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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 2018 assessment report for delinquent water, sewer, solid waste collection, and stormwater 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:
1. Overruling all public protests;
2. Confirming the unpaid utility service charges set forth in the Delinquent Utility Service Charges, 2018 Assessment Report;
3. Adopting the “Delinquent Utility Service Charges, 2018 Assessment Report”;
4. Directing the assessments to be placed on the San Joaquin County Treasurer-Tax Collector’s Tax Roll;
5. Authorizing and Directing the City Manager or his designee to execute all documents, including, but not limited to, agreements and amendments;
6. Authorizing 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 utility service charges and collects delinquent utility service charges. Despite its efforts to collect unpaid utility service charges, in those areas where customers do not receive water service from the City of Stockton, the delinquency rate for City utilities is approximately 15% each month.
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. When property owners do not pay delinquent charges for 60 or more days, the California Health and Safety Code allows the City to place a lien for services provided to the property and collect the lien through an assessment against the property.
On May 15, 2018, staff sent certified and standard letters to 1,048 property owners advising them of the City’s intent to record liens and to assess delinquent charges. The notices also informed the property owners of their right to appeal the recordation of the lien and be heard at an administrative hearing for the proposed assessment. The City held administrative hearings to review the proposed assessment report from June 28 through July 3, 2018. The Administrative Hearing Officer confirmed the accuracy of the assessments in the Delinquent Utility Service Charges, 2018 Assessment Report presented for City Council adoption. If Council adopts the report, the assessments will appear on the affected property owners’ property tax bill that 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 “subscribe to and pay for” solid waste, sewer, and stormwater services. In areas where the City provides water services, the City terminates that service when an account becomes delinquent. However, in areas where the City does not provide water, it cannot terminate water service and must utilize alternative enforcement actions, including calling customers, tagging doors, and referring accounts to a collection service. Despite the City’s efforts to collect delinquent utility service charges in areas where the City does not provide water services, the delinquency rate for City utilities in these areas is approximately 15% each month.
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 California Health and Safety Code. Pursuant to California Health and Safety Code sections 5473 et. seq., the City may elect to have its water, sewer, stormwater and solid waste collection services charges, and any delinquent utility service charges and penalties collected on the San Joaquin County 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.
Additionally, staff continues to work through various solutions related to tenant delinquencies, and plans to convene another task force meeting to present the options to Council. There are currently over 9,000 active delinquent tenant accounts with approximately $5.7 million in outstanding balances. In addition, there are accounts with over $3 million in collection status that are being processed by the City’s third party collection agency. The total uncollected revenue that is due to the City and to the waste haulers is approximately $11 million.
Present Situation
Staff identified property owners with delinquent utility service charges of over $250 that were delinquent for 60 or more days, for a total delinquency amount of over $1.6 million. On May 15, 2018, Revenue Services sent notices by certified and standard mail to 1,048 property owners meeting these parameters. The letters provided notice of the City’s intent to record a lien against the delinquent property. The notice further informed the property owners of their right to appeal or to pay the delinquent charges by the date provided.
The property owners were also notified of the City’s intent to assess the delinquent utility billing service charges. The notices provided the property owner with scheduled administrative hearing dates, which were held June 28 through July 3, 2018. The hearings provided property owners a full opportunity to appear before an Administrative Hearing Officer to contest the charges and placement of the charges on the tax roll. During the hearings, the Administrative Hearing Officer had the opportunity to review the proposed Delinquent Utility Service Charges, 2018 Assessment Report and hear any objections to the amount and appropriateness of the charges. Following these hearings, the Administrative Hearing Officer issued an Administrative Order (Attachment A) confirming the costs and assessments which were appropriate for referral to the City Council.
As of July 6, 2018, the final number of properties confirmed for assessment by the Administrative Hearing Officer is 701, equaling $1,191,998.97 in delinquent utility services charges, interest, and penalties. Staff updated the Delinquent Utility Service Charges, 2018 Assessment Report, Exhibit 1 of the Resolution, to reflect the Administrative Order.
The California Health and Safety Code requires the City Council to hold a public hearing on this report of delinquent utility service charges and consider any objection or protests. At the conclusion of the hearing, if a majority protest does not exist, staff recommends that the City Council pass a resolution adopting the Delinquent Utility Service Charges, 2018 Assessment Report and confirming the assessments, with or without modification.
If approved, the Administrative Services Department will compile delinquent charges from other appropriate City Departments (such as Code Enforcement) and send one file to the County for processing. Once the delinquent utility service charges are confirmed, the list will be forwarded to Administrative Services staff to complete the processing by the County deadline for receipt of assessments of August 10, 2018.
Once the County places the assessments on the tax roll, the City will receive funds from the County as property taxes are paid in Fiscal Year (FY) 2018-19; however, many property owners do not pay timely property taxes. The City may also recoup these funds upon sale or refinance of the property. Staff anticipates the City will receive approximately 47% of the assessed delinquencies in the first fiscal year following the placement of assessments.
Public Notice
In accordance with the California Health and Safety Code, “A Notice of Intent to Hold a Public Hearing” was published once a week for two successive weeks before City Council action. In addition to the published notices, before the City can have the delinquent service fees and charges collected on the tax roll for the first time, the City Clerk is required to cause written notice of the report and the date, time, and location of the hearing to be mailed to each property owner to whom any parcel or parcels of real property described in the report may be subject to assessment. The City Clerk sent these written notices on June 29, 2018.
FINANCIAL SUMMARY
There are approximately $1,191,998.97 in delinquent utility service charges and interest billed to property owners that will be referred for assessment. Although San Joaquin County places 100% of the assessments forwarded on the tax roll, staff anticipates that less than half, $595,000.00, will be received during FY 2018-2019. This estimate is based on Code Enforcement’s assessment experience over the past few years. This amount is assumed in the adopted FY 2018-19 Enterprise Fund Municipality Utility Department Services Section Revenue Account No. 010-2425-300. The remaining utility service charges that are not paid on time will remain on the property tax bill until paid, which occurs when the property transfers title to a new owner or is refinanced.
Attachment A - Administrative Order for 2018 Assessment