, Kulchin, Finnila, Hall
NOES: None
ABSENT: None
ATTEST:
alLcoLR.W
ALETHA L. RAUTENKRANZ, Secretary