Duluth utilities debt a rising problem

• Overdue utility accounts

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• Enlarged view of overdue utility accounts
• Developers called out by Stauber have been paying utility debts

If you’ve got overdue utility bills, a day of reckoning could be just a couple of weeks away. The “cold weather rule,” which protects many Northlanders from having their utilities cut off during winter months, will expire April 15.

More consumers than usual will need to play financial catch-up this year, according to data obtained by the News Tribune from the Duluth Public Works and Utilities Department.

Perhaps it’s yet another sign of the nation’s slow-to-arrive economic recovery, but the number of Duluth public utility accounts at least 90 days past-due rose 11.2 percent between March 2010 and March 2012.

The news wasn’t all bad, however, as the individual customer’s average debt shrank substantially. Uncharacteristically warm weather coupled with near-record-low natural gas prices kept heating bills in check this past winter, according to Nick Petrangelo, customer service manager for the Public Works Department.

From 2011 to 2012, the average debt by customers who were at least 90 days overdue was about $372 in March 2012. That’s about 30 percent less than the average debt of $532 in March 2011.

Make no mistake, however. The kid gloves will come off April 15.

“After that date, we take a much harder line,” said Petrangelo, explaining the goal is to retire any outstanding debts well before winter’s return. “We don’t want people going into the next heating season with a large bill from the previous year still on the books.”

Getting square

Quite often, people are unable to resolve their bills overnight, but Petrangelo said that the city is willing to work with customers as long as they get on a payment plan and stick to it.

“We realize there can be extenuating circumstances. We try to work with people, within reason, to get them through rough spots and get them back on their feet.”

Dennis Hanson, a principal partner with Oxson Properties LLC, said his firm has been working with the utility department to erase debts it accrued after encountering some problems with tenants in its rental properties. The company owns five duplexes and four four-plexes in Duluth. As of March 7, city records show Oxson still owed more than $13,000 in water and gas bills.

But Hanson said: “We’re making great progress, and I’m thinking we’ll get back to even sometime this spring or summer.”

After evicting some problem tenants, Hanson said Oxson is back on track and has hired a local firm, ShipRock Management, to help screen prospective tenants and keep an eye on its properties during certain times of the year. Hanson said he splits his time between Duluth and a southern residence and isn’t always able to personally tend to the local properties.

Petrangelo said customers on payment plans typically are able to satisfy their debts within two to five months outside of the heating season, when making up ground tends to be more difficult.

Stopping service

If customers fail to address their debts or to stick to a payment plan, the city sends out a written warning after a 60-day period of inactivity. Unless it receives a response, a second termination notice is issued 20 days later. Another 10 days down the road, a final reminder is sent. Petrangelo said staff members then make multiple visits to warn residents before shutting off service.

If service to a property is shut off, the city will not restore it until the outstanding debt has been paid, as well as an additional $49.50 hookup fee.

Petrangelo estimates the city cuts off service to an average of about 40 to 50 customers per month, with fewer in the winter and more during the spring and summer. To put that number in perspective, it equates to less than .2 percent the utility’s 30,000-some utility accounts.

The city continues to pursue repayment even after it disconnects customers, but it doesn’t hire a collection service. Instead, city staff members make the calls and take people to small claims court, when necessary.

Petrangelo said the city writes off only a sliver of debt each year as uncollectable. He pointed to the utility department’s most recent annual report, noting that in 2010, the city wrote off a little more than $100,000 out of total utility billings in excess of $76 million. That equates to 0.13 percent of billings going uncollected.

Occasionally, it makes sense for the city to cut its losses, according to Petrangelo. He explained that when someone with no ongoing ties to the city skips town, leaving unpaid utility bills behind, sometimes the cost of pursuing that person and taking him or her to small claims court in another jurisdiction will exceed what the city can realistically hope to recover.

While Petrangelo said the city tries to act swiftly and decisively when customers stop making payments, bills can rapidly balloon, particularly in the winter months, when the cold weather rule makes it more difficult to cut off service. Consequently, the city’s outstanding bills typically reach a high point in the spring.

As of March 7 this year, the biggest unpaid city utility bill in Duluth belonged to Hacienda Del Sol, which owed $13,680, according to the city. A message left for Hacienda Del Sol owner Kevin Deutsch at his now-shuttered restaurant was not returned.

The list of account-holders with outstanding debt 90 days or older is decidedly top-heavy. As of March 7, Duluth’s 20 largest utility debtors collectively owed more than $102,800. This select group represented less than 4 percent of the utility customers that had fallen behind on payments, yet accounted for nearly half of the total funds that were due.

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