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HomeMy WebLinkAboutAgenda Report - August 3, 2022 H-01CITY OF AGENDA ITEM H-0 1 Iry • O t C A L I FORN IA COUNCIL COMMUNICATION AGENDA TITLE: Receive Presentation on Current Utility Delinquencies and Provide Direction to Staff on Returning to Utility Service Suspension for Non Payment to Address Delinquent Bills MEETING DATE: August 3, 2022 PREPARED BY: Deputy City Manager RECOMMENDED ACTION: Receive presentation on current utility delinquencies and provide direction to staff on returning to utility service suspension for non payment to address delinquent bills BACKGROUND INFORMATION: The City of Lodi primarily relies upon suspension of electric service as a means of collection for customers who do not pay their utility bills in a timely fashion. Customers receive a bill that if not paid becomes delinquent, late fees are assessed and various notices sent to comply with the Lodi Municipal Code and eventually service is shut off if the bill has not been paid in full. From billing date a customer has approximately 45 days to pay any bill to keep services from being shut off as shown below. Day 1 — Billing Date Day 26 — Due Date Day 27 — Late Fee applied ($10) Day 36 — 2nd Late Fee applied ($15) and 10 -day shut off notice issued Day 44 — 48 hour shut off notice issued Day 46 — Service suspension As a result of the global COVID-19 pandemic, the City of Lodi suspended shutoff for non payment beginning in late March 2020. This action was taken to support citizens efforts to slow the spread, facilitate access to essential utilities while attending school or working from home and general support public health efforts. Subsequent to the City's suspension of this practice, the State of California prohibited some utilities from suspending service for non payment. While the City of Lodi still may have had options to suspend services for non payment, like almost all utilities in the state, the City elected to cease this practice during the pandemic as noted. In May of 2021, the City Council authorized use of federal pandemic relief funds authorized by the American Rescue Plan Act (ARPA) to enact a local Utility Debt Relief program. The debt relief program would provide payment of utility bills for customers who had become delinquent during the pandemic and could show any APPROVED: Stephen Schwabauer, City Manager income loss from 2019 to 2020. Despite substantial efforts to publicize the program via social media, sign advertisements in the community, bus ads and direct information sharing to all who contacted the utility, these programs were largely ineffective as customers were unwilling to make the effort to apply. City Council subsequently voted to end the program and redirect the funds to other projects in July 2022. In 2021, the State of California also provided pandemic bill relief for electric, water and wastewater services using. Those funds covered utility delinquencies through the end of calendar year 2020 without any application required by the customers. Both active and inactive accounts received funding and all customer classes in Lodi received some level of support from this program. To participate in this program utilities were prohibited from taking collection actions, including service suspension, against customers who received any relief through these programs for 90 days after receiving the funding. In addition, the utilities were required to offer payment plans to customers who remained delinquent after this 90 day period. The program covered delinquencies through the end of calendar year 2020, but funds were not received by Lodi and applied to accounts until April of 2022. Many customers who received these funds continued to accrue bills through calendar year 2021 and 2022 with little to no payment. In addition, other customers have fallen behind due to rising utility costs, particularly due to rising power purchase costs experienced by the Lodi Electric Utility, other economic circumstances and in some cases a knowledge that no action would be taken by the City for non payment. With the adoption of its Fiscal Year 2022/23 budget, the State of California approved a second pandemic relief program for utility delinquencies. This program currently covers electric bills only and only covers bills issued during calendar year 2021. The same 90 day shut off moratorium applies if an account receives funds through this program. The 90 day clock starts from the end of the application period, which is anticipated to be October 31, 2022. The primary difference from this program and the previous state relief program is that only active residential accounts are eligible for this program. Utility delinquencies have risen substantially since the pandemic began despite all of these relief programs. Beginning July 26, 2022, staff took the first steps necessary to begin service suspension for non payment. The first step was issuing late fees on all delinquent accounts and sending the appropriate notices. The first date service suspension could resume would be August 22. It was essential to begin this process to allow sufficient time to manage service suspension for all these customer accounts prior to receipt of the pandemic relief funding from the state to avoid crossover with the 90 day shut off moratorium required by that program. A significant number of the currently delinquent accounts representing over 56.6% of the total delinquent value across all utilities is delinquent only 1-30 days. Many of these accounts would not be eligible for the pandemic relief program and a return to service suspension for non payment is necessary to begin a normal cycle of billing and bill payment that has consequences for non payment. The tables below summarize the current delinquencies across the four utilities from January of 2020 to today. While the number of delinquent accounts has remained constant, the total delinquent amount has more than doubled across all utilities and increased nearly 2.5 times for the electric utility. The reason for the higher electric increase as compared to the other utilities is due to the record energy cost adjustments levied as a result of tremendous market forces on the electric utility to purchase power in today's market. Current Delignuencies Compared to January 2020 (Pre Pandemic) Delinquencies Electric Utility Cust # 1 to 30 Days Past 30 to 60 Days Past 61 to 90 Days Past 91 to 120 Days Past Over 120 Days Past Total Due Now Current 192911 $8,039,960.34 $976,909.31 $352,561.65 $283,625.66 $2,468,510.50 $12,121,567.46 20 -Jan 198711 $4,279,758.62 $378,144.28 $40,623.82 $34,938.84 $163,445.39 $4,896,910.95 Water Utility Cust # 1 to 30 Days Past 130to 60 Days Past 61 to 90 Days Past 191to 120 Days Past Over 120 Days Past Total Due Now Current 183521 $952,317.48 $146,706.72 $86,570.01 $67,167.05 $446,321.21 $1,699,082.47 20 -Jan 177071 $723,279.45 $107,494.90 $16,442.17 $10,991.19 $59,389.05 $917,596.76 Wastewater Utility All Utilities 30 to 60 Days Past 61 to 90 Days Past 91 to 120 Days Past Over 120 Days Past ITotal Due Now Current Cust # I 1 to 30 Days Past 130 to 60 Days Past 61 to 90 Days Past 91 to 120 Days Past Over 120 Days Past Total Due Now Current 224431 $10,872,668.25 $1,473,434.35 $657,346.03 $526,003.07 $5,677,865.37 $19,207,317.07 20 -Jan 222801 $6,862,488.02 $753,993.70 $100,350.72 $72,793.94 $1,270,930.43 $9,060,556.81 Electric Utility Cust # 1 to 30 Days Past 30 to 60 Days Past 61 to 90 Days Past 91 to 120 Days Past Over 120 Days Past Total Due Now Current 192911 $8,039,960.34 $976,909.31 $352,561.65 $283,625.66 $2,468,510.50 $12,121,567.46 20 -Jan 198711 $4,279,758.62 $378,144.28 $40,623.82 $34,938.84 $163,445.39 $4,896,910.95 Water Utility Cust # 1 to 30 Days Past 130to 60 Days Past 61 to 90 Days Past 191to 120 Days Past Over 120 Days Past Total Due Now Current 183521 $952,317.48 $146,706.72 $86,570.01 $67,167.05 $446,321.21 $1,699,082.47 20 -Jan 177071 $723,279.45 $107,494.90 $16,442.17 $10,991.19 $59,389.05 $917,596.76 Wastewater Utility Cust # I 1 to 30 Days Past 30 to 60 Days Past 61 to 90 Days Past 91 to 120 Days Past Over 120 Days Past ITotal Due Now Current 19174 $1,005,619.80 18598 $1,022,073.23 $174,812.46 $112,911.80 $90,333.68 $662,858.82 $2,046,536.56 20 -Jan $144,332.20 $19,807.19 $12,853.97 $63,293.48 $1,262,360.07 o address delinquencies, staff has identified three main options for Council consideration. Option 1 (staff recommended option): Return to Pre-COVID Collections Practices and Accept State Funding for Calendar Year 2021 Residential Utility Delinquencies This includes a return to late fees and service suspension for no payment. This option provides the greatest financial stability to the utility as service suspension is a strong motivator for customers to pay. Accepting state funding to address CY 2021 residential delinquencies will require that the City temporarily not shut off customers receiving this relief for a period approximately November 2022 through January 2023. Customers who are not eligible (including all non residential accounts and residential customers who do not have outstanding charges accrued during calendar year 2021) would continue with business as usual collections practices. This option would provide the City with enough of a window to conduct approximately two suspension cycles on all accounts prior to the arrival of state funding. Option 2a: Accept State Funding for Calendar Year 2021 Residential Utility Delinquencies and Delay Service Suspension on All Accounts This option is the same as option 1 with the exception that the City would not suspend any services on any account until the 90 day moratorium for those receiving the state relief funds ends. This would allow customers to continue to accrue even higher delinquent balances with no consequence for the next six months. During this period the Council could elect to charge late fees or to forgo late fees as well. Refuse Utility Cust # 1 1 to 30 Days Past 30 to 60 Days Past 61 to 90 Days Past 91 to 120 Days Past Over 120 Days Past Total Due Now Current 19157 $874,102.40 $165,292.66 $104,632.21 $84,805.92 $710,932.47 $1,939,765.66 20 -Feb 18953 $904,523.11 $100,788.38 $15,714.39 $8,031.27 $44,706.48 $1,073,763.63 20 -Jan 182471 $837,376.72 $89,087.84 $14,630.11 $9,620.23 $38,079.59 $988,794.49 o address delinquencies, staff has identified three main options for Council consideration. Option 1 (staff recommended option): Return to Pre-COVID Collections Practices and Accept State Funding for Calendar Year 2021 Residential Utility Delinquencies This includes a return to late fees and service suspension for no payment. This option provides the greatest financial stability to the utility as service suspension is a strong motivator for customers to pay. Accepting state funding to address CY 2021 residential delinquencies will require that the City temporarily not shut off customers receiving this relief for a period approximately November 2022 through January 2023. Customers who are not eligible (including all non residential accounts and residential customers who do not have outstanding charges accrued during calendar year 2021) would continue with business as usual collections practices. This option would provide the City with enough of a window to conduct approximately two suspension cycles on all accounts prior to the arrival of state funding. Option 2a: Accept State Funding for Calendar Year 2021 Residential Utility Delinquencies and Delay Service Suspension on All Accounts This option is the same as option 1 with the exception that the City would not suspend any services on any account until the 90 day moratorium for those receiving the state relief funds ends. This would allow customers to continue to accrue even higher delinquent balances with no consequence for the next six months. During this period the Council could elect to charge late fees or to forgo late fees as well. Option 2b: Accept State Funding for Calendar Year 2021 Residential Utility Delinquencies and Delay Service Suspension on All Residential Accounts Only This option is the same as option 2a with the exception that the City would suspend services on non residential accounts for non payment. Residential accounts would not be suspended for non payment until the 90 day moratorium for those receiving the state relief funds ends. This would allow residential customers to continue to accrue even higher delinquent balances with no consequence for the next six months but no commercial customers. During this period the Council could elect to charge late fees or to forgo late fees as well. Option 3: Refuse State Funding for Calendar Year 2021 Residential Utility Delinquencies and Return to Pre-COVID Collections Practices This option would end the practice of levying no consequence for non payment immediately and would require residents to pay their bills without state relief. Those residents eligible would receive no funding and would also have no additional moratorium on service suspension or special treatment in relation to other accounts. All options require a return to punitive collections actions at some point. The City recognizes that some are experiencing financial challenges during these times. Under any option, the City offers a number of assistance programs, including both rate discount programs and delinquent bill assistance programs, as well as programs offered by the County. We will continue to make these programs available as well as make payment arrangements as permitted by Lodi Municipal Code for those balances the cannot be paid immediately. Staff recommends Option 1. Under the other options residents will be allowed to get too far behind on their utility bills to the point where catch up is unfeasible without additional government relief programs. Staff currently believes these programs will not be forthcoming or be forthcoming in too small an amount to allow people to catch up. For example, the City currently has 24 accounts delinquent in excess of $2,500 that are not eligible for the relief programs. Staff anticipates this number growing further the longer we push out a return to normal collections practices. Of accounts that are eligible for the relief program, there is a total of 1,222 accounts with a total and average balance of $3,220,940.92 and $2,635.79 respectively. The total value of the delinquency eligible for relief is $734,484.86 if the program is fully funded. After application of the relief funds, the balance remaining on these 1,222 accounts would be $2,486,456.06 with an average remaining amount due of $2,034.74 plus any charges accrued between now and the end of the shut off moratorium required by the relief funds. Staff anticipates that a significant portion of these funds may be non recoverable due to the high bill balance and customers inability to pay. Summary of High Balances on Accounts Ineligible for Relief Account Balance # of Accounts Greater than $5,000 4 Greater than $2,500 but less than $5,000 20 Summary of Relief Program Eligible Accounts — As of July 27, 2022 Current # of Total Balance Average Program Hypothetical Hypothetical Account Accounts Due Balance Eligible Total Average Balance Due Balance Delinquent Balance Due Due Balance if if Program is Program is Fully Fully Funded Funded Greater than $0 1,222 $ 3,220,940.92 $ 2,635.79 $ 734,484.86 $ 2,486,456.06 $ 2,034.74 Greater than $1,000 but less than $1,500 146 $ 185,752.69 $1,272.28 $ 26,321.86 $ 159,430.83 $1,091.99 Greater than $1,500 but less than $2,500 360 $ 722,340.73 $2,006.50 $ 122,998.11 $ 599,342.62 $1,664.84 Greater than $2,500 but less than $5,000 434 $ 1,500,149.00 $3,456.56 $ 357,504.14 $ 1,142,644.86 $2,632.82 Greater than $5,000 111 $ 748,276.96 $6,741.23 $ 211,237.93 $ 537,039.03 $4,838.19 FISCAL IMPACT: Current delinquencies levels are significantly higher than historical ranges the City has seen. Having no consequence for delinquent bill payment has led and will continue to further unmanageably high bills and poor bill paying behavior by customers. The City has not experienced consequences from higher delinquencies as of yet, however consequences could include credit rating impacts or cash flow issues which might jeopardize capital projects or at worst regular operations. It is essential that the City take action to improve collections rates and return to normal customer payment behavior. FUNDING AVAILABLE: N/A Andrew Keys Deputy City Manager/Internal Services Director CITY OF 1 •fir 00, CALIFORNIA AGENDA ITEM COUNCIL COMMUNICATION AGENDA TITLE: Receive Presentation on Current Utility Delinquencies and Provide Direction to Staff on Returning to Utility Service Suspension for Non Payment to Address Delinquent Bills MEETING DATE: August 3, 2022 PREPARED BY: Deputy City Manager RECOMMENDED ACTION Receive presentation on current utility delinquencies and provide direction to staff on returning to utility service suspension for non payment to address delinquent bills BACKGROUND INFORMATION: The City of Lodi primarily relies upon suspension of electric service as a means of collection for customers who do not pay their utility bills in a timely fashion. Customers receive a bill that if not paid becomes delinquent, late fees are assessed and various notices sent to comply with the Lodi Municipal Code and eventually service is shut off if the bill has not been paid in full. From billing date a customer has approximately 45 days to pay any bill to keep services from being shut off as shown below. Day 1 - Billing Date Day 26 - Due Date Day 27 - Late Fee applied ($10) Day 36 - 2nd Late Fee applied ($15) and Day 44 - 48 hour shut off notice issued Day 46 - Service suspension 10 -day shut off notice issued As a result of the global COVID-19 pandemic, the City of Lodi suspended shutoff for non payment beginning in late March 2020. This action was taken to support citizens efforts to slow the spread, facilitate access to essential utilities while attending school or working from home and general support public health efforts. Subsequent to the City's suspension of this practice, the State of California prohibited some utilities from suspending service for non payment. While the City of Lodi still may have had options to suspend services for non payment, like almost all utilities in the state, the City elected to cease this practice during the pandemic as noted. In May of 2021, the City Council authorized use of federal pandemic relief funds authorized by the American Rescue Plan Act (ARPA) to enact a local Utility Debt Relief program. The debt relief program would provide payment of utility bills for customers who had become delinquent during the pandemic and could show any APPROVED: J-y'CLX�r,� „r Stephen Schwabauer, City Manager A' income loss from 2019 to 2020. Despite substantial efforts to publicize the program via social media, sign advertisements in the community, bus ads and direct information sharing to all who contacted the utility, these programs were largely ineffective as customers were unwilling to make the effort to apply. City Council subsequently voted to end the program and redirect the funds to other projects in July 2022. In 2021, the State of California also provided pandemic bill relief for electric, water and wastewater services using. Those funds covered utility delinquencies through the end of calendar year 2020 without any application required by the customers. Both active and inactive accounts received funding and all customer classes in Lodi received some level of support from this program. To participate in this program utilities were prohibited from taking collection actions, including service suspension, against customers who received any relief through these programs for 90 days after receiving the funding. In addition, the utilities were required to offer payment plans to customers who remained delinquent after this 90 day period. The program covered delinquencies through the end of calendar year 2020, but funds were not received by Lodi and applied to accounts until April of 2022. Many customers who received these funds continued to accrue bills through calendar year 2021 and 2022 with little to no payment. In addition, other customers have fallen behind due to rising utility costs, particularly due to rising power purchase costs experienced by the Lodi Electric Utility, other economic circumstances and in some cases a knowledge that no action would be taken by the City for non payment. With the adoption of its Fiscal Year 2022/23 budget, the State of California approved a second pandemic relief program for utility delinquencies. This program currently covers electric bills only and only covers bills issued during calendar year 2021. The same 90 day shut off moratorium applies if an account receives funds through this program. The 90 day clock starts from the end of the application period, which is anticipated to be October 31, 2022. The primary difference from this program and the previous state relief program is that only active residential accounts are eligible for this program. Utility delinquencies have risen substantially since the pandemic began despite all of these relief programs. Beginning July 26, 2022, staff took the first steps necessary to begin service suspension for non payment. The first step was issuing late fees on all delinquent accounts and sending the appropriate notices. The first date service suspension could resume would be August 22. It was essential to begin this process to allow sufficient time to manage service suspension for all these customer accounts prior to receipt of the pandemic relief funding from the state to avoid crossover with the 90 day shut off moratorium required by that program. A significant number of the currently delinquent accounts representing over 56.6% of the total delinquent value across all utilities is delinquent only 1-30 days. Many of these accounts would not be eligible for the pandemic relief program and a return to service suspension for non payment is necessary to begin a normal cycle of billing and bill payment that has consequences for non payment. The tables below summarize the current delinquencies across the four utilities from January of 2020 to today. While the number of delinquent accounts has remained constant, the total delinquent amount has more than doubled across all utilities and increased nearly 2.5 times for the electric utility. The reason for the higher electric increase as compared to the other utilities is due to the record energy cost adjustments levied as a result of tremendous market forces on the electric utility to purchase power in today's market. income loss from 2019 to 2020. Despite substantial efforts to publicize the program via social media, sign advertisements in the community, bus ads and direct information sharing to all who contacted the utility, these programs were largely ineffective as customers were unwilling to make the effort to apply. City Council subsequently voted to end the program and redirect the funds to other projects in July 2022. In 2021, the State of California also provided pandemic bill relief for electric, water and wastewater services using. Those funds covered utility delinquencies through the end of calendar year 2020 without any application required by the customers. Both active and inactive accounts received funding and all customer classes in Lodi received some level of support from this program. To participate in this program utilities were prohibited from taking collection actions, including service suspension, against customers who received any relief through these programs for 90 days after receiving the funding. In addition, the utilities were required to offer payment plans to customers who remained delinquent after this 90 day period. The program covered delinquencies through the end of calendar year 2020, but funds were not received by Lodi and applied to accounts until April of 2022. Many customers who received these funds continued to accrue bills through calendar year 2021 and 2022 with little to no payment. In addition, other customers have fallen behind due to rising utility costs, particularly due to rising power purchase costs experienced by the Lodi Electric Utility, other economic circumstances and in some cases a knowledge that no action would be taken by the City for non payment. With the adoption of its Fiscal Year 2022/23 budget, the State of California approved a second pandemic relief program for utility delinquencies. This program currently covers electric bills only and only covers bills issued during calendar year 2021. The same 90 day shut off moratorium applies if an account receives funds through this program. The 90 day clock starts from the end of the application period, which is anticipated to be October 31, 2022. The primary difference from this program and the previous state relief program is that only active residential accounts are eligible for this program. Utility delinquencies have risen substantially since the pandemic began despite all of these relief programs. Beginning July 26, 2022, staff took the first steps necessary to begin service suspension for non payment. The first step was issuing late fees on all delinquent accounts and sending the appropriate notices. The first date service suspension could resume would be August 22. It was essential to begin this process to allow sufficient time to manage service suspension for all these customer accounts prior to receipt of the pandemic relief funding from the state to avoid crossover with the 90 day shut off moratorium required by that program. A significant number of the currently delinquent accounts representing over 56.6% of the total delinquent value across all utilities is delinquent only 1-30 days. Many of these accounts would not be eligible for the pandemic relief program and a return to service suspension for non payment is necessary to begin a normal cycle of billing and bill payment that has consequences for non payment. The tables below summarize the current delinquencies across the four utilities from January of 2020 to today. While the number of delinquent accounts has remained constant, the total delinquent amount has more than doubled across all utilities and increased nearly 2.5 times for the electric utility. The reason for the higher electric increase as compared to the other utilities is due to the record energy cost adjustments levied as a result of tremendous market forces on the electric utility to purchase power in today's market. Current Delianuencies Compared to January 2020 (Pre Pandemic) Delinquencies All Utilities Cust # 1 to 30 Days Past 30 to 60 Days Past 61 to 90 Days Past 91 to 120 Days Past Over 120 Days Past ITotal Due Now Current 22443 $10,872,668.25 $1,473,434.35 $657,346.03 $526,003.07 $5,677,865.37 $19,207,317.07 20 -Jan 222801 $6,862,488.02 1 $753,993.70 $100,350.72 $72,793.94 $1,270,930.43 $9,060,556.81 Electric Utility Cust # 1 to 30 Days Past 30 to 60 Days Past 61 to 90 Days Past 191 to 120 Days Past Over 120 Days Past Total Due Now Current 192911 $8,039,960.34 $976,909.31 $352,561.65 $283,625.66 $2,468,510.50 $12,121,567.46 20 -Jan 198711 $4,279,758.62 $378,144.28 $40,623.82 $34,938.84 $163,445.39 $4.,896,910.95 Water Utility Cust # 1 to 30 Days Past 130to 60 Days Past 61 to 90 Days Past 191to 120 Days Past Over 120 Days Past Total Due Now Current 183521 $952,317.48 $146,706.72 $86,570.01 $67,167.05 $446,321.21 $1,699,082.47 20 -Jan 177071 $723,279.45 $107,494.90 $16,442.17 $10,991.19 $59,389.05 $917,596.76 Wastewater Utility Cust # 1 to 30 Days Past 30 to 60 Days Past 61 to 90 Days Past 91 to 120 Days Past Over 120 Days Past ITotal Due Now Current 19174 $1,005,619.80 185981 $1,022,073.23 $174,812.46 $112,911.80 $90,333.68 $662,858.82 $2,046,536.56 20 -Jan $144,332.20 $19,807.19 $12,853.97 $63,293.48 $1,262,360.07 Refuse Utility Cust # I 1 to 30 Days Past 30 to 60 Days Past 61 to 90 Days Past 91 to 120 Days Past Over 120 Days Past Total Due Now Current 19157 $874,102.40 $165,292.66 $104,632.21 $84,805.92 $710,932.47 $1,939,765.66 20 -Feb 18953 $904,523.11 $100,788.38 $15,714.39 $8,031.27 $44,706.48 $1,073,763.63 20 -Jan 182471 $837,376.72 $89,087.84 $14,630.11 $9,620.23 $38,079.59 $988,794.49 o address delinquencies, staff has identified three main options for Council consideration. Option 1 (staff recommended option): Return to Pre-COVID Collections Practices and Accept State Funding for Calendar Year 2021 Residential Utility Delinquencies This includes a return to late fees and service suspension for no payment. This option provides the greatest financial stability to the utility as service suspension is a strong motivator for customers to pay. Accepting state funding to address CY 2021 residential delinquencies will require that the City temporarily not shut off customers receiving this relief for a period approximately November 2022 through January 2023. Customers who are not eligible (including all non residential accounts and residential customers who do not have outstanding charges accrued during calendar year 2021) would continue with business as usual collections practices. This option would provide the City with enough of a window to conduct approximately two suspension cycles on all accounts prior to the arrival of state funding. Option 2a: Accept State Funding for Calendar Year 2021 Residential Utility Delinquencies and Delay Service Suspension on All Accounts This option is the same as option 1 with the exception that the City would not suspend any services on any account until the 90 day moratorium for those receiving the state relief funds ends. This would allow customers to continue to accrue even higher delinquent balances with no consequence for the next six months. During this period the Council could elect to charge late fees or to forgo late fees as well. Option 2b: Accept State Funding for Calendar Year 2021 Residential Utility Delinquencies and Delay Service Suspension on All Residential Accounts Only This option is the same as option 2a with the exception that the City would suspend services on non residential accounts for non payment. Residential accounts would not be suspended for non payment until the 90 day moratorium for those receiving the state relief funds ends. This would allow residential customers to continue to accrue even higher delinquent balances with no consequence for the next six months but no commercial customers. During this period the Council could elect to charge late fees or to forgo late fees as well. Option 3: Refuse State Funding for Calendar Year 2021 Residential Utility Delinquencies and Return to Pre-COVID Collections Practices This option would end the practice of levying no consequence for non payment immediately and would require residents to pay their bills without state relief. Those residents eligible would receive no funding and would also have no additional moratorium on service suspension or special treatment in relation to other accounts. All options require a return to punitive collections actions at some point. The City recognizes that some are experiencing financial challenges during these times. Under any option, the City offers a number of assistance programs, including both rate discount programs and delinquent bill assistance programs, as well as programs offered by the County. We will continue to make these programs available as well as make payment arrangements as permitted by Lodi Municipal Code for those balances the cannot be paid immediately. Staff recommends Option 1. Under the other options residents will be allowed to get too far behind on their utility bills to the point where catch up is unfeasible without additional government relief programs. Staff currently believes these programs will not be forthcoming or be forthcoming in too small an amount to allow people to catch up. For example, the City currently has 24 accounts delinquent in excess of $2,500 that are not eligible for the relief programs. Staff anticipates this number growing further the longer we push out a return to normal collections practices. Of accounts that are eligible for the relief program, there is a total of 1,222 accounts with a total and average balance of $3,220,940.92 and $2,635.79 respectively. The total value of the delinquency eligible for relief is $734,484.86 if the program is fully funded. After application of the relief funds, the balance remaining on these 1,222 accounts would be $2,486,456.06 with an average remaining amount due of $2,034.74 plus any charges accrued between now and the end of the shut off moratorium required by the relief funds. Staff anticipates that a significant portion of these funds may be non recoverable due to the high bill balance and customers inability to pay. Surnmary of High Balances on Accounts Ineligible for Relief Account Balance Greater than $5,000 # of Accounts 4 Greater than $2,500 but less than $5,000 1 20 Option 2b: Accept State Funding for Calendar Year 2021 Residential Utility Delinquencies and Delay Service Suspension on All Residential Accounts Only This option is the same as option 2a with the exception that the City would suspend services on non residential accounts for non payment. Residential accounts would not be suspended for non payment until the 90 day moratorium for thosg receiving the state relief funds ends. This would allow residential customers to continue to accrue even higher delinquent balances with no consequence for the next six months but no commercial customers. During this period the Council could elect to charge late fees or to forgo late fees as well. Option 3: Refuse State Funding for Calendar Year 2021 Residential Utility Delinquencies and Return to Pre-COVID Collections Practices This option would end the practice of levying no consequence for non payment immediately and would require residents to pay their bills without state relief. Those residents eligible would receive no funding and would also have no additional moratorium on service suspension or special treatment in relation to other accounts. All options require a return to punitive collections actions at some point. The City recognizes that some are experiencing financial challenges during these times. Under any option, the City offers a number of assistance programs, including both rate discount programs and delinquent bill assistance programs, as well as programs offered by the County. We will continue to make these programs available as well as make payment arrangements as permitted by Lodi Municipal Code for those balances the cannot be paid immediately. Staff recommends Option 1. Under the other options residents will be allowed to get too far behind on their utility bills to the point where catch up is unfeasible without additional government relief programs. Staff currently believes these programs will not be forthcoming or be forthcoming in too small an amount to allow people to catch up. For example, the City currently has 24 accounts delinquent in excess of $2,500 that are not eligible for the relief programs. Staff anticipates this number growing further the longer we push out a return to normal collections practices. Of accounts that are eligible for the relief program, there is a total of 1,222 accounts with a total and average balance of $3,220,940.92 and $2,635.79 respectively. The total value of the delinquency eligible for relief is $734,484.86 if the program is fully funded. After application of the relief funds, the balance remaining on these 1,222 accounts would be $2,486,456.06 with an average remaining amount due of $2,034.74 plus any charges accrued between now and the end of the shut off moratorium required by the relief funds. Staff anticipates that a significant portion of these funds may be non recoverable due to the high bill balance and customers inability to pay. SummarV of High Balances on Accounts Ineliclible for Relief Account Balance Greater than $5,000 Greater than $2,500 but less than $5,000 # of Accounts n 20 Summary of Relief Proaram Elialble Accounts — As of July 27. 2022 Current # of Total Balance Average Program Account Accounts Due Balance Eligible Balance Due Balance Due Greater than $0 Greater than $1,000 but less than $1,500 Greater than $1,500 but less than $2,500 Greater than $2,500 but less than $5,000 Greater than $5,000 FISCAL IMPACT: 1,222 $ 3,220,940.92 $ 2,635.79 $ 734,484.86 Delinquent Balance Due Balance if if Program is 146 $ 185,752.69 $1,272.28 $ 26,321.86 Hypothetical Hypothetical Total Average Delinquent Balance Due Balance if if Program is Program is Fully Fully Funded Funded $ 2,486,456.06 1 $ 2,034.74 $ 159,430.83 1 $1,091.99 360 1 $ 722,340.73 $2,006.50 1 $ 122,998.11 1 $ 599,342.62 1 $1,664.84 1 434 $ 1,500,149.00 $3,456.56 $ 357,504.14 $ 1,142,644.86 $2,632.82 111 $ 748,276.96 $6,741.23 $ 211,237.93 $ 537,039.03 $4,838.19 Current delinquencies levels are significantly higher than historical ranges the City has seen. Having no consequence for delinquent bill payment has led and will continue to further unmanageably high bills and poor bill paying behavior by customers. The City has not experienced consequences from higher delinquencies as of yet, however consequences could include credit rating impacts or cash flow issues which might jeopardize capital projects or at worst regular operations. It is essential that the City take action to improve collections rates and return to normal customer payment behavior. FUNDING AVAILABLE: N/A Andrew Keys Deputy City Manager/Internal Services Director Receive Presentation on Current Utility Delinquencies and Provide Direction to Staff on Returning to Service Suspension for Non Payment to Address Delinquent Bill Presented by Andrew Keys, Deputy City Manager CITY OF s D Z CALIFORNIA •The City has relied on Service Suspension for Non Payment (SNP) for collections of delinquent accounts. • To support public health stay at home orders, SNP was suspended in late March 2020. • California prohibited SNP for water during much of the pandemic and nearly all POU and IOU (including Lodi) followed suit voluntarily for electric service. • Lodi offered relief in 2021 using ARPA funds but the public did not apply for those funds. • These funds were redirected towards the LOEL Center at a July 2022 Council meeting • Using its own ARPA funds, CA offered relief for bills through December 2020 that prevented SNP on accounts receiving the funds before receipt of the funds and until 90 days after. • The SNP moratorium has ended but the state is offering another relief program with similar SNP moratorium provisions that would begin November 1, 2022. roles • Customers have had over 29 months of penalty billing offered by Lodi. •Atypical bill timeline under normal, pre pandemic billing practices is shown below: • Day 1— Billing Date • Day 26 — Due Date • Day 27 — Late Fee applied ($10) • Day 36 — 2nd Late Fee applied ($15) and 10 -day shut off notice issued • Day 44 — 48 hour shut off notice issued • Day 46—Service suspension • Total delinquencies are more than double at 2.11 times what they were pre pandemic comparing January 2020 to July 2022. • Due primarily to rising ECA in the electric utility, the electric portion of delinquencies is 2.47 times comparing the same periods. All Utilities Cust # 1 to 30 Days Past 30 to 60 Days Pato 90 Days Past 91 to 120 Days Past Over 120 Days Past Total Due Now Current 22443 $10,872,668.25 $1,473,434.3f5 $657, 346.03 $526,003.07 $5,677,865.37 $19,207,317.07 20 -Jan 22280 $6,8621488.02 $753,993.70 $100, 350.72 $72,793.94 $11270,930.43 $9,060,556.81 The Staff report shows information on delinquencies for each individual utility separately. • The state budget for FY 2022-23 offers utility relief for some residential accounts. • The new program covers bad debt through December 31, 2021 but does not cover amounts accrued pre pandemic or since December 31, 2021. • Accounts must be currently active as of October 31, 2021. • Only residential accounts are eligible. • SNP cannot be used to address delinquencies for customers receiving funds for at least 90 days after the close of the application period on October 31, 2022. Account Balance # of Accounts Greater than $5,000 4 Greater than $2,500 but less than $5,000 20 Current Account # of Total Balance Due Average Program Hypothetical Total Hypothetical Balance Accounts Balance Due Eligible Delinquent Average Balance Due Balance if Program Balance Due if is Fully Funded Program is Fully Funded Greater than $0 1,222 $ 3,220,940 $ 2,635 $ 734,484 $ 2,486,456 $ 2,034 Greater than $1,000 but less than $1,500 146 $ 185,752 $1,272 $ 26,321 $ 159,430 $1,091 Greater than $1,500 but less than $2,500 360 $ 722,340 $2,006 $ 122,998 $ 599,342 $1,664 Greater than $2,500 but less than $5,000 434 $ 1,500,149 $3,456 $ 357,504 $ 1,142,644 $2,632 Greater than $5,000 111 $ 748,276 $6,741 $ 211,237 $ 537,039 $4,838 14 F-dr,Iw • All options presented require a return to punitive billing practices for non payment including late fees and SNP. • Option 1 Return to Pre-COVID Collections Practices and Accept State Funding for Calendar Year 2021 Residential Utility Delinquencies • Option 2a: Accept State Funding for Calendar Year 2021 Residential Utility Delinquencies and Delay Service Suspension on All Accounts • Option 2b: Accept State Funding for Calendar Year 2021 Residential Utility Delinquencies and Delay Service Suspension on All Residential Accounts Only • Option 3: Refuse State Funding for Calendar Year 2021 Residential Utility Delinquencies and Return to Pre-COVID Collections Practices 8 ��a • Base rate increase would need to be considered sooner to maintain financial forecast. • Paying customers would continue to pay (and pay more) because of non- paying customers • System maintenance and capital improvements could be delayed to manage cash flow and reserve levels. • Rising costs and diminishing revenue in the face of higher power costs leave the City with fewer resources to provide rate relief to all accounts. • Prolonged and elevated delinquencies could impact the utility's credit rating and create challenges for future debt financing of the 230 kv project. • Option 1: Return to Pre-COVID Collections Practices and Accept State Funding for Calendar Year 2021 Residential Utility Delinquencies • Puts an end to continuously accruing balances. • Allows the City to begin collecting on accounts for past due amounts accrued in calendar year 2022 even on the accounts who are eligible for state funding. • Most closely resembles "business as usual" while still accepting relief funding for those with large balances.