Item 8D
AGENDA IT'ENI #8D
JUNL 28, 2004
CITY OF ATLANTIC BEACH
CITY COMMISSION MEETING
STAFF REPORT
AGENDA ITEM: Elimination of interest on customer deposits, Section 22-
27.1.(b) Utility Deposits.
SUBMITTED BY: Nelson Van Liere, Finance Director
DATE: June 20, 2004
BACKGROUND: For many years, the City has paid three percent interest on
customer deposits while earning much more than that.
Over the past few years, interest rates have drastically
declined and it is no longer in the best interest of the City to
continue to pay interest on customer deposits. Now that the
interest earned by the City on customer's deposits is less
than what we pay, the City is losing money. It is for this
reason that 1 recommend the elimination of the payment of
interest altogether.
The residential deposit amount is $125.00 and is to be paid
interest at 3% per year if the customer maintains a good
payment history for two years. That is $3.75. At the same
time, the City is earning only 1.20%, which equates to
$1.50 for the same period. The City pays out $2.25 more
than it earns. The remaining $1.50 is hardly enough to be
worth the effort of maintaining a customer deposit balance.
The section of the City Code to be amended is as follows:
Sec. 22-27.1. Utility deposits.
(b) The deposit of any customer shall be refunded
after
twenty-four (24) months from the date of deposit, provided
the customer is current in all payments and has timely made
all payments during the preceding twenty-four (24) months.
If any customer becomes delinquent in payments after his
deposit has been refunded pursuant to this section, the city
may require an additional deposit for service to continue.
RECOMMENDATION: That the City Commission request staffto prepare an
amendment to Chapter 22, Sec.22-27.1(b) of the City Code
~" of Ordinances to eliminate the payment of interest on
customer deposits.
~" REVIEWED BY CITY MANAGER:
~.