Chattanooga officials say sweet sewer billing deal for California company is a problem

Developing Story

Chattanooga officials say a four-year sewer billing contract signed by the previous administration just plain stinks. And the city is working to clear the air with residents upset over millions flowing to an out-of-state billing company.

Brent Goldberg, the city's deputy chief operating officer, said Friday that Chattanooga is seeking to break ties with ENCO Utility Services, the California company now under contract for sewer billing.

Since ENCO started billing for the city in January 2013, residents have complained about bills that came only a few days before they were due and extra fees for payments made online and by phone.

The city pays ENCO $1.42 per sewer bill, and customers who pay their bills by phone or online pay another $3 fee. Those who pay at one of 22 retail locations contracted by the company are assessed an average $1.83 in fees.

ENCO-supplied records show the city had 423,950 bills in 2013 and 26 percent of customers paid online, by phone or at a retail spot.

That means the city paid ENCO $602,009, and customers paid another $273,530 for a total of $875,539.

Goldberg says those numbers are low.

He said the contract is a bad deal for taxpayers, but it leaves ENCO flush. He estimates the contract will cost the city about $950,000 a year. According to city records, the first year of the agreement cost Chattanooga about $1.1 million for processing 780,740 bills. And it cost some residents and businesses even more.

The city is looking to buy its own software and wrangle sewer billing itself.

"For the amount of money we are paying them, and the perceived sewer bill issues, we think we can save at least 50 percent of that cost," Goldberg said. "We know how to do property tax billing. We've done that for 100 years. [With new billing software] I think we could handle sewer billing."

That would mean Chattanooga would not pay the $1.42 per bill it's giving ENCO now, and residents would be able to pay online, over the phone -- or at City Hall -- at no extra cost.

"We want for customers to be able to pay multiple ways without a fee. ... The city would just absorb processing fees," Goldberg said.

By the contract, Chattanooga has to give ENCO 360 days' notice of termination, which means the fees would stay into 2015.

Chattanooga -- along with the Hamilton County Water & Wastewater Treatment Authority and the city of Rossville, Ga., signed the joint contract with ENCO in August 2012 under Mayor Ron Littlefield.

Tennessee American Water had handled sewer billing for the city in monthly water bills, but the company had said it would drop sewer billing effective 2013.

Losing the Scenic City would gut ENCO's contract. Chattanooga produces more than 50,000 sewer bills per month on average. The WWTA averages about 10,000 and Rossville makes up about 1,500.

ENCO's vice president of customer service, Ruby Irigoyen, did not respond to multiple emails and phone messages left over the last two weeks.

Cleveland Grimes, WWTA's executive director, said the agency has no plans to break ties with ENCO or to offer other billing options, such as accepting bill payments at its office.

"We have inquired with the state comptroller's office, but taking cash brings a lot of liability," Grimes said Friday.

WWTA customers will have to mail checks or set up recurring payments to avoid extra fees.

The WWTA serves the unincorporated county, East Ridge, Lakesite, Lookout Mountain, Red Bank, Ridgeside, Signal Mountain and Soddy-Daisy.

The WWTA paid at least $166,892 to ENCO in 2013 for the 117,530 bills in its area, and has given the company $26,842 for 18,903 bills as of February this year.

During the same time, nearly 26 percent of the bills generated an additional $76,212 for the company from "convenience fees" levied on residents paying bills at retail stores, online or over the phone. Since February, $16,067 in additional fees have been paid to ENCO.

Rossville Mayor Teddy Harris did not return a phone message left Thursday seeking comment.

LAST-MINUTE FIX

After Tennessee American said it would stop billing, the three government agencies split the cost of a $195,000 consultant and put sewer billing out to bid.

ENCO was selected from among five companies that put in for the job, according to WWTA records.

Global Water, an Arizona-based company, offered at 10-year contract with a $250,000 startup cost. After that, the governments would pay $2.69 per bill per month -- or $2.3 million per year based on the estimated 70,500 sewer customers. Under that proposal, there would be no added fees for payments, except credit card processing fees that would be passed to the governments or the ratepayers.

Two other companies, ERTH Business Tech and Diversified Companies, put in bids but both called on First Tennessee Bank to handle the money. Transaction fees were many and varied, but retail cash payments would be charged $2, retail credit card fees would be an extra $0.30 and electronic billing would cost an extra $0.50 per payment.

The city of Cincinnati, Ohio, even put in for a bid, but it wanted $1 million at the start and per-bill fees starting at $1.76 and increasing every year.

Goldberg said the city and WWTA might have had better options on the table had they acted sooner.

"As far as we can tell, the previous administration had 11 months' notice and just didn't do anything. The same with WWTA, apparently," he said.

Tennessee American Water spokeswoman Daphne Kirksey said Chattanooga, WWTA and Rossville had even more time to find a new way to collect sewer bills.

The water company first told the group it would stop collecting sewer fees in June 2011 -- a full 18 months before it stopped the service. It followed up in November and December 2011 with written notices, Kirksey said.

Contact staff writer Louie Brogdon at lbrogdon @timesfreepress.com or at 423-757-6481.