Rental tenants move out of town without paying city utility bills. A tourist guilty of public intoxication fails to pay the court-ordered fine. A resident who wrote a bad check to the city declares bankruptcy.
There are many reasons the City of Cody has written off hundreds of thousands in uncollectible debt over the years.
Each year debt accounts are identified during the city budget process and approved when the council adopts the fiscal year budget in June. Then each August, according to state law, the city finance officer asks the council to approve writing off that same bad debt total.
In consent agenda action Aug. 20, the council approved writing off $63,247 in uncollectible debt, meaning fiscal year 2019-2020 financial statements will show the amount as lost revenue. The write-offs reduce receivable balances in accounts where applicable and financial statements reflect the revenue loss. But uncollected debts are not expenses and have no direct effect on cash balances.
Cody’s two main sources of lost revenue come from unpaid municipal court fines and unpaid bills for city utility services. Another category for uncollectible funds is accounts receivable, which includes unpaid city permits and copy fees.
To date the city has identified $732,475 as uncollectible. Since FY 2008-09, the annual total has fluctuated from a low of $25,323 in FY 2010-11 to a 10-year high of $78,512 in FY 2016-17. Most years amounts stayed in the $40,000-$50,000 range.
City policy determines when funds are considered uncollectible.
According to Leslie Brumage, city finance officer, accounts typically considered uncollectible are those in bankruptcy proceedings, a deceased customer who has no estate to file a claim against, the account has been in collections status for at least 10 years with no payments made within the past 12 months, the account has reached the statute of limitations and the collection agency has exhausted all legal actions and ceased efforts.
The city also stops attempts to collect when the cost to recover the debt does not warrant further action, a debtor is untraceable or cannot be identified, or a court has ruled the debt is not recoverable.