Utility Account Deposits

Section 14-1 (d) of the City of Allen Code of Ordinances concerns utility deposits.  The City currently holds account deposits for the life of the customer's account.  Seven of the thirteen water district member cities now refund the account deposit after an appropriate on-time payment history is established.  Three cities refund after 12 months, two refund after 24 months, and two cities refund after 36 months.   Staff's proposed ordinance change refunds an account deposit to active account holders as an account credit either after they establish a 24-month period of on-time payments without any penalties; or applies the refund to the final bill, whichever comes first.  Deposits are held as an Enterprise Fund liability, thus refund of the currently held deposits would not affect the fund's cash reserve or days of reserve calculation.  In addition to updating the policy to the prevalent regional standard and eliminating a significant portion of the liability currently on the books in the Water and Sewer Fund, changing the policy at this point simplifies transition of the utility billing system to Tyler Munis and saves the City "data migration" fees to bring the current deposit system information over to the new Tyler Munis system.

Proof of Identity

Section 14-1 (e) of the City of Allen Code of Ordinances concerns proof of identity for citizens establishing City utility accounts.  Under federal guidelines, the City must verify the identity of new account holders as part of our "Red Flag" identification program.  This is our system to ensure new residents do not use stolen identities to establish utility accounts; and that individuals opening utility accounts actually reside at the account address.  Obtaining customer social security numbers is critical to this process.  Additionally, having customer social security numbers allows the City to report closed accounts with unpaid balances to the credit reporting agencies.  The City recovers about half of our write-offs because staff submits credit history notations to the credit reporting agencies.  Applicants occasionally construe the wording of the current proof of identity provisions to say disclosure of social security numbers is optional, which it is not.  The proposed wording clarifies the intent.  The first attachment compares the current and proposed ordinance provisions.

Account deposits are held as enterprise fund liabilities and refunding the deposits in accordance with the new policy will not impact the fund's working capital or days of working capital reserve.  Clarifying proof of identity requirements assures staff can properly identify new account holders and allows staff to recoup about half of the enterprise fund write-offs from accounts closed with unpaid balances.  Account write offs of $90,000 annually are typical in recent years, so utilization of the credit reporting agencies saves the enterprise fund about $45,000 annually that could otherwise not be recovered.

Staff recommends that City Council adopt an Ordinance amending Chapter 14 of the Code of Ordinances to automatically refund utility account deposits and update the current language concerning furnishing proof of customer identity.

I make a motion to adopt Ordinance No. ______________ amending the City of Allen Code of Ordinances, Chapter 14, Utilities, to automatically refund utility account deposits and update the current language concerning furnishing proof of customer identity.