The City's Finance Department maintains a billing system that records and keeps track of amounts owed to the City (Accounts Receivable). Occasionally, the responsible party does not pay and the amount becomes delinquent. Resolution 9666-20 provides authority to the Finance Director to use available lawful methods to obtain prompt and full recovery of all amounts owed to the City, and outlines how uncollectable debt may be written off. Delinquent obligations owed to the City in excess of $10,000 may be written off as uncollectible debt with the approval from the City Council. 

After exhausting good faith efforts in collecting the receivables, a debt owed to the City is considered uncollectible if one or more of the following criteria is met:

• The debtor is deceased;
•  The debtor cannot be identified;
• The debtor cannot be found;
•  The debtor has no assets;
•  The statute of limitations to pursue a legal remedy for collection has passed. 

The write-off of uncollectible receivables is a standard practice to maintain accurate accounting information and is required by both accounting principles and auditing standards.

Included in Fiscal Year 2022-23’s request for the City Council to approve the write-off of the uncollectible debt owed to the City are eight delinquent accounts, each with a balance over $10,000.  The total aggregated amount to be written off is $536,991.82.  The eight accounts are: 

A total of $441,478.46 were attributable to three commercial water customers who had filed bankruptcy between the years of 2010 and 2019.  The remaining $95,513.36 included five subrogation cases where either DUI or traffic accidents were involved, which costed City resources including first responder and damage to various city properties.  All five cases are over two years old. 

Collection efforts were exhausted for the above cases, by both staff and the City’s third party administrator.  Staff therefore is requesting the City Council to approve the write-off of these delinquent accounts as uncollectible debt, to prepare for the Fiscal Year 2022-23 year-end close process.

The requested write-offs totaled $536,991.82.  These amounts were initially recognized as revenue and receivables in the prior fiscal years.  Due to their delinquent status, the amounts were recorded as “allowance for uncollectible account”.  Approving the write-off of these accounts will not have an impact to the current year’s revenue.  The related records including the write-offs will continue to be maintained in our billing system.

It is recommended that the City Council:

• Approve the write-off of the above eight accounts for a total of $536,991.82, as uncollectible debt for Fiscal Year 2022-23.