How Your City Can Improve Utility Collections While Helping Families

The LIFT-UP program offers city leaders a win-win scenario, allowing city utilities to recoup lost revenue due to unpaid bills while enabling residents to reduce outstanding balances and late fees, connect with financial empowerment services, and reduce the chances of a utility shut-off.

With July 2016 being the hottest month on record, energy and water bills are likely to spike in the coming weeks for U.S. households. (Getty Images) With July 2016 being the hottest month on record, energy and water bills are likely to spike in the coming weeks for U.S. households. (Getty Images)

With July 2016 being the hottest month on record, energy and water bills are likely to spike in the coming weeks for U.S. households. (Getty Images)

Editor’s Note: This post has been changed, including a new LIFT-UP Impacts graphic and new language in the sixth paragraph to reflect revised numbers.

When families are unable to pay basic expenses such as water and electricity, it is frequently a sign of much deeper financial issues. Some of these families may have to make difficult choices this summer between paying for food, housing or a utility bill. Unfortunately, this scenario does not only occur during the hottest months of the year.

Fortunately, there are a handful of city leaders looking more judiciously at existing city programs, local partnerships and broader systems to improve financial outcomes for both families and cities. Three years ago, five of these cities – Houston, Texas; Louisville, Kentucky; Newark, New Jersey; Savannah, Georgia; and St. Petersburg, Florida – partnered with the National League of Cities to pilot a new program that accomplishes this.

Local Initiatives for Financial Empowerment and Utility Payments
, or LIFT-UP, is an innovative framework that connects residents who are struggling to pay a municipal utility bill, like a water or sewer service bill, with financial empowerment services including financial counseling and access to public benefits. The result is a win-win scenario in which families receive the support they need to pay their bills and address their debt, and the city recoups lost revenue due to unpaid bills.

With at least a third of all residential accounts classified as delinquent in three of the pilot cities, NLC realized persistent utility debt was a major issue for both families and city leaders. In the last two years, we’ve witnessed mass residential water shut-offs around the country, including the Detroit Water and Sewage Department crisis when the city attempted to collect more than $90 million in overdue payments. Shannan Nobles, Houston’s chief deputy City Controller, says it makes sense for cities to consider the LIFT-UP program, because “if a new approach also lessens the burden on the entire city system, then all the better for everyone.”

Impact:  Participants pay bills on time and avoid water shut-offs

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LIFT-UP offers a holistic approach to help cities collect unpaid bills. The results from an evaluation of the pilot program by the Center for Financial Security at the University of Wisconsin-Madison showed that a mix of program elements including incentives, restructured payment plans, and access to financial counseling and other benefit programs improved payment outcomes in most of the cities that participated.

For example, customers in Houston and Newark were more likely to pay their bills on time compared to customers who were not offered LIFT-UP. Many of these customers were also able to reduce their outstanding bill balances by more than 30 percent at eight and 12 months after enrolling in the program. And customers in St. Petersburg, who were offered customized payment plans, were 53 percent less likely to experience a water shut-off compared to customers not in the program. Overall, these customers also saved on average $100 more in late fees and shut-off/turn-on charges…compared to their counterparts in the evaluation group.

A framework to increase family financial stability

LIFT-UP identifies water customers struggling with payments and offers them the help they need to get back on their feet. The theory is that by helping struggling residents improve their financial management skills through financial coaching, residents can begin to become self-sufficient and build assets such as purchasing a home or saving for a rainy day.

In addition to offering financial counseling, all five cities restructured participants’ outstanding debt and incentivized participation, for example through waiving fees or crediting customer accounts to reward payments. Many customers in the program also received friendly calls, text messages and emails to remind them to make their payment.

LIFT-UP offers cities a new way to consider how they collect payments and pursue debt from residents – one that helps residents move forward in their financial lives. The evaluation suggests that the program model can be implemented in a manner that reduces costs to the city, which has implications for replication. LIFT-UP could be incorporated into the practices of other city and private entities that collect debt, such as private utilities, municipal courts, and public hospitals.  With this hot summer coming to an end and cities thinking ahead to missed payments and utility shut-offs anticipated in the dead of winter, we hope you will consider a LIFT-UP approach in your city.

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About the Authors:

Denise Belser is the Program Manager of Economic Opportunity and Financial Empowerment Program within NLC’s Institute for Youth, Education, and Families.

 

heidi_goldberg_125x150Heidi Goldberg is the Director for Economic Opportunity and Financial Empowerment in NLC’s Institute for Youth, Education, and Families. Follow Heidi on Twitter at @GoldbergHeidi.