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Home My WebLink AboutAgenda Report - May 6, 2009 E-16AGENDA ITEM Gi.. [.6 CITY OF LODI COUNCIL COMMUNICATION Im AGENDA TITLE: Adopt Resolution Increasing Fee for Returned Check Charges from $25 to $35. MEETING DATE: May 6,2009 PREPARED BY: Jordan Ayers, Deputy City Manager RECOMMENDED ACTION: Adopt Resolution raising the fee for each returned check from $25 to $35 as provided by Government Code 6157. BACKGROUND INFORMATION: In 2003, the City Council adopted Resolution 2003-137 setting the fee for returned checks in accordance with Section 1719 of the Civil Code. Section 1719 provides that a check -writer of the dishonored check shall be liable to the payee for a service charge in an amount not to exceed $25 for the first check dishonored, and an amount not to exceed $35 for each subsequent check dishonored. Current cost for processing each returned check is $ 64.24 (Exhibit A). A survey of other California cities and their returned check charges is also attached (Exhibit B). Other jurisdictions are currently charging between $10 and $55 for returned checks, with $25 being the most common charge among the surveyed jurisdictions. Local businesses and banks were also surveyed and their charges range from $25 to $35 for each returned check (Exhibit C). Government Code 6157 (Exhibit D) provides however, that "if any personal check offered in payment pursuant to this section is returned without payment, for any reason, a reasonable charge for the returned check, not to exceed the actual costs incurred by the public agency, may be imposed to recover the public agency's processing and collection costs". The primary goal of the proposed increase is to recover at least a portion of the cost of processing returned checks. Also, it could be a potential deterrent for customers who are writing checks without sufficient funding. An analysis of the returned checks shows a 40 -percent increase from 2003 to 2008 (549 to 767). Revenues generated from Returned Check fees totaled $20,385 in FY 2006/07 and $19,160 in FY2007/08. Collections through April 30, 2009 totaled $16,990. FISCAL IMPACT: A nominal increase in General Fund revenues would be expected from the fee increase. FUNDING AVAILABLE: N/A Jordan Ayers, Deputy City APPROVED: Blair Ki , ity Manager Services Director EXHIBIT A CITY OF LODI PROCESSING COSTS FOR RETURNED CHECKS 02/26/2009 FINANCE - Collections TIME COST CSR II current hourly wage plus benefits: $34.80 minutes Activit Write acc. # , name on bank slip for identification, add $25. to ck. amt, date crdited. 5 $ 2.90 Access R/C register, enter acc. #, $ amt. of check. Key in $25. R/C fee. 5 2.90 Key entries to computer to reverse credits, run reports. 3 1.74 Make photocopies of check written to other departments - non utility. 5 2.90 Verify entries on cash report, account #, $ amount; edit to reports. 5 2.90 2nd return check = $25. charge; requires letter to customer "cash only status". 5 2.90 Redeem returned check for customer, update utility account. 3 1.74 F & M Bank charges 6.00 Sub Total (Office) Each Check $ 23.98 Electric - FIELD SERVICES Field Service Rep = current hourly wage + benefits $ 38.22 Activit Generation andmailin of 48 hour notice 15 $9.56 Physical shut off (requires 2 persons), Field Service Re . II 25 31.85 If paid, Physical Turn on requires 2 person 25 31.85 Sub Total (Field) Each Check $73.26 Less: Reconncect charge ($33.00) Total (Office and Field) Each Check $ 64.24 SURVEY OF CALIFORNIA CITIES AND OTHER PUBLIC AGENCIES- 3/24/2009 EXHIBIT B NSF CHARGE Rolling Hills Estates $ 10.00 Laguna Niguel 10.00 Temple 10.00 Carpinteria Valley Water District 15.00 Desert Water Agency 15.00 EI Monte 15.00 Redwood City 15.00 San Clemente 15.00 Yorba Linda 15.00 San Luis Obispo 18.75 Antioch 20.00 Humboldt Community Services District 20.00 Mesa Consolidated Water District 20.00 Ripon 20.00 Sonora 20.00 Hermosa Beach 22.00 La Palma 22.00 Santa Paula 23.00 Gardena 24.50 Alhambra 25.00 Alturas 25.00 Belmont 25.00 Calimesa 25.00 Carpinteria 25.00 Coachella 25.00 Cotati 25.00 Elk Grove 25.00 Grover Beach 25.00 Lakewood 25.00 Live Oak 25.00 Livermore Area Recreation & Park District 25.00 Lynwood 25.00 Pittsburg 25.00 Poway 25.00 Roseville 25.00 San Rafael 25.00 Suisun 25.00 Vacaville 25.00 Vista 25.00 Waterford 25.00 Yuima Municipal Water District 25.00 Cathedral 25.75 Galt 30.00 Menlo Park 30.00 San Gabriel 30.00 Sunnyvale 30.00 Thousand Oaks 30.00 Long Beach 32.00 Menifee 33.75 Cudahy 35.00 Los Banos 35.00 Tustin 55.00 DSRSD 25.00 & 35.00 Escalon 25.00 & 35.00 Gilroy 25.00 & 35.00 Glendora 25.00 & 35.00 Goletta 25.00 & 35.00 Huntington Beach 25.00 & 35.00 Lodi 25.00 & 35.00 Montebello 25.00 & 35.00 Morro Bay 25.00 & 35.00 Signal Hill 25.00 & 35.00 Surf 25.00 & 35.00 Glendora 35.00 &41.00 EXHIBIT C LOCAL BANKS NSF Charge 25.00 per check Farmers & Merchants Bank $ 28.00 Bank of Stockton $ 27.50 Wells Fargo Bank $ 35.00 Bank of America $ 35.00 Bank of Agriculture and Commerce $ 29.00 Bank of the West $ 35.00 Guaranty Bank $ 35.00 LOCAL BUSINESSES Longs Drug Stores $ 25.00 Lowe's $ 25.00 Food -4 -Less $ 25.00 Wal-Mart $ 25.00 Orchard Supply $ 25.00 GOVERNMENT CODE 6157: EXHIBIT D 6157. (a) The state, and each city, whether general law or chartered, county, and district, each subdivision, department, board, commission, body, or agency of the foregoing, shall accept personal checks drawn in its favor or in favor of a designated official thereof, in payment for any license, permit, or fee, or in payment of any obligation owing to the public agency or trust deposit, if the person issuing the check furnishes to the person authorized to receive payment satisfactory proof of residence in this state and if the personal check is drawn on a banking institution located in this state. (b) If any personal check offered in payment pursuant to this section is returned without payment, for any reason, a reasonable charge for the returned check , not to exceed the actual costs incurred by the public agency, may be imposed to recover the public agency's processing and collection costs. This charge may be added to, and become part of, any underlying obligation other than an obligation which constitutes a lien on real property, and a different method of payment for that payment and future payments by this person may be prescribed. (c) The acceptance of a personal check pursuant to this section constitutes payment of the obligation owed to the payee public agency to the extent of the amount of the check as of the date of acceptance when, but not before, the check is duly paid. (d) The provisions in subdivision (b) prohibiting a returned check charge being added to, and becoming a part of, an obligation which constitutes a lien on real property do not apply to obligations under the Veterans' Farm and Home Purchase Act of 1974 (Article 3.1 (commencing with Section 987.50) of Chapter 6 of Division 4 of the Military and Veterans Code). Source Link: hqp://www.le�,info.ca.�,ov/c�,i-bin/displaycode?section=�'ov&p=06001- 07000&file=6150-6159 RESOLUTION NO. 2009-54 A RESOLUTION OF THE LODI CITY COUNCIL INCREASING FEE FOR RETURNED CHECK CHARGES FROM $25 TO $35 FOR EACH RETURNED CHECK WHEREAS, the City of Lodi has assessed fees for returned checks under the authority of Civil Code Section 1719; and WHEREAS, Civil Code Section 1719 limited the City to a fee of $25 for the first returned item and $35 for all subsequent items; and WHEREAS, Government Code Section 6157 provides that a reasonable charge, not to exceed the actual costs of the agency may be imposed for returned items; and WHEREAS, the costs incurred by staff to collect returned items is $64.24 per item; and WHEREAS, staff is sensitive to difficult economic times and is not proposing full cost recovery for returned items. NOW, THEREFORE, BE IT RESOLVED that the Lodi City Council hereby approves increasing the fee for all returned items from $25 to $35; and BE IT FURTHER RESOLVED by the Lodi City Council that this Resolution shall become effective immediately. Dated: May 6, 2009 I hereby certify that Resolution No. 2009-54 was passed and adopted by the City Council of the City of Lodi in a regular meeting held May 6, 2009, by the following vote: AYES: COUNCIL MEMBERS — Hitchcock, Johnson, Katzakian, Mounce, and Mayor Hansen NOES: COUNCIL MEMBERS — None ABSENT: COUNCIL MEMBERS — None ABSTAI N: COUNCIL MEMBERS — None 2009-54