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TO: Mayor Thomas J. Weisner
FROM: Brian W. Caputo, City Financial Officer/City Treasurer
DATE: February 5, 2014
SUBJECT:
A Resolution Authorizing the Execution of a Collection Services Agreement with Municipal Collections of America, Inc.
PURPOSE:
To obtain the City Council's approval of the attached resolution that would authorize the execution of a collection services agreement with Municipal Collections of America, Inc., for the provision of debt collection services.
BACKGROUND:
The City of Aurora has a systemic procedure for collecting amounts due on its accounts receivable. Generally, the procedure calls for a first invoice that is due within 30 days. If the first invoice is not paid within 45 days of its issuance, the city issues a second invoice reflecting a due date 30 days later (75 days after the issuance of the first invoice). If the second invoice is not paid within 45 days of its issuance (90 days after the issuance of the first invoice), the city refers the debt to a collection agency.
With the exception of a period of approximately 12 months, the city has engaged Receivables Management, Inc. (RMI) as its collection agency since 1998. We have been very satisfied with the performance of RMI. RMI's recovery rates have been excellent and their fees are competitive. The company is appropriately assertive when attempting to collect our debts without being offensive. We have had very few complaints about RMI's collection practices. Moreover, RMI's administrative process is completely automated. This reduces the time that our staff must spend preparing debts for collection referral.
In recently comparing the collection results received by comparable municipalities, we found that RMI was among the best performing collection agencies.
DISCUSSION:
Recently, RMI reorganized its corporate structure. RMI's local government debt collections are now being handled by a newly formed company, Municipal Collections of America (MCOA). The staff of MCOA will be the same individuals who have provided excellent service to us in recent years. MCOA will also replicate RMI's collection practices.
MCOA has local government clients in Illinois, Iowa, Maryland, Oklahoma, and Pennsylvania. The company's current Illinois clients include:
City of Calumet City
Village of Crestwood
Village of East Hazelcrest
City of Elgin
Village of Dixmoor
Village of Dolton
Village of Glenwood
City of Hometown
Village of Justice
County of Lake
Village of Lansing
Village of Lemont
Village of Libertyville
Village of Midlothian
Village of Olympia Fields
Village of Orland Park
Village of Palos Park
Village of Park Forest
Village of Posen
Village of Sauk Village
Village of South Chicago Heights
Village of Steger
Village of Worth
City of Zion
In connection with the company's reorganization, RMI's management has requested that we execute a new contract with MCOA. That contract is attached to the resolution. The contract includes all of the significant terms of the prior contract. The new contract includes no changes with respect to fees. The collection fees are:
● Housing Code Fines: 25%. (These debts are subject to the city's "add-on"
collection charge.)
● Other Debts Subject to the Add-On Collection Charge (e.g., parking fines): 35%.
● Debts Not Subject to the Add-On Collection Charge (e.g., ambulance fees):
25%.
As specified in 65 ILCS 5/1-2-1 and Aurora City Code Section 1-14, only fines and penalties are subject to the "add-on" collection charge. The applicable statutes permit us to add the costs of collection to fine or penalty amounts rather than paying collection fees from base debt amounts collected.
Historically, the city has paid the following approximate annual amounts in collection fees for the types of debt indicated.
● Parking Fines, Seizure/Impoundment Fines, and Other Ordinance Violations:
$25,000.
● Ambulance Fees: $20,000.
● Other Debts (e.g., Housing Code Fines, False Alarm Fees): $55,000.
The proposed contract provides for an initial term of four years with the option of subsequent one-year terms.
MCOA is a woman-owned business that is in the process of formal certification as a minority/women/disabled persons enterprise.
IMPACT STATEMENT:
Not applicable.
RECOMMENDATIONS:
That the City Council adopt the attached resolution that will authorize the execution of a collection services agreement with Municipal Collections of America, Inc., for the provision of debt collection services.
cc: Alderman O'Connor, Chairman
Alderman Mervine
Alderman Bohman
Alderman Peters, Alternate
CITY OF AURORA, ILLINOIS
RESOLUTION NO. _________
DATE OF PASSAGE ________________
title
A Resolution authorizing the execution of a collection services agreement with Municipal Collections of America, Inc.
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WHEREAS, the City of Aurora has a population of more than 25,000 persons and is, therefore, a home rule unit under subsection (a) of Section 6 of Article VII of the Illinois Constitution of 1970; and
WHEREAS, subject to said Section, a home rule unit may exercise any power and perform any function pertaining to its government and affairs for the protection of the public health, safety, morals, and welfare; and
WHEREAS, the City has engaged Receivables Management, Inc. (the "Prior Company") for the collection of municipal debts since approximately 1998; and
WHEREAS, the Prior Company has provided excellent service to the City; and
WHEREAS, the Prior Company has reorganized; and
WHEREAS, the local government collection work of the Prior Company is now being accomplished by Municipal Collections of America, Inc. (the "New Company"); and
WHEREAS, the collection staff and practices of the Prior Company will be retained by the New Company; and
WHEREAS, the City has deemed that engagement of the New Company to provide collection services would promote the City's sound financial administration.
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Aurora, Illinois, as follows:
Section 1. The Mayor of the City of Aurora is authorized to execute the attached collection services agreement with Municipal Collections of America, Inc.
Section 2. The Chief Financial Officer/City Treasurer is authorized to take other actions as necessary to implement Section 1 above.
PASSED AND APPROVED on ______________.
AYES ____ NAYS ____ NOT VOTING ____ ABSENT ____
____________________________ __________________________
Alderman Bohman, Ward 1 Alderman Garza, Ward 2
____________________________ __________________________
Alderman Mesiacos, Ward 3 Alderman Donnell, Ward 4
____________________________ __________________________
Alderman Peters, Ward 5 Alderman Saville, Ward 6
____________________________ __________________________
Alderman Hart-Burns, Ward 7 Alderman Mervine, Ward 8
____________________________ __________________________
Alderman Bugg, Ward 9 Alderman Johnson, Ward 10
____________________________ __________________________
Alderman Irvin, At Large Alderman O'Connor, At Large
ATTEST:
____________________________ __________________________
City Clerk Mayor