Eldridge council approves third-party utility collections contract after debate over indemnity

The Eldridge City Council voted April 6 to approve an agreement with Municipal Collections of America (MCOA) to collect delinquent utility accounts, including electric and water, and to extend collection authority to sewer and garbage debts, after a detailed discussion about contractor indemnification.

City staff (Nevada) described the fee structure: when MCOA collects directly from a resident it retains a 25% collection fee; if collections use the state setoff program, MCOA takes 10% and the city receives the returned debt less a minor state fee. Nevada said the agreement was already approved by the utility board and in use for water and electric collections for about six months, and that initial returns have included sewer and garbage debt.

Several council members raised concerns about Article 6 in the contract, which some interpreted as an indemnity that could make the city liable for the vendor’s legal fees if a debt turned out not to be owed. One council member said, “If we do something wrong, we’re liable for it…we're indemnifying them, but we don't know what kind of practices they have.” Nevada responded that she would seek further clarification on that language and confirm which party bears what legal risk.

Despite the concerns, a motion to approve the agreement carried. Council members asked that staff return with clarified indemnification language and any changes required before the city uses the contract to pursue sewer and garbage debts more broadly.

Next steps: staff will obtain clarification from MCOA regarding the indemnification clause and report back to the council; the utility department will continue to coordinate account transfers and report collection results to the council.