Porterdale city officials described a proposed tier system for water deposits as a significant change for new customers that would have those with risky credit pay more up front.

Referred to as the "red, yellow and green" scale during Tuesday's Porterdale City Council work session, the proposal would require the amount of a deposit to be based on credit checks on all new water service applications. Those with a poor credit history would be asked to pay a higher deposit to cover possible future nonpayment of utility bills, while those with good credit would be required to pay a smaller deposit.

Porterdale City Manager Bob Thomson explained the proposal as an attempt to cut down on the number of utility bill defaults. The city averages about 10 to 14 water service cut-offs per month.

The proposal would remove a discount to homeowners, who pay $75 deposit compared to $250 for renters. Thomson said he has found a person's credit is not affected much by whether they pay rent or a mortgage.

"What I'm asking you to consider is that the renter's deposit and homeowner's deposit be about the same because you're exposed in both ways," he said.

Last year, Porterdale reported a 98 percent collection rate for water services. Thomson said the numbers showed great improvement from years past; however, the city averages between $10,000 and $14,000 in unpaid water account balances annually.

Mayor Arline Chapman said she was open to a new way for the city to manage water billing.

She noted Porterdale's significant number of rental units places even more pressure on the city because landlords sign up tenants without regard for their ability to pay for utilities.

"These people are being set up for disaster. You're putting them in a home, you're turning on the water knowing that somewhere down the pike you're going to cut that water off," she said. "I think that we are complicit if we don't do something to not allow this to happen."

Residents who have their water service cut off are charged $40 in late fees and a $55 reconnect fee and are required to bring their past due account current.

City officials said the average monthly water bill in Porterdale is about $85 and varies depending on the number of residents in a house.

New deposit amounts were briefly discussed. Thomson said the proposal presented has green applicants receiving a deposit waiver for good credit.

Yellow applicants would pay a moderate deposit and red applicants would pay the maximum deposit.

Councilman Lowell Chambers suggested a person with bad credit be required to pay three months of average billing for deposit, while someone with a little better credit pay a deposit of two months billing and those with great credit pay a deposit equal to one month's average water billing.

Thomson said he will have a draft ordinance ready for the council's April 3 regular meeting.

In other news, the city discovered the outstanding balance from uncollected utility services was much higher than previously thought.

Thomson reported the collection agency Professional Placement Services told the city it had $86,000 in unpaid balances.

The discovery came as Porterdale began to switch collection services from PPS to a new agency, Darnel Quick Recovery.

Thomson explained the city wrote off about $147,000 representing the oldest past due accounts as bad debt in 2008 but for reasons not clear the accounts were put back on the city's books in 2009.

"City staff is working to track all 662 past due accounts to move them from PPS to Darnel, but the confusion over the exact amount past due will slow the process," Thomson said.

"We would like to do everything as quickly as we can, but I can't give you a number of days that it would take except that it will be a chunk a day," he said.

Thomson added that auditors will address what can be done with the accounts when they begin the city's annual audit next month.

Councilwoman Linda Finger requested Thomson make utility collections a permanent agenda item to give the City Council monthly updates. Thomson agreed.

"I think as long as we have that much money outstanding, we're talking about a couple of people's salaries, this will keep it in the front of our minds," Finger said.