Agenda

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City Council Regular Meeting

Meeting Date:

01/05/2021

BACKGROUND

In the EMS, Utility Billing, and Magazine functions, services are provided to customers up front and billing is settled later. Since services are provided before receiving payment, inevitably the City has customers that do not pay for the services provided.

When this occurs, staff reaches out to the customer to try to collect the outstanding payment including follow-up notices and phone calls to try to reach out to the customer to remind them of the outstanding balance and encourage payment. However, the longer the customer account goes without a payment the less likely that any payment will be received.

Once a customer account reaches 180 days without payment, Staff brings those accounts to the City Council to be “written off”. This process is an accounting procedure following the Generally Accepted Accounted Principles (GAAP), which lays the framework of accounting practices in the U.S. This designation means it is unlikely those outstanding balances will ever be collected. This leads to an accounting adjustment on the City’s Financial Statements to accurately show how much is still outstanding and is reasonable to expect collection.

If a customer’s account has been written off, this does not erase or forgive that debt. The city can and does collect some portion of the amount owed by those customers. This can be through the debt collection agency used by EMS or if the customer returns to the City and requests new services through the Magazine or Utility Billing.

The resolution authorizes the debt for these areas that is more than 180 days outstanding as of November 1, 2020, to be written off. These write-offs come before council quarterly and last came before council on September 22, 2020.

Previous Write off Amount:

February 2017:	$621,138.97
June 2017:	$544,944.16
September 2017:	$510,516.01
January 2018:	$510,637.79
March 2018:	$433,427.15
June 2018:	$439,627.14
September 2018:	$521,281.82
December 2018:	$727,307.39
March 2019:	$564,227.77
June 2019:	$580,155.10
September 2019:	$586,664.65
December 2019:	$591,829.90
March 2020:	$616,900.00
June 2020:	$552,157.34
September 2020:	$605,161.66

GOAL

To approve write-offs of bad debt in accordance with the standards laid out by GAAP.

COMMUNITY BENEFIT

This will show the City's Financial Statements according to national standards and City policy.

SUMMARY OF RECOMMENDED ACTION

Approve Resolution No. 21-R-01 to write off receivables that are older than 180 days.

FISCAL IMPACT

This accounting adjustment will not affect the City’s Budget or financial standing. The amount written off is estimated during the budget process and is accounted for in the revenue estimations and the bad debt expense accounts. The action taken tonight will reduce the amount shown as owed to the City by $467,802.06 and set it equal to the amount seen as still reasonably collectible. The breakdown is as follows:
EMS - $405,083.38
Utility Billing - $62,718.68
Magazine - $0.00

The EMS write off amount is down about 20% due to fewer calls during this time as these write offs would be for April through June of 2020 which were affected by COVID-19.

The amount being written off for Utility Billing is more than double the typical amount given that the City has not been doing shutoffs due to the economic impacts of the COVID Pandemic. Next council meeting, staff is proposing a workshop to review this practice.

RECOMMENDATION

Staff recommends Council approve Resolution No. 21-R-01.

Attachments
Resolution 21-R-01