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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, 2021 Assessment Report (“2021 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 to:
1. Overrule all public protests;
2. Confirm the unpaid utility service charges set forth in the 2021 Assessment Report;
3. Adopt the 2021 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. Despite efforts to collect unpaid utility service charges, the delinquency rate in areas where customers do not receive water service from the City of Stockton is approximately 21% 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 (“HSC”). When property owners do not pay delinquent charges for 60 or more days, 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.
On June 11, 2021, staff sent certified and standard letters to 765 property owners advising them of the City’s intent to assess delinquent charges. The notices also informed the property owners of their right to appeal at an administrative hearing for the proposed assessment. The City held administrative hearings on June 28 and June 29, 2021. The Administrative Hearing Officer confirmed the accuracy of the assessments in the 2021 Assessment Report presented for City Council adoption. If the 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 21% 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 HSC. Pursuant to HSC Section 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. 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. Council adopted Ordinance 2019-02-05-1403, which requires utility service accounts in areas where the City does not provide water service to be held in the name of the property owner. The transition to owner-only billing was completed by December 31, 2020.
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. These customers have 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 evaluated properties with outstanding utility liens for potential assessment on the property tax roll. Accounts with delinquent balances of 60 days or more were included in the proposed 2021 Assessment Report. Property owners were notified of the outstanding charges, proposed assessment amount, due date, and appeal process. A total of 762 notices were sent by certified and standard mailing on June 11, 2021 for a total of $1,580,727.58 in delinquent utility service charges. The City must submit a final 2021 Assessment Report to the San Joaquin County Tax Collector by August 10 of each year.
Present Situation
To be sent to 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. Of the 762 notices mailed on June11, 2021, sixteen property owners attended the administrative hearings held on June 28 and June 29, 2021. The hearings provided those property owners an opportunity to appear before an Administrative Hearing Officer to contest the placement of their charges on the property tax roll. The administrative hearings are not intended for property owners to challenge the amounts due; it is only to determine the appropriateness of assessing the delinquent charges. Billing errors or disputes had to be provided to the City within five days of the regular monthly billing invoice.
The Administrative Hearing Officer confirmed charges for payment or assessment to the property taxes and issued Administrative Orders (Attachment A) confirming that the placement of charges is appropriate but requesting that the sixteen appellants be placed on payment arraignments to avoid 2021 assessment.
Property owners that received a Notice of Assessment had until July 12, 2021, to pay their balance and avoid assessment of delinquent charges. As of July 12, 2021, there are 638 delinquent accounts remaining, totaling $1,198,100.87 in outstanding utility services charges, interest, penalties, and fees that will be referred to the County for assessment if approved by Council. Staff updated the proposed 2021 Assessment Report, Exhibit 1 to the Resolution, to reflect the Administrative Orders and payments received.
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 2021 Assessment Report and confirm the assessments, with or without modification.
If approved, the Administrative Services Department will submit the 2021 Assessment Report to the County no later than August 10, 2021. 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 2022.
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 July 12, 2021, $1,198,100.87 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 2021-22 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 appropriation solid waste service provider.
Final assessment amounts may vary due to customer payments received prior to transmission to the County.
Attachment A - Administrative Order, 2021 Assessment Report