National League of Cities gets those in debt to pay it back by giving them time, not money

A handful of cities are taking a new approach to collecting overdue bills: They’re backing off. And it seems to be working better than anyone expected.

In 2013, more than 116,000 Houston residents had delinquent water bills with the city. If they didn’t pay on time, they were charged interest and put on a shut-off list. The delinquent bills averaged almost $500 per person — almost $60 million in overdue water bills.

But Houston residents got a chance to pay what they owed without hassle — and actually, a lot of help — when the city was among the first accepted into the National League of Cities’ LIFT-UP pilot program.

The LIFT-UP program, or Local Interventions for Financial Empowerment through Utility Payments, doesn’t pay anybody’s bill for them. It just connects low-income families with local financial services. Everyone who gets into the program gets “individualized financial counseling, including a budget review and customized action plan to address financial needs, as well as referrals to emergency assistance, public benefits, and banking services as appropriate.”

And every participating city in the two-year pilot — Houston, Louisville, Newark, Savannah, and St. Petersburg, Fla. — saw some level of financial improvement.

An empowering path back from debt

Louisville wasn’t even part of the pilot program, but thought it was such a cool concept the city asked to join in. And leaders there are still doing it, even though the pilot has ended. Erin Waddell, program manager for Louisville Metro Community Services, says they knew this concept would be a game-changer.

“When we heard about the project, we were going to replicate it, but came about this way instead,” she says. “We said we were going to do it anyway, so they just included us in the pilot.”

Waddell’s department is the social services arm of Louisville, providing emergency and housing assistance. She says this model of aid is different from their usual methods.

“We used to provide direct financial assistance for clients,” she says. “Instead, we put ownership and responsibility back on them and walked them through paying it back on their own. It’s very unlike any program we’ve had.”

The program started in April 2013, and Louisville, like other pilot cities, saw a significant increase in utility payments over time. Newark saw a 31 percent drop in outstanding water bills. In St. Petersburg, residents were half as likely to see shut-offs in service.

How it works

Step-Up Savannah has worked with the NLC on a few different community initiatives since its creation in 2005. Robyn Wainner, the director of asset building and financial empowerment at Step-Up Savannah, says the LIFT-UP program had a tremendous positive impact on residents.

Qualified residents were invited to participate and once those who were interested put down 25 percent of the debt as a first payment, they were put on a repayment plan. The plan gave them four months to pay the remaining debt, and the opportunity to attend budget counseling through the city. If they did all of that, they completed the program. But it didn’t stop there — they often learned of additional help the city was already offering.

“During the process, if the resident was interested, we would offer to screen them for other public benefit programs, like Medicaid or utility assistance, to help with other financial needs,” Wainner says. “We helped some people work out a debt that they had and connected them to resources they may not have been connected to. I do feel it was a success.”

Not a one-size-fits-all model

Houston was the largest city that participated in the program, and their customers tended to carry larger past-due balances, too, according to the NLC report. So their repayment plan was longer. While Savannah gave residents four months to pay back debt, Houston allowed customers six to 24 months to pay in full. In Newark, payment plans were set to 12 and 24 months, depending on the debt owed and the repayment plan agreed upon.

The program started small, but had a big impact. Between the five cities that participated in the pilot, 306 households were enrolled and got assistance.

NLC says no two cities are alike, so success is measured differently for each of them. But the LIFT-UP model proved it could save cities money on delinquent bills — reducing costs, and improving residents’ financial stability. If other cities want to save money by lessening residents’ debts, NLC says it’s possible, but not always easy.

“Restructuring debt requires tradeoffs between customer needs and repayment options within existing utility structures, requiring cities to consider creative ways to align both,” the report says.

You can learn more about the LIFT-UP model at the National League of Cities website.

Budgeting & Saving, Credit & Debt, Family, News

bills, eliminate debt, save money

Related Posts

Article last modified on June 21, 2017. Published by Debt.com, LLC .