Bad debt repayment policy passed
Council sets rules for debtors that need time to pay city
Debtors owing money to the City of Valdez who are unable to pay up in a timely fashion now have a formal extended payment-plan policy in place.
The city council passed the new policy Monday night that specifically spells out a procedure the city manager must follow in making agreements with debtors.
The policy does not apply to late property tax payments, which are governed under the city’s charter.
As a matter of course, the city manager had made late-payment plan contracts with city debtors, but there was no formal policy in place.
The new policy states that extended payment plans must be no less than one-year in time and states that interest and penalties will accrue until a debt is paid in full. It also states that as long as a debtor meets the terms of the extended payment plan, that person will be considered to be in “good standing with the city.” Under current city rules, anyone that owes money to city coffers cannot receive city monies until the debt is paid in full. This applies to the city’s yearly residential energy credits, as well as vendors and service providers.
“If a debtor fails to meet the payment terms of a payment agreement, the Account
Receivables Manager will initiate standard notification and collection procedures
beginning on the date the payment terms failed to be met. If normal collection efforts
fail to recover the amounts owed, the total outstanding debt will be considered for writeoff and third party collections,” the new policy says. “Extenuating circumstances that would warrant a modified payment plan agreement beyond the terms of the initial agreement may be authorized only following a notice to and concurrence of the City Council.”
Council member Donna Schantz said she would not vote in favor of the new policy because she was concerned that it gave all the power of extending debt payments to the city manager and that the provision could be used as a political tool.
Others supported the policy as a good will gesture.
“This way we help someone who comes on their own volition” that needs help paying a city debt, council member Chris Moulton said during discussions on the matter. “The intent is not to become a financial lending institution.”
When Schantz questioned as to how he planned to notify the public of the new policy, Hozey said he did not plan to advertise or publicize it.
“We’d be financing everyone’s debt that way,” he said.
The need for a formal policy was spotlighted after auditors hired by city council found council member Karen Ables, who happened to have been a member of the council’s audit committee at the time, had signed a late payment plan contract with the city after businesses she owns got behind in lease and catering fees owed to the city. To compound matters, Ables had also fell behind with the payment schedule contract she had with the city.
Ables resigned from the committee though no wrong-doing was alleged on the part of Ables or Hozey. However, a number of council members were uncomfortable with the situation after the city’s finance department moved to write-off the debt when it was deemed uncollectible, along with three others.
Council delayed the write off pending the passage of a formal extended payment policy.
Ables paid off the outstanding debt and as did a second debtor named in list of writeoffs presented to council in late June. Monday night, council voted to write off airport lease payment debts of $7,180 owed by Grant Aviation and $1,222 owed by Darrow Emmett for small boat harbor services.
In accordance with standard municipal accounting standards, the debts will be turned over to a third-party collection agency for further action. Any back payments collected by the agency will returned to city coffers, less 35 percent.