Metro Water late fee

  by Heather - May 25th, 2008 - 4:59 pm| Uncategorized | 4 comments

Ron Reed is a customer of Metro Water Services.

“Loan sharks don’t get that kind of money,” I holler.

Reed nods his head laughing.

For most of his life, the 60-year-old has worked in finance.

“I worked for the Small Business Association for 20 years. Then I was over all the lending and financing and collections in Tennessee for 20 years.”

Reed said he always pays his water bill on time. “I got this May 9,” he says holding up his latest bill for $28.60. ”And I paid it May 9.”

Paying on time, however, is not so easy for many water customers now-a-days.

“That extra 10 bucks hurts doesn’t it?”

“Exactly and they don’t know about finance,” Reed says.

Reed is talking about Metro Water Services’ policy of assessing late fees of $10 to customers.

“Is that userous?” I ask. “I mean you have a $28 bill and it is late, $10 is tacked on — boom — Is that userous?”

“Yes,” he says unequivocally. “Absolutely, I think that it comes close to about 1000% APR.”

To prove his point, he grabs a calculator and a stationary pad with numbers all over it.

“Here is the classic banker formula.”

The financial expert begins walking me through a financial theorem.

“You can figure out principal on a loan,” he says, his finger dragging across the paper.

He says he can figure out the annual percentage rate through a simple formula known in the financial world as: I = P x R x T or Interest = principle x rate x time.

Reed punches numbers in his calculator. Then he comes up with a number. It is mind boggling:

“982%,” he says.

My eyes widen. Can that be true, I think to myself. Even the worst credit cards don’t charge over 30%

Its true Reed assures me.

He says, “They have never been taught and they think it is just $10 is no big deal but it is and your government is doing it to you.”

Emily Evans is Ron Reed’s council woman. Reed is smart and sagacious in the ways of government, money and certainly the inner workings of the Metro Water Department.

She is kind enough to meet with me at her well-maintained Nashville home.

Like Reed, Councilwoman Evans knows a thing or two about finance having worked as a municipal bond underwriter for a major investment bank in Nashville.

“So when I hit you with I = P x R x T it’s not unfamiliar to you?”

She laughs at me. It is like Big Bird asking Issac Newton if he knows what letter comes after B in the alphabet.

“Not is basic stuff,” she says, her laugh filling the quiet of her neighborhood.

Evans doesn’t dispute Reed’s math but says it is misleading.

She says the interest rate seems unusually high because the water rates in Metro are so historically low. Essentially she says if the bills were $200 instead of $20, a $10 late fee wouldn’t seem so high.

“Part of the problem is that water rates and water bills are so low,” she says,” so late fees as a percentage of the water bill is yes out of line.”

NES’ late fee is 5%. 5% on a $150 or $250 dollar bill is a $7.50 or $14 charge so, on average, it’s around the same, $10. Because the bill is so much higher, you don’t think of it the same terms.

Nashville Gas is the same, 5%. It too works to be a few of $10 or $15 but because the bill itself is so high, customers don’t notice it.

It is more the fact that water bills are so low, this late fee sticks out.

Evans has a soft spot in her heart for those who have trouble paying the automatic $10 late fee but tells me that mayor and city council signed off on the $10ollar late fee because it was a better option than raising water rates across the board. She calls this option and water capacity fees and storm water fees one big band-aid for a problem that has to be dealt with on a citywide, systemic level.

Evans makes no bones about it; rates are going to have to be raised.

“Metro Water had to balance the budget last year. We still have to balance the budget. We need enough revenues to pay for clean water and returning that water from the sewer system back into the Cumberland River. It is a fact: this was one option available in lieu of a rate increase last year and the year before. There are other things we have talked about like capacity fees. This is just another part of the band-aid put on the sinking ship. We have to raise rates anyway. But the council and mayor’s office want to look at all this. Late fees are one. Capacity fees are another and funding storm water. All these things need to be considered and put together in one package. We are working toward this later in summer or late fall.”

Sonia Harvat, a spokeswoman for the Metro Water Department, wrote:

Water rates in Nashville have not been increased in many years. In fact, the last change in rates, in 1999, actually lowered residential water rates by 25%.

As we evaluated budget alternatives last year, we had to decide whether to ask everyone to pay more for their water, or to ask those who make our costs higher to pay a bigger share.

When people pay their bills on time, we avoid the additional accounting and collections costs associated with late payments and bad debt. We chose the option that keeps costs down for most of our customers.

A customer can avoid the late fee by paying their bill when it is due.

The late fee information is clearly stated on the bill and on our website at www.nashville.gov.

Payment Policy:
In order to avoid a late payment charge, which is the greater of $10.00 or 5% of the current net bill, payment must be posted within 15 days of the bill date.

Accounts overdue for more than 15 days are subject to be discontinued.

May 25th, 2008 Posted by Heather | Uncategorized | 4 comments