City manager explains controversial $500 utility deposit before May 10 votePublished 10:58am Tuesday, April 27, 2010
By JOHN EBY
Dowagiac Daily News
Dowagiac City Council gave first reading Monday night to utility ordinance amendments that could be enacted at the May 10 meeting, which takes place an hour earlier at 6 due to the Dogwood Fine Arts Festival.
Having implemented a new law regarding utility shutoffs that essentially prohibit shutting off electric users during the five winter months, it is important to review the impact of this law on utility finances and what policies, if any, should be adjusted to make sure costs are fairly paid by users, city officials said.
Mayor Pro Tem Leon Laylin, who conducted the April 26 meeting in the absence of Mayor Donald Lyons, said, “In the last few years, the cost to the city has exceeded $100,000 for services rendered and not paid for.”
“Along with that,” Laylin said, “we are well aware that the governor has indicated we stand to lose $380,000 through lack of revenue sharing funds.
“With that hanging over your head, and you ask us to run a city, we’re not doing anything that we don’t feel is absolutely necessary to do. Each of these proposals is within guidelines set forth by the state,” Laylin said.
City Manager Kevin Anderson stepped to the easel to diagram Dowagiac’s three different kinds of utility customers:
• Customer A owns a home. This is a utility customer who owns the property in which the utility bill is generated. If utility bills go unpaid, the city has the capability to slap a special assessment on the real estate to insure 100-percent payment.
• Customer B rents. Anderson said there are two types of renting customers. The first is one whose landlord does not supply the city with a copy of a lease and a signed affidavit of tenant responsibility for Dowagiac utility charges. If utility bills stay unpaid, the city does have the ability to apply a special assessment on the real estate.
• Customer C would be the second type of renting customer with a landlord who does supply the city with a lease copy and a signed affidavit of tenant responsibility for Dowagiac utilities charges. In this situation, if utility bills go unpaid, the city lacks the ability to place a special assessment on the real estate. Records show about 50 customers currently fall into this category.
Anderson said Customers A and B pose no financial risk to the utilities, thanks to the special assessment covering the unpaid bill, penalties and interest.
Staff is in the process of preparing those special assessments.
“It would be reasonable to expect that some landlords will begin to use the affidavit of tenant responsibility,” Anderson wrote April 23 in a memo to the mayor and council.
Customer C, however, “does pose a financial risk,” Anderson stated. “If utility bills are unpaid, they cannot be placed as a special assessment and must be collected through other means which are more difficult, costly and time-intensive.
‘Given the new state law prohibiting disconnections during the winter, the risk of a significant utility bill going unpaid is much greater. Ultimately, the utility rates will need to be adjusted to cover those types of losses.”
The “relatively straightforward solution that deals only with (Customer C) would be to increase the utility deposit to $500″ from $230.
This applies to new customers only. For existing customers, their deposit would remain the same, however, should those customers become disconnected for non-payment, the new $500 deposit rate would apply for reconnection.
Staff previously analyzed customers who left in this situation and found that “in virtually all cases,” according to the city manager, “this amount would cover the financial risk. We do realize that it will make it more difficult for some people to get into some rental properties, but this policy would place the burden of the financial risk on those who would be creating that risk. Again, this policy only impacts customers who rent from landlords who submit a waiver of responsibility for utility payments.”
In March, Anderson and Building Official Jim Bradford met with the Cass County Landlords Association and reviewed the city’s utility collection policy, the new state law regarding disconnections and the proposed change of deposits.
Those in attendance “appreciated the situation that the law now puts utilities in and indicated that this appeared to be a reasonable approach to dealing with the concern,” according to the city manager.
Specifically on Monday’s agenda were:
• Section 82-7 (1) Level I Deposits, which involves raising deposits for renters.
• Section 82-7 (4) Deposits-General Conditions, which involves changes to the refunding of deposits for good pay customers.
• Sections 82-24 Landlord/Tenant Policy for Rental Properties, Subparagraph (c), which involves the addition of the affidavit for tenant responsibility.