AGENDA CAPTION:
Title
Consider approval of Ordinance 2025-06, on the first of two readings, amending Chapter 86, Utilities, Article 5, Fees, Charges and Billing Procedures, Division 1, of the San Marcos City Code to allow for the placement of a municipal utility lien on certain properties, other than homestead property, for which the owners have not paid utility bills and related city assessments; providing for the repeal of conflicting provisions; providing a savings clause; and declaring an effective date.
Body
Meeting date: March 4, 2025
Department: Finance
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Fiscal Note:
Prior Council Action: February 18, 2025 - at the City Council Work Session, Council expressed interest in hearing more about a utility lien program. March 4, 2025 - First Reading, Council voted unanimously on approval of amending Chapter 86, Utilities, Article 5, Fees, Changes and Billing Procedures, Division 1, San Marcos City Code.
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Background Information:
Other cities in Texas have adopted ordinances that allow the city to place a lien on certain properties for unpaid utility bills and related charges.
The filing of a lien on property is a last resort option to increase collection of utility bills and charges. Among the concerns prompting this ordinance are apartment complexes that are not separately metered so that tenants each pay their own utilities in the tenant’s name. In those circumstances the owner of a complex may be responsible for paying all or some utilities for the complex and prorating the charges among the tenants.
For these complexes, it is impractical for the city to disconnect or cut off services as tenants would be without utility service even though the tenants may have paid their prorated share of utility charges to the property owner. Providing for a lien on the property improves the likelihood that the utility charges will be paid when the property is sold or when a lender steps in to ensure no liens are on the property for which a loan is made to the owner.
A recent occurrence with an established commercial account for an apartment complex that had been delinquent on several occasions was sent several notices along with phone calls by utility billing staff in efforts to remedy the past due amounts and avoid interruption of services. Due to a past due balance of over $35,000 from several billing cycles, disconnection was scheduled for the commercial account, but several steps would have to be taken to notify tenants. City utility service staff had to take into consideration that the landlord has the tenants pay the complex directly for their utility service as the complex is set up with a master meter versus individual tenant meters. The interruption of services would affect tenants who may have already paid their landlord, but landlord failed to pay their utility account with the city. The city would have the ability to communicate to the landlord of a potential lien to be placed on the property due to the delinquent account. The lien would encourage the property owner to resolve past due amounts to avoid interruptions of services and a property lien.
The ordinance specifically exempts homestead properties. The ordinance also makes clear that a property owner is not subject to a lien for utility bills under a tenant’s name.
Council Committee, Board/Commission Action:
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Recommendation:
City Council approve the ordinance authorizing the placement of a municipal utility lien on certain properties, other than homestead property, for which the owners have not paid utility bills.