Utility Accounts: Billing, Collection and Lien Mechanics

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1 Utility Accounts: Billing, Collection and Lien Mechanics April 13, 2017 Lee Marchisio Brad Nelson, Finance Manager

2 Overview Billing and Collection Basics Lien Mechanics Special Issues Managing Utility Accounts Visit Municipal Research and Services Center for additional materials, some of which are incorporated into this presentation. 2

3 Billing Basics: Accounts Type: residential, commercial, mixed, multi-family Disclose policies/procedures for billing, collection, etc. Combined utility accounts Application of payments Penalties irrigation stormwater garbage sewer water Budget billing or equal payment plan. RCW (4). Low income senior and disabled relief. RCW ; RCW (4); RCW (5),

4 Billing Basics: Deposits May require deposit to guarantee payments. Cities and Towns. RCW (1). Water-Sewer Districts. RCW (2). Counties. RCW ,.130 (general authority). How much? How long held? Re-imposition? Unclaimed deposits. Chapter RCW (Uniform Unclaimed Property Act) 4

5 Billing Basics: Underpayments Delinquencies Billing Errors Unlawful/unauthorized connections Cities and Towns. E.g., RCW (sewer). Water-Sewer Districts. RCW

6 Billing Basics: Underpayments (cont.) Duty to Collect: pursue them Rate discrimination. Housing Authority v. Northeast Lake Washington Sewer and Water District, 56 Wn. App. 589 (1990) (failure to collect constitutes an impermissible rate preference). Gift of public funds. Wash. Const. art. VIII, 7. Otherwise, protect agency from audit exception by prompt write-off of delinquencies. 6

7 Billing Basics: Underpayments (cont.) Statute of Limitations If treated as accounts receivable: 6 years. RCW (2). If not accounts receivable: 3 years. RCW (3); see City of Snohomish v. Seattle-Snohomish Mill Co., Inc., 118 Wn. App (2003) (unpublished) (3-years). Discovery rule: when agency knew or should have known. See City of Snohomish v. Seattle-Snohomish Mill Co., Inc. Written utility services agreement: 6 years. RCW (2). Good housekeeping by regular administration of collections. 7

8 Billing Basics: Overpayments Refund plus interest Statute of limitations 6 years if written agreement. RCW (1). 3 years from discovery. RCW (3), (4). Scope of refund: entire overcharge. Western Lumber v. Aberdeen, 10 Wn. App. 325 (1973) (false representation of water consumed due to faulty meter). 8

9 Collection Basics: Penalties and Interest Interest Cities and Towns. Chapter RCW. Water-Sewer Districts. RCW County. RCW Rate of interest? Check applicable statute. Late charge or penalty. Specify in policy: Fixed rate or flat amount. Its application to the delinquent utility bill. May be cumulative. Shutoff, reconnection and other fees must relate to costs. 9

10 Collection Basics: Shutoffs Combined Accounts Most current water bill as last priority. Ordinance/resolution establishes order of application of payments. E.g., first $ to storm; second $ to sanitary sewer, then last $ to water. Easies/most effective to shut off water. Policy considerations. Effective, but Agency perception. Public health: sewer, garbage 10

11 Collection Basics: Shutoffs (cont.) Proper notice. Consistency of notice process (alternative langue?). Letter Door hanger Call Second door hanger (?) Shutoff Opportunity and procedures to protest (due process). Agency contact information. Duration of notice prior to shutoff? Timing: certain limitations. Cities and Towns: 4 months delinquent charges. RCW , 300. Water-Sewer Districts: 30 days before shutoff. RCW (5). 11

12 Lien Mechanics: Attachment To the premises (not owner or tenant). Counties. RCW Cities. RCW ; Water-Sewer Districts. RCW (4). Filing: the utility department must periodically certify delinquencies to the county to pursue lien enforcement. 12

13 Lien Mechanics: Foreclosure Water: Cities and Towns: NO. Shutoff only. RCW (1). Counties: YES. RCW (4). Water-Sewer Districts: YES. RCW (4). Sewer. Cities and Towns: YES. RCW Counties: YES. RCW (4). Water-Sewer Districts: YES. RCW (4). Electric: Cities and Towns: NO. Shutoff only. RCW (1). 13

14 Lien Mechanics: 4-Month Rule Cities and Towns. RCW a lien against the premises for four months charges therefor due or to become due, but not for any charges more than for months past due. Absolute 4-month limit? Balance accrues beginning 4 months prior to shutoff to present? Check with counsel 14

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18 Special Issues Managing Utility Accounts: Bankruptcy Automatic stay: date petition filed. Pre-petition charges stayed. Restore service if terminated for pre-petition debt. Create new billing account for post-petition charges. Collecting pre-petition debt: File lien notice. File secured claim in bankruptcy court. Attach backup materials. Notify trustee of intent to foreclose lien. DO NOT contact debtor (contact debtor s attorney and bankruptcy trustee). 18

19 Special Issues Managing Utility Accounts: Bankruptcy (cont.) Collecting post-petition debt. Close pre-petition utility account. Open a new utility account for post-petition debt. Track developments in the case by using PACER account. Assurance of payment deposit. May not refuse service or otherwise discriminate because debtor filed for bankruptcy or pre-petition charges are still owed. 11 U.S.C. 366(a). May require within 20 days of the stay adequate assurance of payment. 11 U.S.C 366(b). A cash deposit A letter of credit A certificate of deposit A surety bond A pre-payment of utility consumption Another form of security that is mutually agreed on between the utility and debtor or the trustee. 11 U.S.C. 366(c)(1) 19

20 Special Issues Managing Utility Accounts: Property Sales Seller Responsibilities. Chapter RCW. Satisfy liens for delinquent utility bills. Provide a list of utility providers to the closing agent. Closing agent is to make written request for final utility billings. Final billing includes all outstanding charges as of the stated closing date and average daily utility charges. If utility fails to provide final billing info within 7 business days, then it loses the right to collect the billings from the new property owner (but not from the seller). 20

21 Special Issues Managing Utility Accounts: Collection Agencies and Costs May use collection agencies. RCW To recover delinquent charges. May add reasonable collection agency fees to outstanding charges, paid by debtor. 30 days notice to customer before assignment. Federal Fair Debt Collection Practices Act (15 USC 1692); State Collection Agency Act (Ch RCW). Contract attorneys are debt collectors Follow statutory requirements 21

22 Special Issues Managing Utility Accounts: Landlord/Tenant Name on account? [Utility s discretion] Owner Tenant with owner s permission Owner with copy of bill to tenant Transfer to owner upon delinquency Ultimate responsibility: Owner. RCW (water/electricity); RCW (sewer). Notice to owner of tenant delinquency? Optional, but required upon owner request. Cities and Towns. RCW Water-Sewer Districts. RCW (7). Shutoff may not be used as an eviction tool. RCW

23 Special Issues Managing Utility Accounts: Tips from Silver Lake Billing Policy Overview SLWSD bills Property Owners with copies of bills provided to tenants and/or Property Managers: No Inactive Account Status 23

24 Special Issues Managing Utility Accounts: Tips from Silver Lake (cont.) Basic Billing & Collection Schedule Date Billing Action Typcial Number 2/28/2017 Regular Billls 9,500 3/15/2017 Due Date 8,000 3/31/2017 Mailed Payment Reminder Notice 1,500 4/14/2017 Mailed Shut-Off Notice 835 4/24/2017 Last Day for Payment or Arrangements N/A 4/24/2017 Customers Making Arrangements 300 4/25/2017 Shut-Off Day 125 5/1/2017 Lock Off Day 10 5/1/2017 Mailed Payment Arrangment Confirmation /5/2017 Last Day for Payment N/A 5/8/2017 Arrangement Shut-Off Day 0-10 Up to 5/31/2017 Special Arrangements - Medical, Death, Divorce, 0-3 Abuse etal Managed by Outlook Calendar 24

25 Special Issues Managing Utility Accounts: Tips from Silver Lake (cont.) Account Status Defined and Tracked Turn Offs with Consumption Lock Off Liens Filed Bankrupt Arrangements 25

26 Special Issues Managing Utility Accounts: Tips from Silver Lake (cont.) Lien Filing Every 90 Days Accounts are reviewed Mail Merge Process Generates Notice of Intent to File Lien Lien Filing Release of Lien.pdf of Release of Lien attached to account Cash, Escrow Check, Cashier Check is immediate lien release Personal Check of Credit Card Payment is ten-day hold NOTE County Tax Lien Sale (Schedule) May Override Utility Lien 26

27 Special Issues Managing Utility Accounts: Tips from Silver Lake (cont.) Bankruptcy Pacer s Account: Proof of Claim is Filed: Letter and Proof of Claim Mailed to Attorney for Debtor, Trustee, and Court Clerk 27

28 Special Issues Managing Utility Accounts: Tips from Silver Lake (cont.) 28

29 Special Issues Managing Utility Accounts: Tips from Silver Lake (cont.) 29

30 Special Issues Managing Utility Accounts: Tips from Silver Lake (cont.) 30

31 Special Issues Managing Utility Accounts: Tips from Silver Lake (cont.) 31

32 Special Issues Managing Utility Accounts: Tips from Silver Lake (cont.) 32

33 Special Issues Managing Utility Accounts: Tips from Silver Lake (cont.) 33

34 Special Issues Managing Utility Accounts: Tips from Silver Lake (cont.) Unauthorized Service Reconnections Special Situations 34

35 Special Issues Managing Utility Accounts: Tips from Silver Lake (cont.) 35

36 Special Issues Managing Utility Accounts: Tips from Silver Lake (cont.) 36

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38 Questions? 38

Utility Billing and Collection: Understanding the Complexities

Utility Billing and Collection: Understanding the Complexities Presented by Jim Doherty (MRSC) Heidi Nagler (City of Issaquah) Greg Wilson (Highline Water District) Webinar Technical Notes During the webinar: