HomeMy WebLinkAboutNovember 1, 2010 AgendaAGENDA
CITY OF DENTON CITY COUNCIL
November 1, 2010
After determining that a quorum is present, the City Council of the City of Denton, Texas will
convene in a Special Called Work Session on Monday, November 1, 2010 at 11:30 a.m. in the
Council Work Session Room, 215 E. McKinney Street, Denton, Texas at which the following
item will be considered:
NOTE: A Work Session is used to explore matters of interest to one or more City Council
Members or the City Manager for the purpose of giving staff direction into whether or not such
matters should be placed on a future regular or special meeting of the Council for citizen input,
City Council deliberation and formal City action. At a Work Session, the City Council generally
receives informal and preliminary reports and information from City staff, officials, members of
City committees, and the individual or organization proposing council action, if invited by City
Council or City Manager to participate in the session. Participation by individuals and members
of organizations invited to speak ceases when the Mayor announces the session is being closed to
public input. Although Work Sessions are public meetings, and citizens have a legal right to
attend, they are not public hearings, so citizens are not allowed to participate in the session
unless invited to do so by the Mayor. Any citizen may supply to the City Council, prior to the
beginning of the session, a written report regarding the citizen's opinion on the matter being
explored. Should the Council direct the matter be placed on a regular meeting agenda, the staff
will generally prepare a final report defining the proposed action, which will be made available
to all citizens prior to the regular meeting at which citizen input is sought. The purpose of this
procedure is to allow citizens attending the regular meeting the opportunity to hear the views of
their fellow citizens without having to attend two meetings.
Receive a report, hold a discussion, and give staff direction on proposed revisions to the
credit and collection policies for City of Denton utility customers.
CERTIFICATE
I certify that the above notice of meeting was posted on the bulletin board at the City Hall of the
City of Denton, Texas, on the day of 2010 at o'clock
(a.m.) (p.m.)
CITY SECRETARY
NOTE: THE CITY OF DENTON COUNCIL WORK SESSION ROOM IS ACCESSIBLE IN
ACCORDANCE WITH THE AMERICANS WITH DISABILITIES ACT. THE CITY WILL PROVIDE
SIGN LANGUAGE INTERPRETERS FOR THE HEARING IMPAIRED IF REQUESTED AT LEAST
48 HOURS IN ADVANCE OF THE SCHEDULED MEETING. PLEASE CALL THE CITY
SECRETARY'S OFFICE AT 349-8309 OR USE TELECOMMUNICATIONS DEVICES FOR THE
DEAF JDD) BY CALLING 1-800-RELAY-TX SO THAT A SIGN LANGUAGE INTERPRETER
CAN BE SCHEDULED THROUGH THE CITY SECRETARY'S OFFICE.
AGENDA INFORMATION SHEET
AGENDA DATE: November 1, 2010
DEPARTMENT: Finance
ACM: Jon Fortune 9
SUBJECT
Receive a report, hold a discussion, and give staff direction on proposed revisions to the credit
and collection policies for City of Denton utility customers.
BACKGROUND
During the summer of 2008, the Customer Service department participated in the management
study conducted by Navigant Consulting. The results of the study provided an evaluation of the
department's current processes including procedures related to customer credit issuance and
revenue collection. Navigant's findings indicated that Denton's annual bad debt is high,
especially for a small utility. Contributing factors to the bad debt included a lack of effective
customer credit screening, inadequate deposit policies, and ineffective collection efforts. Based
on these findings, Navigant recommended that Utilities Customer Service revamp procedures to
reduce the City's bad debt and enhance the customer experience.
To assist with prompt implementation of these recommendations, Customer Service once again
partnered with Navigant in July 2009. The goal of this collaborative effort was to introduce a
strategy that bases collection activity on customer credit risk. By adhering to a risk based
system, Customer Service can make processes easier for good paying customers and protect the
City from bad debt associated with high risk customers. The proposed processes can be used to
guide decision making when working with new, existing, and former customers.
An essential element of the proposed process will be to ask customers to verify their identity and
participate in a credit check when requesting new service. The credit check will be a "soft"
inquiry on the customer's credit, and as such, will not negatively affect their credit rating. The
results of the credit check or previous payment history with the City, Customer Service
employees will determine the appropriate deposit for each customer based on established criteria.
After an account is established in the customer's name, Customer Service will evaluate the
customer's payment activity on a monthly basis. These activities will be reflected via a credit
rating within the utility billing software. On-time bill payment has a positive impact on the
credit rating while poor payment habits will affect it negatively. This credit rating will then be
used as the basis for reevaluating deposit coverage and determining the timing and type of
collection action.
During the March 2, 2010 City Council meeting, Customer Service presented Council with an
overview of the aforementioned changes along with a proposal to revise the Code of Ordinances.
Agenda Information Sheet
November 1, 2010
Page 2
The proposal was originally an item on the Consent Agenda; however, Council recommended
the item be removed from the agenda so that staff could research 1) options available for
customers attempting to connect service and unable to pay deposits, 2) changes to due dates and
collection timelines, 3) possible increases to late fee penalties, and 4) the need for further
documentation of the City's collection processes.
The City Council expressed concern that high credit risk customers could be denied services
until deposit amounts were paid in full. It was suggested that staff investigate funds from
charitable organizations being used toward service deposits. After reviewing this suggestion
with the charitable organizations serving Denton, staff found that organizations such as
Community Services will not provide funds for delinquent fees or deposits. Other charities may
elect to provide a donation to assist with a deposit requirement; however, the donation may
depend on the availability of funds, customer income, and billing documentation.
In addition, Council asked staff to consider waiving the deposit amount if a customer agrees to a
shorter collection cycle. Doing so may allow the customer entering the utility system to receive
services without payment. Additional administrative and meter reading work will be required to
effectively manage such agreements, and as a result, additional resources for both Customer
Service and the metering department would be required. Due to the debt risk and additional
resources required to implement this suggestion, staff recommends maintaining the proposed
collection timeline and the collection of service deposits prior to connection of utility service.
During review of Customer Service's collection action timeline, the City Council requested that
staff consider adjusting due dates and the timing of collection actions. Council mentioned that
the current due date of sixteen days may prove to be too aggressive for many commercial
customers and recommended that staff consider implementing a due date of thirty days. In order
to accommodate a separate collection cycle for commercial accounts, additional resources will
be required. Staff also reviewed credit ratings by customer type within the utility billing system
and found that commercial customers maintain a higher ratio of good credit than residential
customers. Based on these findings, it appears that most commercial customers are adhering to
the current due date.
The Council also requested that staff consider reducing the timeline's forbearance period. The
proposed timeline allows twelve days to elapse before assessing late penalties and another ten
days to elapse before terminating a customer's service for nonpayment. Staff agrees with this
suggestion; however, further changes to the collection timeline will be difficult due to the
manual nature of the meter reading and billing processes. Staff recommends the implementation
of the proposed timeline, and if unpaid utility debts continue to grow, the timeline will be
reevaluated.
Council members expressed concern that the current late fee charge of $10.00 may not be an
adequate penalty to encourage late paying customers to change their behavior. Staff agrees with
this observation and an increase to a $20.00 penalty for late payment is recommended.
The above information is more fully explained in the Powerpoint presentation. If the City
Council is in agreement with the proposed strategy, staff will present a revised ordinance for
consideration on November 16, 2010.
Agenda Information Sheet
November 1, 2010
Page 3
RECOMMENDATION
Staff recommends approval of the proposed revisions to the credit and collection policies for
City of Denton utility customers.
PRIOR ACTION/REVIEW (Council, Boards, Commissions)
During the summer of 2008, the City Council and Public Utilities Board reviewed the Navigant
Management Report prepared for Denton Municipal Electric.
On January 26, 2009, a Customer Service strategy was presented to the Public Utilities Board.
The Board recommended that staff proceed with the suggested strategy.
On March 10, 2009, a Customer Service strategy was presented to the City Council. The City
Council recommended that staff proceed with the suggested strategy.
On February 22, 2010, the Public Utility Board recommended implementation of the proposed
ordinance changes and requested that staff conduct further investigation regarding the continued
practice of paying interest toward customer service deposits.
On March 2, 2010, the City Council reviewed proposed ordinance changes and requested that
staff investigate recommendations regarding alternatives to service deposits, changes to due
dates and collection timelines, increases to late payment penalties, and documentation of
collection processes.
FISCAL INFORMATION
Uncollectible utility debt has increased each of the past two fiscal years. In fiscal year 2006-
2007, uncollectible debts totaled $690,317.70. In fiscal year 2007-2008, debts increased to
$761,722.53 followed by $1,121,273.06 in fiscal year 2008-2009.
EXHIBITS
PowerPoint Presentation
Respectfully submitted:
Bryan Langley
Chief Financial Officer
Prepared by:
Ethan Cox
Customer Service Manager
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