City staff recommend pursuing Arizona Water agreement to allow shutoffs for long-unpaid sewer bills

City staff recommended that Casa Grande pursue an agreement with Arizona Water Company to permit water-service disconnections for customers who are 90 days or more delinquent on city sewer bills and asked the council for direction at a study session.

The issue arises because the city provides wastewater service but not potable water; staff said gravity-fed sewer systems cannot reasonably be turned off, which has reduced the city’s leverage to collect sewer charges. Rob, a staff member, told the council the city conservatively estimates at least $1,800,000 in sewer revenue "that should have been collected but not collected," and presented an agreement other Arizona municipalities have used to address similar shortfalls.

Why it matters: Staff said allowing Arizona Water to disconnect shared customers who are long-term delinquent would provide a practical collection tool, reduce cross-subsidization by paying customers, and prompt delinquent customers to address balances early through payment plans.

How the proposed agreement would work

- Eligibility and notice: The agreement would apply only to customers who receive water from Arizona Water Company and wastewater service from the city and are 90 days or more past due. The city would be required to mail notice to the customer and place a physical notice on the premises before a disconnection could occur.

- Payment plans and reconnection: The agreement requires the city to offer a payment plan; Arizona Water would disconnect service only after notices and the waiting period. Arizona Water would reconnect service after the balance is paid or a payment plan accepted.

- Fees and costs: Rob said the model agreement includes a one-time $1,000 establishment charge (to be paid by the city), an annual fee of $0.50 per shared customer, a $100 disconnection/reconnection fee, and a monthly lost-revenue fee prorated for days of disconnection. Staff said other cities that have such agreements generally pass the routine fees (annual $0.50 and disconnection/lost-revenue fees) on to customers as part of delinquent balances; the establishment charge would be borne by the city.

- Local scale and precedent: Staff estimated shared residential accounts in the ballpark of 22,000 (roughly 94% of the total customers are residential). Rob reported that other jurisdictions — Buckeye, Sedona and Coronado Utilities — have used the agreement successfully and that Sedona officials told staff they had not yet needed to disconnect service because customers addressed past-due balances after receiving notice.

- Regulatory step: Staff said the Arizona Corporation Commission must approve a variance to allow Arizona Water to disconnect service on the city’s behalf; Buckeye, Sedona and Coronado Utilities have secured that variance, establishing a precedent staff said is likely to be granted here.

Numbers discussed and staff cautions

- Delinquencies and amounts: Rob said finance staff identified approximately 9% of accounts as delinquent in some way but that the portion of those accounts that are long-term nonpaying is not yet quantified. He reported a conservative estimate of at least $1,800,000 potentially collectible under a stronger enforcement mechanism.

- Rate implications: Staff said the annual $0.50 per shared customer would likely be implemented as a minor rate adjustment and noted that other participating cities add that cost to customer bills. Council members discussed how that annual fee spreads across the customer base and that the city would need to set a minor rate change to accommodate the annual fee.

Council response and next steps

Council members asked about the exact fees and scale; Rob confirmed the fee structure is the same as other jurisdictions’ agreements and that staff intends to ask the council to authorize engagement with Arizona Water to draft an agreement for formal adoption. Matt asked how many shared customers the city has; Rob said "It's somewhere in the ballpark of for residential accounts... about 22,000, a little short of that." Ed Edwards and Council Member Herman raised cost and fairness questions; staff said other cities reported positive community response because the approach reduces cross-subsidization.

Staff requested direction to engage Arizona Water Company and develop the agreement, pursue the Arizona Corporation Commission variance, and return the proposed agreement to council for adoption. The council provided general support for staff to proceed; no formal vote occurred at the study session.

Ending

Staff will pursue drafting an agreement with Arizona Water, seek the required commission approval, design a robust outreach campaign and return to council with the agreement and an implementation plan. Staff noted they would propose offering payment plans and extensive public notice before any disconnections occur.