TO: Mayor and Commission AGENDA DATE: 2/17/2025
FROM: City Manager AGENDA ITEM: 7 - D
SUBJECT:
Title
Request for approval of Resolution No. 2025-30 - Fiscal Year 2024 Utility Billing and Miscellaneous Accounts Receivable Account Adjustment.
Body
LOCATION:
Citywide
COST:
001 - $ 129,492.53
401 - $1,996,632.17
SOURCE OF FUNDS:
Not Applicable
ORIGINATING DEPARTMENT:
Finance
POTENTIAL MOTION:
Recommendation
“I move to approve Resolution No. 2025-30, Utility Billing and Miscellaneous Accounts Receivable Account Adjustment”
END
BACKGROUND:
Background
Throughout each fiscal year, the City accumulates various types of uncollectible revenue as a result of accounts being terminated, individuals filing for bankruptcy, businesses becoming inactive, or balances being outstanding over 180 days. These amounts are subject to write-off at the end of each fiscal year.
This process is an accounting procedure following the Generally Accepted Accounting Principles (GAAP), which lays the framework of accounting practices in the U.S. In applying GAAP accounting principles, the act of writing off outstanding account balances is a necessary accounting function that leads to an accounting adjustment on the City’s Financial Statements to accurately show the outstanding balance and the expectation of that timely collection is unlikely. If a customer’s account has been written off as uncollectible on the City Financial Statements, this does not erase or forgive the debt. The City can and does collect some portion of the amount owed by those customers through several methods. If it is an owner-occupied location, liens can be filed with the Clerk of Court and will be per the Write-Off of Uncollectible Accounts Policy of 2025. These liens are typically satisfied when the property is conveyed. For tenant accounts, when the customer requests new utility services, we attempt to collect any outstanding balance prior to establishing a new service.
The City provides utility services to over 38,000 customers and the monthly billing is settled in arrears (after usage has occurred). 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 to remind them of the outstanding balance and encourage payment. However, the longer the customer account goes without payment, the less likely that any payment will be received. There has been no request submitted to the Commission for a write-off (accounting adjustment) since 2006. The amount requested for adjustment is $1,996,632.17 as of January 29, 2025. This amount changes daily as accounts might be paid prior to the Commission’s action. The outstanding amount includes:
• 11,122 accounts (8,333 tenants, 2,778 owners and 11 contractors)
• Tenant accounts of $1,582.467.30
• Owner accounts of $326.201.55
• Contractor accounts of $87,963.32
• The average delinquency is $179.52
• Accounts over $1,000 - 268 accounts
• It represents less than 0.86% of our annual billings for utility services.
• The last request for write-offs was in 2006 for accounts from 2004.
Additionally, the City provides various services to individuals within Deltona, from fire inspection services, hazardous use permits, and business tax receipts (BTRs). The amount requested for adjustment of $129,492.53 includes $93,073.04 in penalty and reinspection fees. Between fiscal years 2012 and 2023 there were 599 invoices for Miscellaneous Receivables.
An "acceptable" write-off percentage of accounts receivable varies based on industry and company specifics, but generally, a percentage between 1% and 5% of total accounts receivable is considered reasonable, with older, past-due receivables carrying a significantly higher write-off rate depending on the aging schedule used.
The total adjustments of $2,126,124.70 can be found in Exhibit A.
Accounts that are less than six and half years old, will be sent to collections to assist with collections of all outstanding accounts.
Staff is implementing several new initiatives to help minimize future write-offs, such as implementing two new policies regarding Write-Off of Uncollectible Accounts Policy, and Procedure for Returned Checks. Contracting with a collection agency to assist with collections of aged accounts. Finally, seeking Commission approval to work with a company that provides credit-based decisions for utility deposits and is a utility specific collections company. This company is a sole-source integrated provider with our ERP solution, Tyler Munis. All these steps have the overall goal of minimizing future accounts receivable for write-off.
End