TO:  Mike Wildgen, City Manager

FROM:  Ed Mullins, Finance Director

DATE:  May 10, 2005

SUBJECT:  Write-off of Receivables

The City Commission is requested to authorize the write-off of certain water, sewer, sanitation and miscellaneous receivables deemed uncollectible by the Finance Department.  The period covered is January 1, 2003 through December 31, 2003.  The total requested write-off is $110,407.49 for 736 utility billing customers and $14,785.86 for 71 miscellaneous receivable accounts.

In order to fairly present the financial position of the City of Lawrence, the Finance Department performs an annual review of the status of its accounts receivable.  Since the Department has the capability of disconnecting delinquent active accounts within two months, uncollectible utility accounts are typically unpaid final bills of our inactive customers.  The decrease in the number and amount of write-offs can be partially attributable to the Farmland bankruptcy that resulted in the write-off in 2004 of over $30,000.  The uncollectible miscellaneous receivables are primarily uncollected billings for building inspections and sanitation roll-offs.  Nearly $1,200 was uncollected from a former employee for a computer purchases and over $2,000 was not received from an individual for a cemetery lot.

The Finance Department has reviewed the utility accounts to determine if the customers have relocated to another service address within Lawrence.  Delinquent notices have also been sent and the accounts have been turned over to a collection agency.  The collection agency will continue to pursue the accounts.  Utility billing personnel also can sometimes find an individual who has had a prior account written-off when they are signing-up for new service.

The amounts written off in 2000, 2001, 2002, 2003, and 2004 were $85,826.02, $78,412.13, $72,026.30, $113,136.65, $189,083.87 respectively.

The Finance Department has been charging $15.00 per account sent to a collection agency since January 1991.  The number of utility accounts to be written-off represents 2.5% of the total accounts in the City.  A detailed list of utility accounts to be written-off is available upon request.  The list of miscellaneous accounts is attached.

To help locate prior uncollectible accounts, the social security number and driver’s license number of customers are recorded when the account is established.  Delinquent customers are sent to the State of Kansas as part of its set-off program.  If the customer is owed any money from the State of Kansas, the amount due the City is deducted from the amount and paid to us.

The increase in both the number and amount of utility accounts written off is a concern.  In order to be more aggressive in terminating utility service in a timelier manner, the utility billing staff will need to be increased.  An additional Field Service Representative that would spend the majority of their time on collection activities would help reduce the number of delinquent accounts.  An increase in the amount of deposit is also recommended.