Memorandum 15-153 Status of Natural Gas Assessment Payments and Proposed Grace Period

Memorandum 15-153

TO:                       Honorable Mayor Wythe and Homer City Council

FROM:                 Katie Koester, City Manager

DATE:                  September 9, 2015

SUBJECT:         Status of Natural Gas HSAD Payments and Proposed Grace Period

The purpose of this memo is to brief the Council on the status of payments to the Natural Gas Homer Special Assessment District (HSAD) and receive guidance on a proposed grace period for the September 1 deadline.

Assessments were due on September 1, 2015. There are 3,776 properties on the assessment roll. Property owners could pay in full at $3,265.77 or in 10 annual installments at 4% interest of $405.27. There is no penalty for early pay off. As of September 8, 2015 the payment status is as follows:

1,089 parcel owners paid assessments off in full (including City lots)

1,946 parcel owners made the first payment on their assessment

17 low income deferrals (including on agenda for September 14)

110 Condominium units (to be assessed at a later date)

607 overdue assessments (16% of assessment roll)

As is common with many lending institutions, staff has considered a minimum grace period appropriate (15 days) before the penalty structure (a $326.58 fine and 10.5% interest rate) is implemented. As of yet, no penalties have been assessed. Payments have steadily come in after the due date. Some have argued to extend the grace period to allow people to make payments after the Permanent Fund Dividend comes out on October 1. This is over a 30-day grace period; 35 days would land on October 6. The City must strike the balance between honoring those who did pay their bills on time, encouraging payment, and collecting the most payments as possible.  The City is still accruing interest. If 607 parcel owners do not pay anything on their assessment, over the life of the loan it represents an approximate cost of $2.5 million in principal and interest. While it is not reasonable to assume all of these parcel owners will not pay, it does add up quickly.

With Council’s approval of the memo, I will implement a 35-day grace period. This will give staff time to send a final notice to the 600 plus lot owners the City has not received payment from. There will be those who do not pay for one reason or another, so eventually penalties will have to be assessed for those parcels.