Pima County's sewer amnesty program nets $250K in new revenues

A new strategy for turning hundreds of nonpaying sewer-system users into regular monthly customers has netted sizable added revenues for the county wastewater department, which is trying to contend with declining usage and rising costs.

On Jan. 9, the county mailed more than 1,700 forms to addresses across the Tucson metro area suspected of receiving free sewer service to let them know about a six-month window during which they could get monthly billing set up with the Pima County Regional Wastewater Reclamation Department without the risk of being hit with a large bill for past unpaid service.

So far this calendar year, the county has added more than 300 new paying sewer customers that will bring roughly $250,000 in additional annual revenues, according to data obtained by the Star through a public-records request. The largest among those previously unpaying users is a southeast-side Walmart store, which even though it qualified for the amnesty program has chosen to pay for the free sewer service it says it received unknowingly for more than three years.

More previously unpaid accounts are likely to be set up as paying customers by June 30, the amnesty program’s end date. After that, nonpaying customers could face two years of back billing, interest and additional fees.

Sewer-connection fees, which are paid once for new developments or significant additions, have not been forgiven for properties that were added to the system within the last five years. Monthly user fees, which are largely based on volume, are the target of the wastewater department’s’ temporary amnesty proram.

The new revenues are a small portion of the department’s annual user-fee revenues of roughly $160 million, but a positive change in a period when the department is looking for ways to increase revenues amid declining usage. A sewer rate hike was recently approved and additional hikes are recommended.

Previous attempts

The amnesty program has also shown better results compared to a previous, more aggressive fee-recovery program by the department.

Between October 2015 and late 2016, county staff identified about 130 nonpaying sewer customers, far fewer than what the new effort has achieved in less time. Those customers were originally sent bills for past unpaid service, totaling a collective $116,000.

A number of those customers did not respond well to the unexpected news of sizable unpaid utility fees.

Many of them contacted county officials with “varying degrees of disdain,” according to a November 2016 memo from wastewater Director Jackson Jenkins.

“In our community, a lot of people live paycheck to paycheck, if they can make it even that far,” he told the Star. “I was not a very popular person.”

In a November 2016 memo, Jenkins said some customers may have known they were receiving free service, but he told the Star there are reasons many customers may have been unaware, including issues with the previous billing format.

“People were like … ‘Why didn’t you bill me. It’s your problem. It’s your fault,’” Jenkins recalled. “Well, I don’t know if it was my fault, if it was their fault, if it was the builder’s fault, if it was the city of Tucson’s fault, whose fault it was.”

The outcry was enough to suspend issuing bills for unpaid sewer service, and those customers were eventually either refunded or credited the amount they had paid. It also spurred the establishment of the amnesty program.

Comparing the amnesty program to the former approach to dealing with nonpaying accounts, Jenkins said, “I think it’s gone very, very well.”

The county has whittled what was once a list of roughly 30,000 suspect accounts — the vast majority of which were determined to be on septic systems or had other legitimate reasons for not paying for sewer service — down to around 1,700.

Of the remaining accounts, Jenkins offered an educated guess that around 850 might be receiving free sewer service, many of which have been already been resolved through the amnesty program and previous fee-recovery effort.

“Through this combined effort, we’re going to have 450 — maybe even 500 by the time it’s done — new accounts, people that are paying on a regular basis,” Jenkins said.

How did the sewer situation arise?

Memos from Jenkins point to county record-keeping errors, developers “not following the full development process for utilities and building codes,” and building departments in cities and towns issuing building permits or certificates of occupancy “without ensuring a Pima County sewer connection fee has been paid.” Connection-fee payments trigger the creation of a new sewer-user account and monthly billing.

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Data mapped by the Star show that the roughly 1,700 addresses of confirmed or likely nonpaying accounts are scattered across the Tucson metro area, with the heaviest single concentration in and around the city of South Tucson. A county official pointed out that buildings in that area are among the oldest in the area.

A number of measures are being taken to ensure new sewer customers get their monthly bills.

Those include ongoing monitoring of the water-only database from Tucson Water to make sure water customers without a parallel sewer bill are legitimately not paying the county wastewater department, a redesign of the Tucson Water bill to make it easier for customers to see if they are being charged for sewer service and new guidelines shared with various local building departments to ensure permits aren’t issued before ensuring connection fees have been paid.

Those guidelines include requirements that the wastewater department review all commercial and multifamily development permits, as well as many single-family projects.

The chances of a similar situation re-emerging is now “significantly reduced,” Jenkins said, adding: “We would believe and hope that we would never get this kind of list again.”

Nevertheless, a lot of revenue was lost over the decades during which customers weren’t paying.

The data show that some such accounts date back as far as the mid-1970s, and the average start month among formerly nonpaying sewer accounts that have been resolved is May 2002, according to the Star analysis of the data. Sewer rates have risen dramatically since then, making it difficult to calculate exactly how much revenue was lost, but a county official acknowledged that it was likely a sizable figure.

Through mid-June, new monthly revenues from the roughly 340 new accounts established under the amnesty program are over $20,000.

Large and small accounts

The largest of those newly established accounts offers some insight into one way free sewer service can improperly be established.

The Walmart at 9260 S. Houghton Road, which is in the Tucson city limits, had its water account set up in April 2014. The company did not respond to information about the amnesty program sent out by the county, but internal research established that it was a nonpaying sewer customer in early April and its account was set up April 21, according to the county spreadsheet reviewed by the Star.

The twist in the Walmart case is that a connection fee was paid, but it was tied to the address 9090 S. Houghton Road, triggering the creation of a sewer account without a corresponding water account. The county finance department did not monitor that unusual account for a little over three years, a wastewater spokeswoman told the Star. Officials are reviewing procedures to avoid a repetition.

Lane Mandle, a city spokeswoman, said that the city development services department ensures that connection fees are paid before issuing any permits, as occurred in this case. Confirming that there is correspondence between the connection-fee address and water-service address is outside of their purview.

In written comments, a company spokeswoman said the retail chain was “surprised to learn about the unpaid balance for wastewater services at the Walmart on Houghton Road resulting from errors in the county’s billing process.”

“We have been paying the utility bills we received each month and were unaware that they were incomplete,” Tiffany Wilson wrote.

Walmart has chosen to forego participation in the amnesty program and instead fully compensate the county for the service it received, a decision made after the Star informed the company the store’s location was among those identified as a nonpaying account. The county sent the company an invoice for $25,656.50, which the company intends to promptly pay, according to Wilson.

Additionally, Walmart will review utility billing at all of its 20 locations in the Tucson area to ensure “no other wastewater billing errors exist.”

The Tucson Airport Authority, which manages Tucson International Airport, was also one of the larger customers not paying for sewer service for some of its properties as far back as the mid-1980s.

After receiving a letter from the wastewater department, authority employees discovered that several addresses were indeed connected to the sewer system but not being billed, a situation marketing director David Hatfield said the authority was unaware of. The TAA had been paying its water bills throughout, and it will be budgeting a little extra for utilities moving forward, he added.

Jenkins agreed that it was unlikely that the TAA, Walmart and other large customers knowingly avoided sewer bills.

“I don’t think anybody has intentionally done this,” he added. “Many of these could likely be explained by an administrative error or oversight.”