Discussion:
The city has been certifying delinquent storm drainage accounts for many years, but only started certifying sewer accounts since 2015. Our certification thresholds for the past couple years has been $100 for sewer and $50 for storm drainage, meaning the city would only go through the certification process for accounts above these thresholds. In years prior, the storm drainage threshold was likely higher.
This leaves many accounts with delinquent balances that are many years old and below prior thresholds. For instance in the storm drainage fund, there are approximately 4,450 accounts with delinquent balances between $0.01 and $100, which accounts for $34,000 of the total $45,194 in delinquencies. Theses delinquent accounts date anywhere in between 2000 and the end of 2015. There are also about 30 accounts with delinquent balances between $100 and $2500. I don’t have a rational why these were not certified other than they could potentially have been bankruptcies or foreclosures.
As for delinquent sewer accounts, there are about 1,600 accounts totaling $95,693 ranging in amounts from $0.73 to $12,083. I know the account with the $12,083 sewer delinquency is a supermarket that went bankrupt a number of years ago. A vast majority of the accounts (1,455) are below $100, which I believe was the threshold instituted in 2015 when we started certifying sewer accounts.
City staff and Shakopee Public Utilities (SPU) would like clean up the old delinquent accounts, which will make our annual certification process much simpler since these delinquencies would not show up in future queries. Council approval is requested to write off delinquent accounts. Council approval is an internal control procedure that ensures write-offs/uncollectible accounts are handled uniformly.
At this point, certification of these old accounts is still an option, but not a good option. The delinquent storm and sewer accounts remain the responsibility of the property owner, no matter whose name is on the account. However, the likelihood that the same property owner being in place from who knows when is unlikely. I have no problem certifying to new owners when I know records are current and accurate, because in reality title companies are responsible for ensuring clear and free titles. However, in this circumstance collecting from a title company is unlikely due to the passage of time. Transferring the liability from the title company to potentially a new owner several years later is also problematic.
My recommendation is to write off all delinquent accounts prior as December 31, 2015 which totals about $141,000. These old delinquencies have never been included as an accounts receivable in our financial statements. So writing off the accounts will have no financial impact.
For this year’s certification process we will be lowering the delinquent sewer threshold from $100 to $50 and keeping the storm drainage amount at $25. Any accounts that are above these thresholds with an aging between 1/1/2016 and 12/31/2016 will go through the certification process. After that process is final in December, I will then have the council write-off any delinquent accounts less than these thresholds dated between these same dates. The write-offs should be minimal at that point.