When reviewing the fiscal condition of a city, the collection of fees and charges is an important element to consider. In other words, a city must be able to collect all the money it is entitled to through its established fees and service charges. Monitoring of this can be done when the council receives monthly financial reports from the city clerk or finance director. Because most cities budget and report on a cash basis, the city must also monitor those accounts that fall behind on payments to ensure all collections are made when they are due. It is much easier to collect these fees and service charges when they are due, rather than wait until the amount grows to an unmanageable amount for the customer, or when the customer terminates the account.
Dealing with Nonsufficient Funds Checks
The city should have policies and procedures in place delineating the methods for the collection of uncollected amounts (accounts receivable). With the policy in place, the city can, for example, act quickly when a check is returned from the bank for nonsufficient funds (NSF). The policy in place should reflect that only cash or a credit card is acceptable to replace the NSF check to ensure a quick resolution. It takes staff time to track down the individual. If this is not done in a timely manner, the chances of recouping the funds become problematic. Some banks and third-party vendors offer a check recovery solution that is fast, effective and, best of all, free to the city. When a bad check is written, the NSF check is forwarded to the third-party vendor who can electronically debit the checking account of the individual who has written it from any bank in the U.S. Federal Reserve system, along with a state-allowed NSF fee. One hundred percent of the face value of the check is remitted to the city; the third party retains the NSF fee.
Collection Agencies
There are three other ways to collect outstanding amounts owed to the city. In addition to the ability to shut off utilities for non-payment (with certain restrictions), cities can use a third-party collection agency. The contract between the collection agency and the city should be in writing with the fees clearly understood. This may assist the city in recouping some of the fees; however, collection costs must be considered before this option is used.
Setoff Program
The state setoff program is a method public agencies of the State of Iowa may use to collect past-due (delinquent) debts (for example, child support payments) that are owed.
The state setoff program matches people and businesses who owe delinquent debts with money that is owed to those people and businesses (for example, an income tax refund). Sources of funds available for setoff include, but are not limited to, tax refunds, casino and sports wagering winnings, State-issued vendor payments, and Iowa Lottery winnings. To the extent allowed by law, when a match occurs, the Iowa Department of Revenue (IDR) withholds or sets off money to apply toward the delinquent debt. State of Iowa Setoff Program requirements are outlined in Iowa Code section 421.65 as enacted by 2020 Iowa Acts, House File 2565, and Iowa Administrative Code rule 701—Chapter 26. Participation requirements can be found at the Setoff Program Web site.
Special Assessments
A city may also enter into payment agreements for special assessments, for streets, curb and gutter, sidewalk, water or sewer improvements. Code of Iowa Section 384.37 defines the process for establishing assessments to taxes. In essence, this is a loan agreement in which the city makes improvements when the property owner is responsible for some or all of the expenses which benefit the property. If the property owner wishes to pay for the improvements upfront, no certification to the county treasurer is required. However, the city can offer up to a 10-year repayment schedule with interest. During this time, the city acts as the lender. Assessment procedures are very specific so working closely with the city attorney and engineer is required. If the city uses bonds to finance the improvement project, bond counsel and financial advisors may also need to be involved in the process.
Costs associated with nuisance abatements can also be collected from the property owner or assessed to taxes. Code of Iowa Sections 364.12 through 364.13B and 364.22 authorizes this collection and draws out the procedures required. Legal assistance should be secured before the city undertakes any nuisance-related work. More information can be found on the Nuisance Abatement page.
