HomeMy WebLinkAbout1999-09-21; Municipal Water District; 453; Proposed Customer Deposit for Utility AccountsCARLSBAD MUNICIPAL WATER DISTRICT - AGENDA BIL,L.
AB# r53 TITLE: l-r= DEPTHD. /---
MTG. 09/21/99 PROPOSED CUSTOMER DEPOSIT FOR UTILITY
DEPT. FINKMWD ACCOUNTS
RECOMMENDED ACTION:
Adopt Resolution No. lo64 amending the District’s utility account deposit procedure.
ITEM EXPLANATION:
In October 1995, the Board approved a resolution allowing the District to collect deposits from the
following classification of water district customers:
l New customers to Carlsbad for whom the District did not have a two-year credit history.
l Past Carlsbad customers whose payment history had been unsatisfactory.
l Current customers whose service had been terminated for non-payment.
The Board also approved refunding deposits to customers only after two years (24 months) of timely
payments on their account at which time the deposit would be refunded to the customer in full. If a
customer held an account for fewer than 24 months, the deposit would only be returned after final
payment on the account had been cleared.
In the four years since the customer deposit policy was adopted, the District has determined that the
cost to administer the deposit policy is greater than if the District waived the deposit policy for new
customers and past customers whose payment history had been unsatisfactory. The District
estimates that $28,000 in staff resources were used in Fiscal Year 1999 to administer the customer
deposit policy while the cost to the District if the deposit policy were waived would have been
$10,500.
Staff resources used to administer the policy include:
l Staff time spent with a new District customer. Customer service staff explain the deposit policy to
the new customer, obtain the customer’s proof of good credit history that allows the District to
waive the deposit requirement, and calculate the required deposit and obtain payment from the
customer if a good credit reference cannot be provided to the District. The District had 5,200 new
utility customers last fiscal year and collected 860 deposits in the amount of $82,750.
l Staff time used to process deposit refunds. Deposit refunds are issued to a customer after two
years of timely payments on their account or if their account is closed and the final payment on
the account has cleared. The District issued 765 refunds last fiscal year in the amount of
$70,900.
l Staff time used to apply deposits to closed accounts that were delinquent. If a customer has not paid the balance on their closed account and the customer has a deposit, the District applies the
deposit to the balance due.
In Fiscal Year 1999, $15,000 in deposits were applied to 143 unpaid closed accounts. If deposits
were not held by the District to apply to these accounts, the accounts would have been sent to the
Districts collection agency. The collection agency has an average collection rate of 30%. The
District would have expected that of the $15,000 in unpaid closed accounts $4,500 would have been
collected through the collection agency if no deposits were applied. The District estimates that the
net cost for Fiscal Year 1999 would have been $10,500 ($15,000 less $4,500) if the District did not
have any deposit policy. This cost would have been even less if the changes recommended in this
agenda bill had been implemented since deposits would have continued to be held for customers
whose service had been terminated for non-payment.
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Page 2 of Agenda Bill # -Is3
Therefore, staff is proposing that the District no longer require deposits from new customers or past
Carlsbad customers whose payment history has been unsatisfactory as long as they had eventually
paid their bills in full. Staff is proposing that a two-month deposit still be required of Carlsbad
customers whose service has been terminated for non-payment since these customers pose the
greatest financial risk to the District. The change in the deposit policy will allow the District to continue
to provide top quality customer service to new and current utility customers at the least possible cost.
ENVIRONMENTAL IMPACT:
None.
FISCAL IMPACT:
The recommended changes in the deposit policy are expected to result in a reduction in staff
resources cost from $28,000 to $10,500, a savings of $17,500 if costs continue at the same pace as
Fiscal Year 1999.
EXHIBITS:
1. Resolution No. /06 Y , amending the Districts customer deposit procedure.
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RESOLUTION NO. 1064
A RESOLUTION OF THE BOARD OF DIRECTORS
OF THE CARLSBAD MUNICIPAL WATER
DISTRICT, CARLSBAD, CALIFORNIA, ADOPTING A
CUSTOMER DEPOSIT PROCEDURE
WHEREAS, the District’s previous policy of collecting deposits from new
customers that did not have a two-year credit history or past Carlsbad customers
with unsatisfactory payment histories is not cost effective; and
WHEREAS, Carlsbad customers whose service has been terminated for
non-payment poses the greatest credit risk as determined by the District; 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
WHEREAS, a change in the deposit policy will allow the District to continue to
provide top quality customer service to new and current utility customers at the
least possible cost.
NOW, THEREFORE, BE IT RESOLVED by the Board Of Directors Of The
Carlsbad Municipal Water District, as follows:
1. That the above recitations are true and correct.
2. That the previous deposit procedure adopted under Resolution # 911
dated October 3, 1995 is hereby repealed.
3. That a deposit procedure is hereby established that
l requires all customers, regardless of customer classification, to
submit a two-month deposit if their service is terminated for non-payment,
prior to reestablishment of service, and
l authorizes staff to refund the deposits held after two years (24
months) of timely payments. If a customer holds an account for fewer than
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24 months, the deposit will be returned after final payment on the account
has cleared.
PASSED, APPROVED AND ADOPTED at a regular meeting of the
Carlsbad Municipal Water District held on the , 1999, 21s~ day of SeA&mhpr
by the following vote, to wit:
AYES: Board Members Lewis, Nygaard, Finnila, Hall & Kulchin
NOES: None
ABSENT: None
ATTEST:
ALETHA L. RAUTENKRANZ, Secretary
KAREN R. KUNDTZ, Assistant City Clerk
(SEAL)