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PUBLIC HEARING TO APPROVE A RESOLUTION OVERRULING PROTESTS, ADOPTING THE DELINQUENT UTILITY SERVICE ASSESSMENT REPORT, AND DIRECTING THE ASSESSMENTS BE PLACED ON THE SAN JOAQUIN COUNTY TREASURER-TAX COLLECTOR’S TAX ROLL
recommended action
RECOMMENDATION
Conduct a public hearing to consider all objections or protests to the proposed Delinquent Utility Service Charges, 2024 Assessment Report (“2024 Assessment Report”) for delinquent water, wastewater, stormwater, and solid waste collection service charges (“utility service charges”) incurred by property owners.
After the public hearing, if a majority protest does not exist, it is recommended that the City Council approve a resolution to:
1. Overrule all public protests;
2. Confirm the unpaid utility service charges set forth in the 2024 Assessment Report;
3. Adopt the 2024 Assessment Report;
4. Direct the assessments to be placed on the San Joaquin County Treasurer-Tax Collector’s Tax Roll; and
5. Authorize the City Manager to take any necessary and appropriate actions to carry out the purpose and intent of the resolution.
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Summary
The Administrative Services Department bills for and collects utility service charges.
To address the significant amount of uncollected delinquent utility service charges, the City Council directed staff to form a task force to study the issue and develop solutions. The task force recommended that the City proceed with recording liens and assessing charges incurred by property owners. Consequently, the City Council approved Resolution 2018-03-20-1403, which brought the City’s preexisting utility rates under the authority of the California Health and Safety Code (“HSC”). When property owners are delinquent on their utility bills, the HSC allows the City to place a lien for services provided to the property and collect delinquent charges through an assessment against the property.
Historically, the City has managed billing for solid waste services through its consolidated utilities billing system, combining these charges with other City services like water and sewer. As of January 1, 2022, for Cal Water customers, and July 1, 2022, for the City’s water customers, direct billing for solid waste collection services was transferred to the City's franchised solid waste haulers, pursuant to Stockton Municipal Code (SMC) section 8.04.140. As such, solid waste services are billed separately from the City’s other utilities (i.e., water, wastewater, and stormwater). Although the responsibility for solid waste collection services was transferred to the haulers, the City retains the responsibility to collect on delinquent solid waste accounts through special assessment, as authorized by SMC section 8.04.140(l).
On May 30, 2024, staff sent certified and standard letters to 1,797 parcels, advising the property owners of the City’s intent to assess delinquent charges. The solid waste services team sent out certified and standard letters to 1,236 parcels on May 24 and May 29, 2024. These notices informed property owners of their right to appeal the proposed assessment at an administrative hearing. The City held administrative hearings on June 17 and June 18, 2024. The Administrative Hearing Officer confirmed the accuracy of the assessments in the 2024 Assessment Report, which is presented for City Council adoption. If the Council adopts the report, the assessments will appear on the affected property owners’ tax bills, which will be issued and collected by the San Joaquin County Treasurer-Tax Collector.
DISCUSSION
Background
The Stockton Municipal Code requires all properties in the City to “subscribe to and pay for” solid waste, sewer, and stormwater services, as well as water within the City’s water service areas.
On January 9, 2018, a Council study session was held to discuss the significant increase in delinquent utility accounts, and as a result, Council directed staff to form a task force to study the issue. The task force recommended the City pursue delinquencies incurred by property owners by applying liens and assessments.
On March 20, 2018, Council adopted Resolution 2018-03-20-1403, reaffirming and reenacting the City’s previously approved utility rates and service charges to bring the rates under the authority of the HSC. Pursuant to HSC Section 5470 et. seq., the City may elect to have delinquent water, sewer, stormwater, and solid waste collection service charges, with penalties, collected on the San Joaquin County Tax Roll. Government Code section 38790.1 provides an additional avenue for the City to collect delinquent solid waste service charges on the tax roll.
In accordance with Resolution 2018-03-20-1403 and the direction of City Council, Administrative Services began the process to place property owner utility delinquencies on the tax roll. Staff continued to work through various solutions related to tenant delinquencies and convened another task force. The task force recommended the adoption of an owner-only billing ordinance on February 5, 2019. The Council adopted Ordinance 2019-02-05-1403, which required utility service accounts to be held in the name of the property owner for California Water Service Company (“Cal Water”) customers only. On November 19, 2019, Council adopted Ordinance 2019-11-5-1403-2 to require all utility accounts to be held in the name of the property owner, whether the property was in the Cal Water or the City’s own water service areas. The transition to owner-only billing for properties in the Cal Water service area was completed by December 31, 2020, and the City Water transition to owner-only billing was completed by March 2022.
Liens and assessments are two separate collection methods recommended by the task force and approved by the Council. To qualify for either collection method, delinquencies must be greater than 60 days, and the bill must be in the property owner’s name. Before a lien is recorded, the City notifies customers by certified and standard mail of the delinquent balance and a due date to avoid the lien. The notices also inform the property owners of their right to appeal or to pay the delinquent charges by the date provided. If the delinquent balance remains unpaid, the City records a lien against the parcel with San Joaquin County. The customer can pay their delinquent balance at any time, and once satisfied, the lien may be removed. However, if a customer chooses not to pay their delinquent balance to the City, the lien remains on the parcel, which protects the City’s interest in the event the property sells. When the customer refinances or sells the property, the lien is listed on the title report stating there are funds due to the City, and the City receives payment from the refinance or sale proceeds.
Customers with a delinquent balance are also subject to collection through the assessment process. Assessment allows for the collection of the delinquent balance, fees, and charges through the property tax roll. The amount is included in the annual parcel property tax bill. While not a statutory requirement, these customers have already gone through the City’s lien process, continue to have a delinquent balance, and are now subject to the assessment process. Prior to assessment, the City notifies customers of the delinquent amount, due date, and appeal process.
Staff reviewed properties with outstanding utility liens for possible assessment on the property tax roll. Accounts with delinquent balances of 60 days or more were included in the proposed 2024 Assessment Report. Property owners were notified of their outstanding charges, the proposed assessment amount, the due date, and the appeal process.
The City must submit the final Assessment Report to the San Joaquin County Tax Collector by August 10 of each year.
Present Situation
To be considered for assessment, properties must have a delinquent balance for 60 days or more. Only utility service accounts billed in the owner’s name are eligible for lien and assessment. For City of Stockton utility billing, notices were sent by certified and standard mail to 1,797 parcels on May 30, 2024, covering a total of $3,404,097.84 in delinquent water, wastewater, and stormwater utility service charges. For solid waste services, 1,236 parcels received notices on May 24 and May 29, 2024, accounting for $1,040,102.04 in delinquent solid waste service charges. Twenty-four individuals attended the corresponding administrative hearings on June 17 and June 18, 2024. These hearings allowed property owners to contest the placement of their charges on the property tax roll before an Administrative Hearing Officer.
The Administrative Hearing Officer issued 24 Administrative Orders for 24 appellants confirming that the placement of charges for 20 appellants are appropriate and should be assessed on the 2024 tax roll. Five of the 24 appellants paid the past due charges in full and have been removed from the assessment list. The remaining 19 appellants remain on the 2024 assessment list.
Property owners who received a Notice of Assessment had until June 30, 2024, to pay their balance and avoid the assessment of delinquent charges. As of June 27, 2024, there are 1,672 delinquent parcels, totaling $2,730,529.42 in outstanding water, wastewater, and stormwater utility service charges. For solid waste services, there are 1,102 delinquent parcels, totaling $880,727.61. All outstanding amounts, including interest, penalties, and fees, total $3,611,257.03 and will be referred to the County for assessment, pending Council approval. Staff has updated the proposed 2024 Assessment Report, Exhibit 1 to the Resolution, to reflect the Administrative Orders.
The HSC requires the City to hold a public hearing on the report of delinquent utility service charges subject to assessment and consider any objection or protests. At the conclusion of the hearing, if a majority protest does not exist, staff recommends that Council pass a resolution to adopt the 2024 Assessment Report and confirm the assessments, with or without modification.
If approved, the Administrative Services Department will submit the 2024 Assessment Report to the County no later than August 10, 2024. The City will record the assessed amounts against the property owners’ utility accounts and will not accept additional payments on the assessed amounts. The City will receive payment for the assessed amounts from the County through the Teeter Plan. Under the Teeter Plan, the County remits the assessment amounts to the City in full, even if the property taxes are not paid or paid late. In exchange for the advance, any penalties or interest due on the delinquent property taxes will be paid to and retained by the County. The City will receive the funds in two payments from the County in January and April 2025.
Public Notice
In accordance with the HSC, “A Notice of Intent to Hold a Public Hearing” was published once a week for two successive weeks before City Council action.
FINANCIAL SUMMARY
As of June 27, 2024, $3,611,257.03 in delinquent utility service charges and interest billed to property owners will be referred to the County for assessment. This amount is included and anticipated in the FY 2024-25 revenue budgets for the three Municipal Utility Department Enterprise Funds - Water Utility (600), Wastewater Utility (610), and Stormwater Utility (620). Assessment revenue for garbage services will be deposited into the waste management accounts, Account No. 0000-000-210090-780-000-00-00-000-000- for distribution to the appropriate solid waste service provider.
Final assessment amounts may vary due to customer payments received prior to transmission of the 2024 Assessment Report to the County.
Attachment A - Administrative Orders