Archived Story

How Anderson answered deposit questions

Published 9:36pm Tuesday, May 11, 2010

Dowagiac Daily News

During a wide-ranging 90-minute dialogue Monday night between Dowagiac City Council and a roomful of its constituents, City Manager Kevin Anderson answered some concerns City Hall staff had received to date.

Would it be a $500 deposit in all cases?

“Only for new customers and for those current customers who are disconnected and come in for reconnection, if they are customers of electric, sewer and water combined. You have to be a customer of each, and that’s a limited amount. If somebody is an electric customer only, this ordinance calls for that deposit to be $325. While $500 is the number we hear bantered around pretty heavily, it’s only if you have all three utilities and are renting in situation C. In situation B, it goes from $210 to $230.”

Is the city forcing renters into this situation?

“The landlord has a choice of which situation they want to be in and they can sign a waiver accordingly. We have not had many people use that waiver in the past, but admittedly over the last couple weeks as we’ve looked at this, we’ve had a series of people come in a lot larger numbers.”

Is the downtown affected?

“There are deposits in the downtown, and this applies universally.”

What’s the impact on senior citizens who live at Eagle’s Wood and Eagle’s Trace apartments at the edge of the city?

“Those projects are actually AEP customers, so they would not be impacted at all.”

Will existing customers have to come in and pay an additional amount?

“No, they would not. They would only have to pay an additional amount if they were disconnected. When it came time to reconnect, they’d need to make up the difference depending on the situation.”

Won’t existing customers have higher deposits if they transfer?

“Not unless they were disconnected and we applied their deposit at the time. If you’re a current customer and you’re current, you can transfer whatever deposit you have.”

What about MSHDA apartment projects downtown and how will they impact students?
“This doesn’t supplant student housing. Landlords downtown and city staff know that.”

Is this to help offset the contract switch a year ago?

“Actually, deposits can’t be used for those types of things. They can only be used for specific customer accounts, then returned to that customer. They could not be used to offset any other expenditure.”

A 16-year power contract Dowagiac approved in April 2009 with I&M will ultimately yield savings from stable rates a few years down the road.

The cost in this contract will be 54 cents a kilowatt hour to purchase power, compared to 87 cents previously.

In the meantime, the switch from AEP meant paying $3.4 million owed from 13 months remaining on a two-year contract.

Will this reimburse foreclosure losses?

“Actually, foreclosures fall into category A,” Anderson said, “so no.”

Is this consistent with what other communities do?

“We checked around and talked to the Michigan Municipal Electric Association. It expressed there are a wide variety of ordinances out there with various municipal public utilities. Those are the heart of questions that have come before us. I think it’s important to note that the goal behind this is to even the playing field as much as possible.”

“It’s fair to say we do have a problem,” Mayor Donald Lyons said.

“There’s no question about that. We have a number of people who have skipped town owing the city money” – $19,000 for 2007, $20,000 for 2008 and $30,000 for the first 10 months of 2009.

“That’s the issue we’re confronting and have to deal with,” the mayor said.

“What has been happening in the past quite frankly, everybody who has city services and pays a utility bill has had to subsidize those people who skipped out of town owing us money. Is that fair? Is it fair for everybody else to be supporting those people who choose not to pay their bills? I think the clear and obvious answer is no. I don’t want to do it and I don’t think you want to do it. Number one what we’re talking about is a fairly small group of people” Anderson pegged at 260 – 80 to 90 per year or half a dozen a month.
“So when I look at the impact this potentially might have on schools,” Lyons, a former school board president, said, “and on the local economy, I don’t see that we have an issue.

“We’re not talking about hundreds and hundreds of people who are going to be negatively impacted. We’re talking about a very small number of people who, for whatever their personal reason, be it unfortunate finances or a lifestyle that they choose not to pay their bills, I don’t think it’s fair that everyone else should have to subsidize them.”

“That’s the bottom line,” Lyons said.

“If we don’t get this, we have to start raising electrical rates and saying, ‘We’re going to take $30,000 of skips a year divided by the 2,500 customers.’ I just don’t feel that’s the way to handle the problem because it’s not a large economic issue for the community, it is a problem of a few individuals that taken collectively adds up to a pretty decent number for the city. When I looked at those three years I see $70,000, which pays a lot of bills around here. That’s what we’re looking at.

“We’ve surveyed apartment complexes in town and virtually all of them are electric only. If you look at the great majority of rental units, you’re not looking at places that also would have sewer and water, so you’re looking at $325 instead of a $500 charge. Again, we’re grandfathering everyone who lives here now. Nobody is being asked to pay anything that is not deserved, by which I mean disconnected and reconnected or they’re moving in. We’re starting with a fresh slate. This $500 is an average kind of number. There are people less than that by a fair amount. There are people who are more than that” – as high as $3,500, according to Anderson.

As he did at the April 26 meeting, Anderson explained Dowagiac’s three kinds of utility customers as A, B and C.

A is where someone owns a piece of property and is a customer.

If someone falls behind on payments and leaves owing money, the city has the ability to place a special assessment or lien on the property once it is six months in arrears.

B and C revolve around what Anderson labeled “the landlord’s choice.”

A landlord can own the property and rent it to an individual without a responsibility waiver.

“That means if they skip out owing utilities,” Anderson said, “like the property owner (A), a lien can be placed on the property for that amount that’s due.”

The third customer category, C, is where a landlord has a waiver of responsibility and lease brought to the city’s attention indicating “the tenant’s responsible and if they’re behind in payments, that landlord will not take responsibility. In that case, then,” Anderson said, “the city does not have the ability to place a lien on the property and collect it.

“In situation A and B, we know we can collect 100-percent of the utilities that are used,” the city manager said, “and as such, we’re able to put our rates in place accordingly because we know 100-percent of the billings will take place. (In example C), we have the opportunity to have lost revenue, if you will. Uncollectible revenue. This deposit ordinance we’re talking about,” which the council tabled May 10 until June, “is attempting to address this to make these situations on a similar playing field to the other two. Otherwise, there’s a potential of subsidizing lost revenue. The idea behind the deposit is to try to get to that point where these three are on as even a playing field as possible.”

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