HomeMy WebLinkAbout09/07/1993, 1A - UTILITY ACCOUNT SET-UP FEE IIIn�IbNIIuIIIIIIIIi IIr . M ING
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COUNCIL AGENDA REPORT ITEM NUMBER
FROM: William C. Statler, Director of Finance
Prepared by: Linda Asprion, Revenue Manager
SUBJECT: UTILITY ACCOUNT SET-UP FEE
CAO RECOMMENDATION
Adopt a resolution initiating a utility account set-up fee in the amount of $25.00, with an
optional annual service fee of$500 available to any customer for unlimited service starts and
stops, effective October 1, 1993.
DISCUSSION
Background
At their July 20, 1993 meeting, the Council reviewed staff's revised recommendation of
initiating a utility account start-up fee in the amount of $25.00 rather than converting the
responsibility for payment of water and sewer utility bills to property owners. The original
recommendation of converting responsibility for utility bills to property owners was based
upon the approved staff reduction of one Accounting Assistant position which spends 90%
of their time on utility billing and 10%on accounts receivable and transient occupancy taxes
(TOT). By transferring responsibility of utility bills to the property owners, the volume and
amount of time staff spends on processing service starts and stops would be significantly
reduced and the staff position could be eliminated.
The revised recommendation was presented at the property owner's meeting on July 16,
1993 as an alternative to conversion of the utility bills, and received overwhelming support
from the 200 property owners in attendance. Initiating the account set-up fee in the amount
of $25.00 will cover the costs associated with starting and stopping utility service, and as
such, will pay for the Accounting Assistant as well as field work involved in processing
service starts and stops. A fee of $12 would recover just the cost of the Accounting
Assistant position.
After Council's review of the issue, they directed staff to return with a proposal for the
utility account set-up fee as well as an analysis of the following:
■ Options for mitigating the impact of this fee on property owners
■ Joining with other utility companies for utility billing services
How will the account set-up fee be implemented?
The proposed account set-up fee in the amount of $25.00 is a non-refundable fee and will
be paid by the customer starting service. When a customer phones the Finance Department
to initiate utility service they will be informed of the account set-up fee which will be
displayed as a separate line item on their first utility bill. The fee will be added onto the
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customer's first utility bill and it will be due and payable at the same time as the utility bill.
The fee will be charged each time a customer phones to initiate service - even if the
customer has previously had utility service in their name. It is important to remember that
the proposed account set-up fee is to cover the costs associated with starting and stopping
utility service, i.e. 90% of an Accounting Assistant plus the time and costs of the field crew
to read, turn-on, and turn-off meters.
Do other cities and utility companies have account set-up fees?
We performed a survey of the same cities chosen by the Revenue Task Force study on new
revenue sources plus all the cities in San Luis Obispo County and other utility companies.
From this survey of seventeen cities and four utilities, the following have non-refundable
account set-up fees:
I
CITY AMOUNT OF FEE
Palm Springs $37.00
Camarillo $10.00
Ventura $ 8.00
Santa Cruz $20.00
Napa $ 5.00
Arroyo Grande $13.50
Grover Beach $16.50
Atascadero Water $10.00
UTILITY COMPANY AMOUNT OF FEE
Sonic Cable Television $20.00-$45.00(depending if service is"on"or"off')
Pacific Bell $34.75 residential
$70.75 commercial
Southern Calif. Gas Co. $ 5.00
With the exception of Southern California Gas Company (The Gas Company) as discussed
below, in all of the cities and utility companies surveyed the non-refundable fee is added to
the first billing, and all customers, including property owners and property management
companies, are required to pay the account set-up fee. The Gas Company does provide
consideration for property owners and property management companies. This consideration
is discussed below.
Do property owners or property management companies have concerns regarding the
account set-up fee?
The concern expressed by property management companies at the July 20, 1993 Council
meeting was the overall cost of paying the $25.00 account set-up fee on every property they
manage. Since many of their properties turnover two or three times a year, the
management company could be paying $50 to $75 per property annually in account set-up
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fees for a very short service period (typically for clean-up purposes, using very little water).
In an effort to determine how other cities and utility companies handle this concern in their
areas, we again contacted the survey cities and utility companies having account set-up fees.
Survey results indicated that all cities and utility companies, except The Gas Company,
charge the account set-up fee to everyone starting service including property owners,
property management companies, and prior customers. The surveyed cities expressed that
most of the workload for starting and stopping utility service is from the property owners
and property management companies due to the short timeframe the account is held in their
name - normally less than a week for cleaning purposes. Because this creates double
turnover on an account in a very short timeframe and most city billing systems are not
sophisticated enough to handle such turnover, a great deal of manual intervention is
necessary to assure an accurate transition. This scenario is also true for San Luis Obispo.
However, The Gas Company has developed a 'Request for Continuance of Service"
agreement which allows any property owner or management company to request service
automatically be placed in their name when a tenant vacates. By signing this agreement the
property owner or management company agrees to pay the gas bill during the interim period
between tenants, and The Gas Company does not charge the property owner or
management company an account set-up fee. There is no cost for this agreement.
What options are available to customers for payment of the account set-up fee?
On August 10, 1993 members of the Finance Department met with three representatives
from property management companies and the President of the Property Owners
Association to discuss the concern surrounding the account set-up fee. Keeping in mind that
the proposed account set-up fee is to reimburse the associated costs of starting and stopping
utility service, and that we are attempting to make the process less cumbersome, staff and
participants proposed an agreement be made available to any customer that would be very
similar to the one offered by the Gas Company, with two differences:
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■ The customer will pay $500 annually for this agreement; and
■ In return for this pricing, the customer will notify the City in writing at least two
weeks in advance of service turnovers.
For customers with multiple units, this agreement may provide a viable alternative to paying
the $25.00 account set-up fee. For the property management companies the agreement
becomes more cost effective with the number of units they manage. By receiving prior
notice of tenant turnovers, work can be scheduled to allow the City's utility system to
operate to staff's advantage.
Those attending the meeting felt this opportunity can be used as a "pilot program". As the
proposed agreements are initiated, we can determine which procedures are working
effectively in processing of service requests (starts and stops) and those that continue to
need improvement. Attendees were open to future meetings to refine the proposed
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approach and to assess the effectiveness of the "pilot program".
In addition to the agreement described above, it is also recommended that government
agencies be exempt from this fee.
Can we join with other utilities to read meters?
At the July 20, 1993 Council meeting the question was raised on whether the City could join
with other utility companies for meter reading purposes. The two other utilities which read
meters in San Luis Obispo are Pacific Gas and Electric (PG&E), and The Gas Company.
During initial contact with PG&E and The Gas Company, both indicated willingness to
discuss the possibility of providing meter reading services for the City, but a great deal of
additional information needs to be obtained (from both the City and the utility companies),
as well as discussions regarding various requirements, before the viability of the proposal
can be assessed.
Staff will continue to pursue this proposal with The Gas Company and will keep Council
informed.
FISCAL IMPACT
If the proposed account set-up fee becomes effective October 1, 1993, it is anticipated that
thirty-seven percent (37%) of the service starts for fiscal year 1993-94 will have already
occurred - based on prior year statistics. As such, the projected annual revenue from the
account set-up fees of $75,000 will be reduced to $47,000 for 1993-94. However, in future
years $75,000 in revenue is projected. This is the equivalent of a 1.3% general water rate
reduction.
SUMMARY
On July 20, 1993 Council directed staff to return with a proposal for a utility account set-up
fee in the amount of $25.00, which would cover the associated costs of starting and stopping
utility service. Property owners supported this proposal rather than converting the
responsibility of utility bills into the property owners names. Property management
companies were concerned with the amount of the account set-up fee and requested a
compromise. This compromise, in the form of a"pilot program" agreement will be available
to any customer for an annual fee of$500. It is anticipated that this agreement will provide
for a more cost effective and workload efficient approach in processing service starts and
stops. Accordingly, staff recommends adopting the resolution implementing the account set-
up fee effective October 1, 1993.
ATTACHMENT
Resolution implementing utility account set-up fee
RE, ..UTION NO. (1993 SEI 5)
A RESOLUTION OF THE COUNCIL OF THE CITY OF SAN LUIS OBISPO
IMPLEMENTING A UTILITY ACCOUNT SET-UP FEE
WHEREAS, the Council of the City of San Luis Obispo determined that a utility
account set-up fee is necessary to pay for the costs associated with starting and stopping of
customers utility service; and
WHEREAS, after a comprehensive analysis of the costs associated with starting and
stopping utility service, divided by the number of service starts, it has been determined that
the account set-up fee will be $25.00; and
WHEREAS, the Director of Finance has the authority to initiate an agreement with
customers whereby for an annual fee of$500.00 they can obtain unlimited service starts and
stops by agreeing to conditions set in the agreement.
.NOW THEREFORE BE IT RESOLVED by the Council of the City of San Luis
Obispo that effective October 1, 1993 a utility account set-up fee in the amount of $25.00
and an optional annual service fee of $500.00 for unlimited service starts and stops will be
implemented. Governmental agencies shall be exempt from these fees.
On motion of , and seconded by
and on the following roll call vote:
AYES:
NOES:
ABSENT:
The foregoing Resolution was adopted on this day of , 1993.
ATTEST: Mayor Peg Pinard
City Clerk Diane Gladwell
APPROVED AS TO FORM:
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