Local sanitary district experiences loss of user payments due to coronavirus

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Urbana-Champaign Sanitary District

An aerial photo of the Sanitary District from its website.

The Urbana-Champaign Sanitary District has been hit with a $1.1 million loss in revenue because of unpaid bills resulting from the district’s suspension of its late fees and water discontinuance policies during the coronavirus pandemic. 

The revenue loss is about 8.5% of the district’s total budget said Kim Lytle, the director of administrative services.

The district’s executive director, Rick Manner, said the district placed a moratorium on water disconnections and late fee penalties after the Illinois Commerce Commission made moratorium arrangements with other larger utilities across the state. 

He said the commission shifted its moratorium policies, but the district has not resumed water disconnections because it makes its own decisions based on its board of trustees

“People tend to expect us to be regulated to a similar extent as the commerce commission, so we try to stay similar to their rules,” Manner said. “We don’t have to follow all of them, and we don’t follow all of them explicitly because our governance is different, and so we can vary and where it makes sense to us, we do vary from their rules.”

Manner said the coronavirus’s largest impact on the district’s overall revenue is on the user charges, which are the charges based on the gallons of water that people use and discharge down the sewers. 

Manner said the district usually sees a decline in revenue every summer when the University of Illinois students leave campus. He said the district saw a moderate drop in revenue once students left campus prematurely in March because of the pandemic. 

“In this case, come March when things mostly closed down, we saw our summer decline hit back in March instead of in May, and so that’s just a couple months of normal user income that we’ll never get back because the kids weren’t here to use the water to generate the user charge,” Manner said. 

To track the effects of the coronavirus within the district, the administrative staff created aging reports to track the number of days an account is past due. 

Aging reports over time for accounts past due (left) and total money due (right).

Aging reports are periodic reports that show the total balances owed by the customers the district serves and the duration of how long the bills have been outstanding. The overdue bills range from one day late to over 120 days late. 

Lytle said the estimated revenue lost from the university accounts is $650,000 because of students’ early departure last spring, fewer employees and students on campus this fall and the continuation of remote learning in the upcoming spring semester. 

Lytle said the district’s revenue itself, not including the university’s revenue, has not experienced a significant decrease, but the district has seen decreases in user payments as a result of its inability to penalize people for late fees. 

She said 8.5% of the district’s overall revenue, which would equal about $1.1 million, has been impacted by the coronavirus, but its total income has not decreased drastically because people are still at home and using water. 

Lytle said the primary sources of revenue impacting this number are the university revenues, delinquency and collection fee revenues, and revenues from commercial establishments such as restaurants, hotels and retail stores. 

Over the past three years, the district’s annual budget has increased by 18.6%, and its estimated expected revenue has increased by 13% according to the district’s annual budgets

Despite the decline in user payments, the district’s grand total for revenue includes connection permits, interceptor cost recovery fee permits and a $3.1 million project loan that increased the district’s overall revenue. 

Lytle said the operation and maintenance funds within the budget’s revenues for the 2021 fiscal year were reduced by $831,000 to accommodate for changes caused by the coronavirus, reduced income due to the current market environment and other factors. 

She said the district and its employees provide an essential service, so there were no layoffs and no reduction of employee hours. 

Manner said the district created the aging reports to make sense of how many bills are past due and if the number of bills past due is increasing. He said the aging reports are informative for the district’s board of trustees to see trends in the accounts past due and if the amount of overdue money is increasing.

“Back in April right away at the beginning, we started producing this aging report as a way to try and follow how it’s going, and I think it’s been pretty helpful in terms of both tracking and keeping the board and the public informed,” Manner said. 

Administrative Services Supervisor Theresa Plotner said she uses a utility billing software, known as MUNIS from Tyler Technologies, that helps her generate the aging reports based on the number of days that an account is past due. 

Plotner said the district services 42,759 accounts, but this number does not include the university accounts because those accounts are billed separately from the district’s billing system. 

Lytle said the number of accounts with past due charges hasn’t been substantially affected by the coronavirus but said the accounts receivable balance is still growing because people aren’t making payments to reduce their delinquent balances. 

Delinquent balances occur when an account is past due on its payment obligations for a monthly bill. Accounts receivable is the amount of money the account owes to the district for the services it delivers. 

Lytle said the estimated loss for the district’s delinquency and collection fee revenues is approximately $172,000 from mid-March through the end of October since the district discontinued assessing these fees during this period.

She said the estimated revenues from commercial establishments are estimated to have decreased by around $255,000 but said this number varies as coronavirus restrictions change. 

The aging reports separate the accounts past due into four categories: residential, commercial, government and industrial accounts. The number of residential accounts equals approximately 97% of the total amount of accounts with past due charges per each aging report. 

“The number of accounts that are past due really hasn’t changed pre-COVID and now. So the same accounts that’ve been historically past due are still past due,” Lytle said. “It’s just that they’re not making any payments at all, and so the balances are simply growing.”

Since the first aging report on May 27, the number of accounts past due increased before peaking at 4,183 accounts on Aug. 25’s report. According to the latest aging report from Oct. 21, 3,540 accounts are past due and collectively owe $437,929 in unpaid balances. 

The district saw the biggest decline in the number of accounts past due between Sept. 29 and Oct. 21 when the number of accounts past due decreased by 520 accounts. It saw its biggest increase in the number of accounts past due between May 27 and June 30 when the number of accounts past due increased by 214 accounts, according to the aging reports. 

To combat the growing number of unpaid balances, the district has introduced payment plans that allow people to stretch out their repayment over the course of the year. 

Manner said the district will also begin assessing late fee penalties in December, and he encourages people to create payment plans. He said people who set up payment plans will not have their account’s late fee penalties assessed. 

“People would be able to catch up and over time be able to pay that bill, and so that’s the purpose of the combination of both payment plans and starting the penalty so that people start the payment plan,” he said. “If people start the payment plan, there will not be any penalties assessed.” 

Lytle said the district’s water discontinuance policies used to prompt people to pay their bills, but the district’s current inability to shut off accounts has made it difficult to incentivize customers to pay their bills. 

She said the loss of the customer cash payments affects the district’s revenue, but the district has adequate reserves that allow it to pay for all of its expenses. Lytle said the loss of cash payments is reducing the district’s available reserves but said the payment plans will increase the revenue stream.  

“We’re hoping these plans will encourage people to begin making payments because the balances aren’t going to be written off, and so we’re trying to work with them to give them a mechanism by which they can catch up in a manner that we’ve never used before cause we’ve never had payment plans before,” she said. 

Lytle said the district’s board of trustees approved a five-year plan of a 0.3% per year rate increase on user charges, with the first increase occurring in 2016 and the last occurring in 2020. She said there has been no recommendation to the board of trustees for an increase for the next fiscal year.

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