Delinquent utility bills spike in metro area

Buried in the Edina City Council's agenda last month were four pages dense with columns of numbers followed by dollar figures that ranged from $54.03 to well into the thousands of dollars.

It was a list of properties that have delinquent city utility bills that, unless they are paid within a couple of weeks, will be added to next year's property taxes. Edina's council certified delinquent bills for 525 properties ranging from offices and dry cleaners to homes.

It's an annual exercise that's being repeated in cities across Hennepin County. After sending late notices and warning letters, printing legal announcements in local papers and holding hearings, cities are ready to recoup the money they're owed through county property taxes, often by adding such penalties as administrative fees and interest of up to 8 percent annually.

Hennepin County records show that the number of properties with unpaid utility bills added to property taxes has increased in recent years, sometimes dramatically, depending upon the city.

Between 2000 and 2009 in Minneapolis, that number increased from 595 to 1,935, an increase of 225 percent. Brooklyn Center's number jumped 247 percent. Cities including Brooklyn Park, Crystal, Eden Prairie, Edina, Hopkins, Medina, New Hope, Plymouth, Richfield and Rogers all had increases of more than 100 percent.

Property owners who owe utility bills that roll over to property taxes usually have ignored repeated city mailings and warnings, indicating that the numbers mirror financial stress in the communities.

Scott Loomer, Hennepin County's property tax manager, said that while that is true in many cases, changes in the way some cities handle utility delinquencies can skew the statistics. This year, for example, new computer software used in Bloomington means that it is changing the way it counts properties with late utility bills. Before, property owners who had multiple properties with late bills were counted as one. Now, each parcel will be counted individually.

But although Bloomington historically has had a small number of unpaid accounts bump to property taxes, this year the $39,100 that remained unpaid as of September was up almost 80 percent over any previous year.

"There's definitely people out there who are feeling financially stressed," said Lori Economy-Scholler, Bloomington's finance director. "But I don't see a substantial change."

The county's most recent tally of properties with utility bills that were added to property taxes is for bills that were unpaid through June 2008, before the recession deepened.

But numbers from cities show the trend has deepened this year: In Minneapolis, as of last week, more than 2,500 commercial and residential accounts owed almost $1.7 million in unpaid utilities through June. That's about 600 more than were certified for payment through 2009 property taxes. That number may shrink because account holders still have several weeks to pay their bills.

Similarly in Richfield, Mike Eastling, the city's director of public works, said he expects about 650 accounts to have utility charges added to 2010 property taxes, up about 100 over last year. Each will have a $50 fee and 8 percent interest added to the bill. "To me, it's obvious that it's the economy," he said. "But it's not up as much as I expected."

Not all cities are seeing dramatic increases in delinquencies, however.

Edina Finance Director John Wallin said he expects many of the people who own properties with late bills to pay by the Nov. 20 deadline. "There is a little bit of a step up [in delinquency numbers], no doubt about it, but it's not real large," he said.

In Rogers and Plymouth, delinquency numbers have been way up since 2000, but the number of utility billings that end up on 2010 property taxes is expected to fall. Officials in both cities attributed the increase in utility delinquencies over the years to the increasing numbers of housing units in their cities. There were more people who didn't pay because there were more houses and more apartments, they said.

"You would think it would be higher because of foreclosures and the financial stress people are feeling, but we've not seen that," said Cal Portner, Plymouth's director of administrative services.

In fact, some people let their utility bills run up on purpose because they prefer to pay them all at once, said Rogers Finance Director Lisa Wieland. "People like the convenience," she said. "And they know cities don't go out and turn off the water."

Eastling said that when interest rates were higher, some "large organizations" made a business decision to take the financial penalties imposed by deferring utilities to property taxes because they could make more investing their money. That doesn't happen in this economy. But he said people who have credit card debt may very well decide to roll over late utility bills to property taxes while they work on paying off a card with a higher interest rate.

Although Richfield wants the roughly $267,000 that residents owe the city for utilities through June, Eastling said the city isn't rushing out to turn off the water to those properties.

The advantage of putting the charge on property taxes, he said, is that the city "gets the money, one way or another."

Mary Jane Smetanka • 612-673-7380