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HomeMy WebLinkAbout06 WATER DEPOSIT POLICY AND ADOPTION OF RESOLUTION NO. 15-10Agenda Item 6 >>0 Reviewed: AGENDA REPORT City Manager Finance Director MEETING DATE: MARCH 3, 2015 TO: JEFFREY C. PARKER, CITY MANAGER FROM: PAMELA ARENDS -KING, FINANCE DIRECTOR /CITY TREASURER JULIE INTERRANTE, CUSTOMER SERVICE SUPERVISOR SUBJECT: WATER DEPOSIT POLICY AND ADOPTION OF RESOLUTION NO. 15 -10 SUMMARY: The adoption of Resolution No. 15 -10 will establish a comprehensive policy governing required customer deposits associated with applications for new or continued water service. The proposed City of Tustin Water Department Deposit Policy will establish criteria for determining deposit amounts based on customer credit risk and will replace the uniform deposit amount currently set forth in the City's Comprehensive Schedule of Fees. RECOMMENDATION: It is recommended that the City Council adopt Resolution No. 15 -10 adopting a City of Tustin Water Department Deposit Policy governing required customer deposits associated with applications for new or continued water service from the City of Tustin, replacing the deposit requirements set forth in the City's Comprehensive Schedule of Fees. FISCAL IMPACT: There is no direct fiscal impact associated with the proposed Resolution and Policy. CORRELATION TO STRATEGIC PLAN: Goal C. Financial Strength — Protect the assets of our Utility and develop comprehensive financial policies. BACKGROUND AND DISCUSSION: Deposits have been required and have been included in the City's Comprehensive Fee Schedule since the City purchased Tustin Water Service. Resolution No. 81 -09 established a required deposit amount for all customers of twice an average bill or $20.00, whichever is higher. In 2007 the required deposit amount was increased to twice RESOLUTION NO. 15 -10 DEPOSIT POLICY March 3, 2015 Page 2 an average bill or $50.00, whichever is higher. A comprehensive written Deposit Policy has never been developed. The proposed Deposit Policy is designed to assess the credit risk associated with all customer applications for new or continued service, while protecting the assets of the City and shifting the financial burden of potential bad debt away from good paying customers to those who pose a credit risk. The proposed Policy will ensure that all water customers are treated in the same manner and will allow staff to require a larger deposit from those customers who, based on a soft credit check, may be more likely to default or leave unpaid bills when they move out of Tustin. The table below shows what the average deposit amount for Residential customers would be (based on their credit risk) under the proposed Deposit Policy in comparison to the current average required deposit amount for Residential customers. Average Residential Water Bill Current Average. Deposit (2x Avg. Bill) Average Deposit Per Proposed Deposit Policy Pamela Arends -King Finance Director /City Treasurer Attachment: Resolution No. 15 -10 $113.55 Average Required Deposit $227.10 No Risk $113.55 Minimal Risk $170.33 Substantial Risk Jul Interrante Customer Service Supervisor RESOLUTION NO. 15 -10 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF TUSTIN, CALIFORNIA, ADOPTING A CITY OF TUSTIN WATER DEPARTMENT DEPOSIT POLICY IN CONJUNCTION WITH REQUESTS FOR WATER SERVICE THE CITY COUNCIL OF THE CITY OF TUSTIN HEREBY RESOLVES AS FOLLOWS: SECTION 1. The City of Tustin Water Department Deposit Policy ( "Deposit Policy ") attached hereto at Exhibit "A" is hereby adopted. SECTION 2. The Deposit amount for new water service is hereby deleted from the Comprehensive Schedule of Fees (Exhibit F; Finance Department; Page 56 of 57), attached and adopted pursuant to Resolution No. 08 -60. All individuals or entities applying for or receiving water service from the City of Tustin shall make deposits in the amounts determined in accordance with the attached Deposit Policy. SECTION 3. If any provision, section, subsection, sentence, clause, phrase or word of this Resolution or the attached Deposit Policy is for any reason held to be invalid by a court of competent jurisdiction, such decision shall not affect the validity of the remaining portions of this Resolution or the attached Deposit Policy. The City Council hereby declares that it would have passed and adopted this Resolution, and each and all provisions hereof, irrespective of the fact that one or more provisions may be declared invalid. PASSED AND ADOPTED at a regular meeting of the City Council of the City of Tustin, California, held on the 3rd day of March, 2015. Charles E. Puckett, Mayor ATTEST: Jeffrey C. Parker, City Clerk STATE OF CALIFORNIA ) COUNTY OF ORANGE ) ss. CITY OF TUSTIN ) I, Jeffrey C. Parker, City Clerk of the City of Tustin, do hereby certify that the whole number of the members of the City Council of the City of Tustin is five; that the above and foregoing Resolution No. 15 -10 was duly passed and adopted at a regular meeting of the Tustin City Council, held on the 3rd day of March, 2015, by the following vote: COUNCILMEMBER AYES: COUNCILMEMBER NOES: COUNCILMEMBER ABSTAINED: COUNCILMEMBER ABSENT: JEFFREY C. PARKER, City Clerk Deposit Policy Our Deposit Policy The City of Tustin Water Department's deposit policy is designed to assess the credit risk associated with all customer applications for new or continued service, while protecting the assets of our utility. It is important that every employee of the City of Tustin Water Department understand and support our policy of treating all customers with courtesy and respect regardless of the risk assessed. It is very important to our success that we adopt and strictly adhere to the policy of shifting the financial burden of potential bad debt away from good paying customers to those who pose a credit risk. This policy is aimed at accomplishing that task. It is also important to note that most of our customers will be required to make only the minimum deposit, because they pose little or no credit risk. Likewise, those customers who have not established credit or pose a substantial credit risk should bear the financial risk of providing service to them. This policy is based upon the use of a technology -based screening tool called the ONLINE Utility Exchange to assess credit risk at the point of application. Deposit Criteria The City of Tustin Water Department shall consider the status of the applicant and act according to the following criteria: Residential Service Applicants 1. New - service applicants who pose no credit risk (Green Light returned on the ONLINE Utility Exchange) shall make the minimum deposit of one (1) times the average bi- monthly amount billed for the service address during the preceding 12 months, or $75.00, whichever is higher (the "minimum deposit "). 2. New - service applicants who pose minimal risk (Yellow Light returned on the ONLINE Utility Exchange) shall make a deposit equal to one and one half (11/2) times the highest bi- monthly amount billed for the service address during the preceding 12 months, or $75.00, whichever is higher. 3. New- service applicants who pose substantial credit risk (Red Light returned on the ONLINE Utility Exchange) shall make the maximum deposit equal to two and one half (2'/z) times the highest bi- monthly amount billed for the service address during the preceding 12 months (the "maximum deposit "). 4. If the residential service address is new and has not had service before, applicants shall pay initial deposits in the following amounts, based on their level of credit risk: A. No credit risk (Green Light returned on the ONLINE Utility Exchange): $75.00; B. Minimal risk: (Yellow Light returned on the ONLINE Utility Exchange): $100.00; C. Substantial credit risk (Red Light returned on the ONLINE Utility Exchange): $200.00. 5. Any existing customer who has no deposit on account and who becomes delinquent (i.e. has not paid current bill for 30 days, or has had two or more delinquencies in any consecutive 24- month period), shall be deemed to have an unsatisfactory payment record and must make a maximum deposit in order to continue service. 6. Upon any request for extension, where the customer has had existing service for six months or more, a new ONLINE Utility Exchange report will be pulled, and, if credit risk is indicated, the amount of the required deposit shall be increased to the appropriate deposit amount. 7. A customer who has had service terminated due to nonpayment shall be required to make the maximum deposit prior re- initiation of service. 8. A service applicant is not required to provide a social security number in order to receive water service. However, since a social security number is needed in order for the City of Tustin Water Department to adequately evaluate a customer's credit risk, any service applicant who chooses not to supply a social security number shall be required to make the maximum deposit. 9. A service applicant who provides a social security number that is returned as deceased, non - issued, belonging to a person under the age of 18, or belonging to a person other than the applicant, or that is fraudulent, shall be denied service until that person supplies a valid social security number, as well as additional picture proof of identity, such as a valid driver's license or valid passport. Commercial Service Applicants The deposit for Commercial applicants will be determined in the following manner: A. Sole Proprietorships: An ONLINE Utility Exchange report will be pulled on the owner / sole proprietor, and the applicant will be required to make a deposit in the amount described above for residential service applicants, based on the level of credit risk set forth in the report. B. Partnerships, Limited Liability Companies (LLC) and Limited Liability Partnerships (LLP): If the entity is less than one year old, an the ONLINE Utility Exchange report will be pulled on the managing partner or managing director, as appropriate, and the applicant will be required to make a deposit in the amount described above for residential service applicants, based on the level of credit risk set forth in the report. If the entity is over one year old, an ONLINE Utility Exchange's Business IntelliScore Report will be pulled on the entity, and the amount of the required deposit shall be determined in accordance with paragraph 2, below. C. Corporations (regardless of whether Subchapter "S" or "C" corporations): Credit risk shall be determined based upon the ONLINE Utility Exchange's Business Profile Report and IntelliScore Report, and the amount of the required deposit shall be determined in accordance with paragraph 2, below. Corporations that are less than one year old will be assessed the maximum deposit. 2. The ONLINE Utility Exchange's Business IntelliScore reports. A. Commercial applicants who pose low risk and display an IntelliScore of «80 to 100» shall make a deposit of one times the highest bi- monthly amount billed for the service address during the preceding 12 months. B. Commercial applicants who pose a medium credit risk and display an IntelliScore score of «70 to 79» shall make a deposit of two times the highest bi- monthly amount billed for the service address during the preceding 12 months. C. Commercial applicants who pose a moderate credit risk and display an IntelliScore score of «69 or lower>> shall pay a deposit of three times the highest bi- monthly amount billed for the service address during the preceding 12 months. Deposit Duration City of Tustin Water Department normally returns deposits to our customers after two years of service and a payment history indicating no delinquent payments. However, any customer who either: A. makes any delinquent payment during the initial 24- months of service, or B. returns as a substantial credit risk on the ONLINE Utility Exchange at the 24 -month anniversary of service or, C. does not provide a valid social security number, shall not have their deposit returned until their service is terminated or they no longer pose a substantial credit risk for a consecutive 24 -month period. General 1. Deposits are required to be paid prior to the time a connect order is issued. 2. Deposits are not transferable from one service address to another. 3. Upon termination of service, the deposit will be applied against any unpaid balance. 4. Any remaining balance will be returned to the consumer. 5. Customers who terminate service and have an unpaid balance that is delinquent by more than 30 days from their final bill date shall not be entitled to any other privileges and will be referred to a collection agency. Using the ONLINE Utility Exchange to Screen Service Applicants The ONLINE Utility Exchange is designed to screen service applicants to determine their credit risk based upon three criteria: 1) Social Security Number (SSN) verification; 2) Credit risk; and 3) Payment experience with other utility providers. Each of these criteria reflects upon the credit risk associated with the City of Tustin providing service to the applicant. The City provides service and then bills for the service, and the deposit is often times the best way to protect our utility. Who Will Be Screened Using the ONLINE Utility Exchange Homeowners If the applicant indicates that they own their home, or are in the process of purchasing their home, all new owners of the property must be screened to determine their identity and credit risk. Where there are multiple owners, the deposit decision shall be based on the owner who poses the greatest credit risk. Renters If the applicant indicates that they rent their home, each person unit shall be screened, and the deposit decision shall be based credit risk among those responsible for the lease. For example apartment, and three pose no risk, but one scores a maximum maximum deposit. responsible for the lease of the rental on the applicant who poses the greatest if four persons are renting an ieposit, the deposit shall be the Any person under the age of 18 years of age shall obtain the guarantee of their parent or another adult as a co- signor. The parent or co- signor shall also be screened. Active Duty Military Any United States military active -duty customer who owes a deposit shall have the deposit reduced by an amount of $100 to honor their service to our country. Letters of Credit City of Tustin Water Department will not accept a letter of credit in lieu of screening an applicant through the ONLINE Utility Exchange. If a new - service applicant produces a letter of credit, the letter will be placed in the applicant's file, but it will not be considered in determining the deposit amount. All deposit decisions are based on the ONLINE Utility Exchange reports and not on an applicant's past history with another utility. Adverse Action Letters An adverse action letter will be printed and given to each applicant who is charged more than the minimum deposit. The Federal Trade Commission and the Fair Credit Reporting Act (FCRA) mandate that a consumer who is charged a deposit based upon their credit information be given notification as to where that information was obtained and detailed procedures as to how they might dispute the information. Spanish- speaking applicants will be given the adverse action letter printed in Spanish. Deposit Receipt A receipt of deposit or confirmation number shall be issued to each customer from whom a cash deposit is received or who otherwise requests a receipt. Methods of Payment It is required that City of Tustin Water Department collect all monies owed (service charges and deposits) on the account after a deposit decision has been made and prior to the connection of service. 1. Deposits must be made before connection of service via either of the following payment methods: A. Coming into City Hall and making payment with CASH, or B. Making payment over the phone by credit card (Master Card, Visa or Discover). At its discretion the City may allow a customer who makes a satisfactory showing of inability to Pay the full amount of the deposit at the time of connection to split the deposit into up to three (3) monthly payments. 2. All deposit amounts are subject to periodic review and adjustment based on the actual water usage and customer payment history. The amount of the deposit may be adjusted upward or downward to reflect the actual amounts billed and the on -time payment history of the customer. 3. Where a customer has been required to make a deposit, that deposit shall not relieve the customer of the obligation to pay the service bill when due. Unclaimed Deposits A record of each unclaimed deposit will be maintained for at least 2 years, during which time the City of Tustin Water Department shall make a reasonable effort to return the deposit. Any deposit remaining unclaimed after 2 years shall be forfeited. Record Keeping City of Tustin Water Department shall keep records to show: 1. The name, address and social security number of each depositor. 2. The amount and date of the deposit. 3. The last transaction concerning the deposits. Delinquent Accounts / Collection Activities City of Tustin Water Department reserves the right to require additional deposit funds if the customer's account appears on the disconnection list, becomes delinquent, or reflects increased water usage, or where the record otherwise necessitates. Any required increase in the deposit will be reflected on the customer's account and must be paid by the due date of the next bill, or service will be disconnected. If an account is closed, the deposit will be credited toward the final bill. If monies are still left on the account, a refund will be made to the customer. In the event that a balance remains unpaid on the account after the deposit is applied, the City of Tustin Water Department reserves the right to begin collection activities, which may include penalty notices, referral to the Consumer's Credit File, referral to a Third Party Collection Agency, or legal action. Deposits may not be transferred from one customer to another