SHELBY — It’s been nearly nine years since the City of Shelby increased its security deposit for city utility users.
But that changed last week when local lawmakers approved a 50-percent hike in some of those fees.
According to John Ensman, Shelby’s director of utilities and deputy director of public service, the last time the deposit amount was raised was January 2017. But since that date, the collective outstanding balance has grown to $279,595.
“When the outstanding amounts are compounded year after year, the balance grows heavily,” Ensman said recently. “The amounts owed would help support projects and equipment needed to operate and maintain the city utilities.”
The issue sparked three separate pieces of legislation to be brought before City Council, first on Aug. 4. Council approved the first reading on all three that evening, but the trio of ordinances were postponed until Sept. 2 during their second reading on Aug. 18.
What ensued was another postponement on Sept. 15. The postponements were ultimately due to absences on council. All three ordinances were referred back to the city’s utilities and streets committee on Oct. 6.
When brought back to council on Nov. 3, each was passed unanimously.
“There was a lot of good discussion and research on this legislation. The approved security deposit legislation provides the support needed to help the ongoing issue with the outstanding amounts,” Ensman said.
“The utility billing software will provide the necessary reports in the months to come to determine if additional action is needed again to align legislation to help reduce the outstanding amounts,” he said.
Utilities operate on ‘very tight budgets,’ says Ensman
The city’s three utilities (electric, water and sewer) are enterprise funds, Ensman said, meaning each utility is self-supporting.
“Not through taxes, but by means of managing expenses to revenues from the sale of that respected commodity through the established utility rates,” he said. “When customers don’t pay for the utilities they consumed, the required revenues needed to cover the expense for the service isn’t collected.”
Without the legislation approved by council Nov. 3., Ensman said the alternative could mean entertaining utility base rates to cover the loss.
“The utilities operate on very tight budgets and must maintain a positive balance. Reducing outstanding balances from unpaid utility bills will help in keeping the operation and maintenance for the respected utility financially sound,” Ensman said.
The deposit amount for strictly residential water remains $200 — the same goes for strictly residential sewer.
Third Ward Councilman Eric Cutlip, a member of the utilities and streets committee, added that if base rates were raised to cover those expenses, that would also include commercial accounts — which could hinder Shelby’s ability to attract new commercial accounts, he said.
The legislation also states that for homeowner and commercial/industrial accounts, the deposit shall be credited to the customer’s account after 60 months (five years), unless the customer’s account has been terminated.
For rental accounts, the deposit shall be credited to the customer’s account when the account has been terminated. For all account holders, any remaining deposit not used to credit the account shall be directly reimbursed to the customer or payee within 30 calendar days.
According to housing demographics in Shelby, 40 percent of residents are renters, Ensman said. As of September, renters make up 88 percent of the delinquencies (outstanding balances).
Below is a recording of Shelby City Council meeting Nov. 3. The utility deposit discussion begins around eight minutes into the recording and runs until 50:15.
Mixed opinions on deposit increases
1st Ward Councilman Charlie Roub said he was opposed to raising the deposit amounts, but agreed with the timeline of when deposits are to be returned to customers.
“There are a lot of people out there (that) can’t afford decent housing and this is just adding to their problems,” Roub said.
Likewise, 4th Ward Councilman Nathan Martin said he was not against an increase, but wanted to make sure the proposed increase — which originally increased the deposit for residential electricity, water and sewer to $400 from $300— was justified.
Roub’s motion to keep the deposit for the trio of residential utilities at $300 passed 3-2, with Cutlip and fellow utilities and streets committee member Councilman Steve McLaughlin voting against.
“I’m not excited about it (increases), but I think with the changes we made and crediting back the deposits, I think that’s a pill that I’m willing to swallow,” Martin said.
McLaughlin said the information provided by Ensman showed something needed to be done.
“Mr. Ensman and his staff worked very hard, putting in many long hours as well as our utility committee, to get this information together, to do what we felt was right to try to recover these losses — that our constituents end up paying the bill for each year,” he said.
According to legislation passed by council, “losses incurred by the utilities because of the insufficiency of the utilities deposit to cover unpaid charges” are distributed proportionately among the three utilities (electric, water and sewer).
“The security deposits have not increased since 2017 and needed adjusted upwards per the CPI (consumer price index),” McLaughlin said. “If a rental customer fails to pay their last bill, then we would be able to use the increased security deposit to help pay this deficit down.
“Those renters that pay their bill would end up getting it back.”