Unpaid utility bills have left the city of Española’s utility services short $1.5 million — about 15 percent of the city’s annual budget.
However, officials have a plan they hope will recover some of that money. A proposal reviewed by the city’s Finance Committee, Aug. 18, would hire The Advantage Group, LLC, an Albuquerque-based debt collection agency, to find customers who are delinquent on their utility bills and collect the money from them.
The money owed by utility customers to the city, including active and closed water and sewer accounts, totals $1,517,844, according to a report presented to the Committee.
Chief Financial Officer Joyce Sandoval said in a phone interview, Tuesday, she is focused on customers with closed accounts who are more than 90 days behind on their utility bills. Those customers’ collective debt to the city is about $955,000. The report states that some debt is more than 15 years old, but in New Mexico, the statute of limitations for collecting old debt is four years.
“It’s not so much that we have lost customers, or that we’re having disconnects like crazy,” Councilor Peggy Martinez said. “What’s going on is the fact that we’re not really collecting it.”
About 4,000 Española residents pay into the water and sewage systems. The water and wastewater funds in the city’s budget are the two largest enterprise funds meant to generate income for the city. Together, the city expects them to bring in about $6.5 million during Fiscal Year 2017, which began July 1, according to city budget documents.
Water and sewer law ‘antiquated’
City Attorney Frank Coppler is reviewing the proposed contract with Advantage, so that it can be implemented into new water and sewer ordinances currently being drafted by the city’s Public Works Committee.
“It’s antiquated code,” City Clerk Anna Squires, who acted in place of City Manager Mark Trujillo, said during the Committee meeting. “It’s old ordinance, it’s old law.”
If approved by Coppler, the proposal will go back to the Committee, and then to the next meeting of a majority of city councilors, either during a Finance Board meeting or a City Council meeting.
Currently, the city code only explicitly gives officials the authority to place liens on property in order to collect payment from water and sewer customers who are delinquent on their bills.
What the code does not address is whether officials can hire debt collectors to find the delinquent customers. Financial Analyst Jessica Ortiz told the Committee that the city currently has no way to collect bad debt, which is why they have become such a large amount.
“The code, as it stands now, is silent on our ability, or to consider the option, for a collection agency,” Councilor John Hernandez said. “If it doesn’t specifically prohibit it, then I would say it allows for the city to be able to do that. You have to tell me that it specifically prohibits it, so I think we’re okay with that.”
The code states that a utility account becomes delinquent on the 21st day of the month after the billing month. At that point, there is a penalty of 10 percent of all charges, plus a 1 percent interest charge per month. After 30 days, the customer’s deposit is applied to their balance. If the deposit isn’t enough to cover the balance, the service is disconnected. In order to reconnect, the customer must fully pay the penalties, with interest, and pay a connection charge again, plus three months’ of service paid in advance.
The Public Works Committee is currently drafting new city ordinances that will likely change the rates that the city utility charges customers, along with the fees to connect new water and sewer lines. They plan to rewrite the wastewater ordinance, then the water ordinance, and then the language that determines the actual rates and fees.
“We would just like to affect what we really believe needs to be affected, and make the language as simple as possible, and be as fair as possible, to the constituency, and to the customers,” Martinez said.
If the city does end up hiring Advantage, the company would make a 14.75-percent commission from all the collections they manage to make for the city, according to a draft contract. If the debt collectors were able to collect all of the money that Sandoval is concerned about, they would make about $140,000 on the deal.
In the event that any of the debt would have to be resolved in court, Advantage’s commission on those specific cases would increase to 50 percent.
The city does not need to put the contract out to bid because it is a statewide pricing agreement overseen by the Purchasing Division of the state’s General Services Department. Ortiz said Advantage is familiar with the area, and already does debt collection for Jemez Mountains Electric Cooperative, Inc.
In 2007, the city wrote off about $300,000 in unpaid utility bills that were considered uncollectible, Sandoval said. A lack of manpower and, until recently, the city’s chronically late financial audits prevented officials from trying to collect unpaid utility bills for the past three to four years.
“I don’t anticipate a big write-off in the future,” Sandoval said. “I think these debts are collectible, we just have to find them.”
A version of this article appears in print on Aug. 25 on page A1 of the Rio Grande SUN with the headline: City Officials Want To Collect Old Debt.