FRONT ROYAL – Town leaders say they want to clamp down on utility customers who don’t pay their bills.
Front Royal writes off thousands of dollars in “bad debt” each year linked to unpaid utility accounts, according to information provided by Finance Director B.J. Wilson, who updated the Town Council at its work session Monday.
Council members discussed at their March 4 work session more options the town could use to collect bad debt. Council members asked Wilson to look at pursuing judgments for bad debt on utility accounts; raising the minimum deposit from $125 to $150; seeking a personal guaranty or promise by a business to answer to another utility’s unpaid account, or requiring a customer to show proof of income.
On Monday, council members continued their discussion about proposed changes to the town regulations pertaining to utility account payments and termination of services. A public hearing must be held before the Town Council can approve any changes to an ordinance.
Requiring proof of income and guaranty for business accounts would help reduce the town’s bad debt, Wilson told the council. However, either rule changes would make the utility application process more cumbersome for some applicants, he has advised.
The town has about 8,000 utility accounts, approximately 240 of which are subject to bad-debt expense after five years, Wilson said. The town writes off roughly 1 percent of the amount billed each year and sees about 2,000 new accounts opened each year.
Councilman Eugene Tewalt asked Wilson if the proposed requirement for a guaranty would help the town collect the unpaid debt owed by entities such as limited liability companies. Wilson said the town could enforce such a rule when applied to limited liability companies with regular utility accounts. The town could not apply the requirement to businesses along the U.S. 340-522 corridor that receive utilities through payment in lieu of taxes accounts, Wilson explained. The town hasn’t seen any major problems in collecting on accounts for corridor customers, he said.
Town officials have not ruled out using garnishments to recover unpaid debt, Wilson said. The town is in the early stages of obtaining judgments against unpaid accounts and has secured 20 to 30 in this round, he added.
Town Attorney Doug Napier explained that the town can pursue garnishments once staff obtains a judgment and collects information on the debtor’s assets.
Interim Mayor Matthew Tederick suggested that the council find out how other utility providers handle debt collection and accounts.
Councilman William Sealock said he wants town staff to provide a target date for when they would implement any of these changes.
“I am very interested in garnishments because when I see the amount of money we write off annually to bad debts, it really troubles me,” Sealock said.
The town recently wrote off approximately $300,000 in bad debt from unpaid accounts, Wilson confirmed for Sealock.
“That’s not chicken feed,” Sealock said. “That’s a quarter-million dollars, and that pays for a lot of good service for us.”
Tederick noted that taxpayers are subsidizing that.
“That’s really the bottom line,” he said.
Wilson said he recommends the council move forward with increasing the deposit requirement but hold off on the guaranty and proof of income.