The City Council has adopted a new way of charging penalties on late payments to the city.
The change came after Treasurer Donald L. Watson told the council that the city's existing late-charge system was both unfair and a disincentive for residents to pay bills more than one month overdue.
"The method we've had was unfair in that it charged a large penalty, 10%, on the first month the account was late, and only 0.5% each month thereafter," said Watson. The idea was to give an incentive to people to pay on time and for the city to recover as much of the collection cost as possible in that first month, he said.
"But what actually happens is that many people aren't aware of the 10% penalty until after it is assessed. And the 0.5% penalty thereafter is low interest and therefore no incentive for them to pay," he said.
Watson suggested that the city instead charge 1.5% a month on an outstanding balance. He said this is the procedure commonly used by many businesses. A standard month-by-month charge also would bring fewer complaints, Watson said.
The City Council agreed, and last week unanimously passed a new ordinance changing the city's late-payment assessment. The ordinance, which becomes effective in late June, will standardize the late-payment penalty at 1.5% a month, regardless of when the bill is paid.
Watson said an added benefit of the new system is that it will allow multiple invoices to be consolidated on a single statement. He said the city will thus save by having to mail fewer bills.
A city resident paying a bill for $100 that was one month late previously would have been charged $10 on the first month. However, the new penalty for the first month will be only $1.50 for that same $100 payment.
Watson said that the city does not expect to lose money with the new plan.
"I think it's going to be revenue-neutral," he said.