To: Honorable Mayor and Members of Town Council
From: Mark Marlowe, P.E., Director of Castle Rock Water
Title
Resolution to Approve Customer Assistance Programs through Castle Rock Water in Response to the COVID-19 Economic Hardships
Body
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Executive Summary
Town staff have prepared this memorandum to request Council approval of a Resolution to approve Customer Assistance Programs through Castle Rock Water in response to the COVID-19 economic hardships (See Attachment A). The memorandum also provides details on the proposed customer assistance programs. The programs have been developed in response to the economic challenges being posed by the COVID-19 response. The programs are targeted at two areas of our customers where the biggest impacts seem to be apparent, small businesses and residential customers. With many businesses being closed or severely reduced in operations due to the recent public health orders, these businesses will have a difficult time generating revenue to cover their water bills. Many of the businesses will be using less water, but this does not help with the fixed fees that Castle Rock Water charges. In response to this challenge, the Town has developed a program to try and assist those businesses in surviving the challenging economic conditions and paying their water bills. The program would involve providing qualifying small businesses with a combination of a microloan of $750 for 12 months at no interest and a grant of $750, all administered directly through our billing system. Small businesses would apply on a first come first serve basis through completing a simple on-line application. Staff proposes to fund this program out of Castle Rock Water’s Rate Revenue Stabilization Reserves to a total of $500,000. Additional details on the small business assistance program are provided in the discussion section.
The residential customer care program is structured in a very similar manner to the small business assistance program. With many of our residential customers potentially losing jobs or receiving reduced work hours, this program is designed to assist those at risk customers with paying water bills during this time period. As with the small business assistance program, The Town would provide a microloan through Castle Rock Water of $150 for 12 months at no interest and a grant of $150, all administered through our billing system. The Town will work with an appropriate not for profit agency to identify customers at risk who need help. Once those customers are identified by the not for profit agency on a first come first serve basis, Castle Rock Water would credit the customer accounts with $300 divided into a loan and grant as noted previously. Staff proposes to fund this program out of Castle Rock Water’s Rate Revenue Stabilization Reserves to a total of $200,000. Additional details on the residential customer care program are provided in the discussion section.
As a final item, the Town is already not charging disconnect fees, late fees and Not Sufficient Funds (NSFs) fees for all customers and will continue this practice through June 30th, 2020. This will cost an estimated $100,000 over the next 3 months, so the Town would plan to use Castle Rock Water’s Rate Revenue Stabilization Reserve for this as well. Total appropriations from the Rate Revenue Stabilization Reserves would be $800,000. Roughly, $350,000 of that total would hopefully be paid back into the fund with the payments on the microloans. A first quarter budget amendment will be needed to appropriate the funds for these assistance programs.
Notification and Outreach Efforts
The Town will utilize the normal Town outreach channels including social media and email. The programs have been presented to the Economic Development Council and their member organizations, as well as other relevant non-profit organizations in Town.
History of Past Town Council, Boards & Commissions and Other Discussions
Castle Rock Water presented the concepts for these programs to the Castle Rock Water (CRW) Commission at their meeting on March 25, 2020. The general consensus from the CRW Commission was positive and to continue to develop the programs for Council consideration.
Discussion
Small Business Assistance Program
Details and assumptions used to develop the program are shown below:
• We assume roughly 285 small businesses (this may not include franchises which we could include in the program).
• Average bill is about $500/month which would result in a total microloan of $1,500 (half of which we would write off as a grant) if we assume we are trying to waive for 3 months. We would fix the dollar amount; however, in order to make this easy to administer in the billing system (i.e. all businesses would get $1,500 up front, some will make that last longer than others).
• Average monthly payback amount for a $750 loan would be a $62.50 additional charge per month for 12 months.
• Payments would go back to the Rate Revenue Stabilization Reserve.
• Allocate $500,000 to this program from our Rate Revenue Stabilization Reserve based on a first come, first serve basis with half ultimately hopefully being paid back into the fund.
• This would amount to basically a microloan (covering up to 3-months of an average bill), set up with half as a no interest microloan of $750 paid back over 12 months and half as a grant of $750.
• Supplemental payment plans can be used for businesses that cannot pay back in 12 months on a case-by-case basis.
• Be prepared to write off as bad debt if the small business fails.
• Simple on-line application. Business needs to meet definition of a Small Business according to the Small Business Administration.
Residential Customer Care Program
Details and assumptions used to develop the program are shown below:
• Allocate $200,000 to this program from the Rate Revenue Stabilization Reserve based on a first come, first serve basis.
• Up to 3-month bill waiver for indoor water use, wastewater, water resources and stormwater bill, assume $100/month for ease of administration, again set up as a no interest microloan paid back over 12 months. To be clear, each customer approved would get $300 in a microloan.
• Do 50% bill forgiveness up to $100,000 ($150 per customer approved for the program).
• 12-month payment plan to repay $12.50 per month for the other $150.
• Supplemental payment plans can be used for customers that cannot pay back in 12 months on a case-by-case basis.
• Have option to lien property if customer defaults.
• The Town through Castle Rock Water will contract with an appropriate not for profit agency to qualify customers based on need for the bill assistance program. That way, The Town is not trying to identify who needs it. The not for profit agency would tell us, Mr. Smith qualifies and Castle Rock Water would then move forward. We have reached out to not for profit agencies to see if this would work for them.
Examples of how the grant and microloan combination look on a monthly basis for actual bills for both the small business and residential customers at risk are shown below:
Budget Impact
The programs will result in a net reduction of at least $450,000 to the Rate Revenue Stabilization Reserve and possibly more if we have to write off significant amounts of bad debt from the programs. This reserve was funded at $1,200,000 in the 2020 budget. This reserve can be built back up in 2021 through reductions in capital spending on projects which can be pushed into the future.
Staff Recommendation
Staff recommends approval of the Resolution in order to help our local customers weather the economic challenges surrounding the National and Statewide emergencies declared as a result of the COVID-19 public health crisis.
Proposed Motion
“I move to approve the Resolution as introduced by title.”
Attachments
Attachment A: Resolution