The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

THE Water & Sewerage Corporation’s chairman yesterday said he was reviewing pre-election contracts issued to two debt collectors who have recovered just 8 per cent of the $5 million assigned to them.

Adrian Gibson, the Long Island MP, told Tribune Business that the contracts “make no business sense” given that the two companies - one a law firm, the other a collections agency - were allowed to keep between 20-25 per cent of the sums recovered from delinquent customers in addition to having their costs paid. Describing the arrangements as “ludicrous”, Mr Gibson said he was focused on “beefing up” and incentivising the Corporation’s in-house collections department to go after the $44 million in outstanding bills owed by customers.

He added that the Corporation needed to switch from quarterly to monthly billing of consumers, as the 90-day delay between payment and water services consumption was undermining its already-stretched cash flow and working capital.

Mr Gibson also revealed he is exploring at innovative ways to incentivise delinquent customers to bring their accounts current, such as offering a 10-15 per cent discount and extended payment plan terms if half the outstanding balance is paid upfront. “Right now we have two collections agencies that were hired at the Corporation immediately before the May 10 general election,” he told Tribune Business. “We have these two entities, and they have only collected about 8 per cent of what was assigned to them.”

Declining to identify the companies by name, Mr Gibson said a collective $5 million debt - representing around 1,200-1,500 non-paying accounts - was assigned to the duo to recover on the Corporation’s behalf.

“One of those agencies only collected $1,000 in December,” he disclosed. “Those customers assigned to that particular company paid in $13,000 direct to the Corporation through the Corporation’s own payment mechanisms. Yet that company received 25 per cent of the total $14,000 collected.”

Mr Gibson said the second entity was a law firm hired by the Corporation to take delinquent customers to court. He added that its contractual arrangement with the Government-owned water supplier ensured that not only were its legal costs covered, but that it also received 20 per cent of the debts collected via the court process.

“They get their legal fees when they file documents and appear in court,” he added. “They get their costs and 20 per cent of whatever amount is collected. If the amount is statute-based, and I’m having this matter reviewed by internal control and compliance, they get a regular legal fee.

“It makes no business sense. This agent gets legal costs and fees, and 20 per cent of what is recovered. In nutshell, it makes no business sense. It’s ludicrous.”

Mr Gibson confirmed that he was reviewing both collectors’ contracts, but declined to say whether the Corporation may move to amend or terminate the arrangements.

He did, though, emphasise that he was more focused on using the Water & Sewerage Corporation’s in-house collections team to pursue delinquent customers - especially those with long-standing arrears and/or large balances.

“My personal view is that we need to strengthen the in-house collections department, incentivise it and give people working in there incentives so they can be even more enthused about pursuing lengthy outstanding receivables,” Mr Gibson added.

“We already have people collecting a salary for this, and can probably get even more money in. I’ve taken the position of paying specific attention to collections, persons in the in-house department and reviewing contracts that are poorly drafted and constructed, do not benefit and are not in the Corporation’s interests.

“I want to give performance targets, and that’s the way the Corporation will claw back some of these monies.”

Mr Gibson then told Tribune Business he wanted to move customer billings from quarterly (every three months) to monthly in a bid to improve the loss-making Corporation’s cash flow, and halt the rapid depletion of credit lines and working capital that it currently experiences all-too frequently.

“We have to make the changes to turn the Corporation around,” he added. “To mitigate the Water & Sewerage Corporation’s ballooning debt and collections, we should move to monthly payment plans.

“Currently it’s quarterly, and all that does is that within 90 days operating lines of credit and working capital are being depleted too quickly without corresponding payments. Ninety days may be a bit too much.”

Mr Gibson said the threat of being cut-off, or having service lines removed, typically prompted customers with three-figure balances outstanding for 90 days or more to settle their arrears.

With those owing much larger balances, the Corporation’s chairman said he was going to push for incentive plans that were structured in such a way as to create a ‘win-win’ - boosting the utility’s cash flow while also enabling customers to enjoy resumed water supplies.

“I’m going to consider, and advocate, a 10-15 per cent discount on the bill and extending the payment plan beyond three months, which is conditioned on the customer paying more than 50 per cent upfront,” he explained.

“It gives the Corporation cash flow, it keeps people on the network who have been turned off, and ensures there are regular payments. We get cash flow from the consumer paying debt, the arrears are reduced and we have persons returning to the network who were previously disconnected.

“These are all areas I am going to explore to move the Corporation to profitability, see a reduction in the Government’s subsidy, and really and truly seek to get it on a path to boosting the Government’s coffers as opposed to where it has been in recent years.”