Water Payment Grant Proposal

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					Bush Public/Non-Profit Opportunity Grant
Close, Faron, Mayo, Rogers, Sarmiento, Valdez, Welkener

8 OCTOBER 2009
Bush 601- Government Reform
Proposal Abstract

        The City of Newark Water and Sewer Department is seeking the Bush Opportunity grant
in order to improve the interface between water consumers and the department. The program will
help residents whose places of residence or businesses are currently without water, and establish
long-term solutions in two ways: Making the process of bill payment easier and helping residents
know that the full range of options available to them.

Statement of Need

        The City of Newark Water and Sewer Department has a projected 2009 revenue of
52,459,966 (City of Newark, 2009). Beginning in September of 2009, the Department was owed
$29 million in unpaid, overdue water bills from previous years (Rispoli 2009). The accumulation
of delinquent bills was due to nonpayment by both residential and commercial property owners.
To address the issue, the Newark Water and Sewer Department announced that it would shut off
water services to thousands of individual citizens, with overdue bills amounting to $6.5 million.
The bills varied in size and it is unknown how many total people are affected by the shutoffs,
given that in many cases landlords are responsible for the payment of water bills for entire
residential developments. It is known that 7,000 customers each owe at least $1,500 dollars in
back payments (Friedman 2009). The Department currently does not give citizens the option of
paying their water bills online or over the phone. There have been complaints by citizens over
the lack of an over the phone payment option. (Friedman 2009).

        On September, 21, 2009 Newark launched a tax amnesty program looking to collect
overdue taxes, fees, water, and sewer payments. The program will cancel penalties and interest
on payments made in full by October 30, 2009. The program is modeled after a similar amnesty
program conducted by the state of New Jersey. Payments for water gradually began to resume
after shutoffs were announced, but there is no evidence that the debt accumulated by the Water
Department as a result of years of non-payment will cease to be a problem. With the introduction
of grant money the Newark Water Department will take steps to help alleviate the problem and
provide greater public awareness.

Water Payment Program Description

       The goal of the program is to improve customer interactions with the Water and Sewer
Department through the establishment of convenient and easily accessible payment options, as
payments must currently occur by mail or in-person. Two key changes that can immediately
occur are implementing on-line and phone bill payment options.

       These payment option work directly to address the problem of water bills not being paid.
“For the customer that is late in paying, collection rates increase when the Collector can initiate a
payment while the customer is on the phone, rather than waiting form then to mail a check”
(Messner and Yaeger 10). Making payments faster and easier for water consumers decreases the
economic opportunity costs (such as time) inherent in paying water bills, automatically making
bill payment a better economic proposition (Posnet and Jan, 1998). A study conducted by
Payment Systems researchers with the Federal Reserve found that bill characteristics are a key
indicator of which payment type consumers will use. Consumers are 37% more likely to use
direct or online bill payment for frequent bills than consumers facing the base bill type.
Consumers are also more likely to use online-bill payment for variable dollar amounts (like
water bills), as opposed to fixed dollar amounts. These factors may account for the fact that apart
from credit card bills, utility bills are the most likely to be paid online (Hayashi and Klee, 2003).

         In addition, the program will also include informational sessions to instruct citizens on
the use of the new billing system as well as steps citizens must take should their water services
be shut off. The information provided in the information sessions would include community
resources, such as non-profits that could help the citizen pay a water bill in light of a household
crisis, methods of payment and available payment plans, places in the community available for
public water use, and tips for conserving water.

        The estimated cost of the program would cover the implantation of an online payment
option and phone bill payment option. For the first year, the $200, 000 would pay for the setup
of the online and phone payment service. The second year and third year, $125,000 and $75,000
would pay for updates to the online and phone payment service respectively. The educational
programs would be led by a partnership between the Department of Water and Sewer and
volunteers from designated non-profits.


         The awarding of the Bush Public/Non-Profit Organization Grant will help the Newark
Department of Water and Sewer to better serve the citizens of the City by establishing a
convenient and efficient process of water bill collection, and promoting public education with
regard to this new process. By making the water billing system more accessible and convenient
for citizens, the Department of Water and Sewer will improve efficiency, facilitate bill
collection, and balance the department’s budget.

Au, Yoris A. and Robert J. Kauffman. “Should We Wait? Network Externalities, Compatibility

       and Electronic Billing Adoption.” Carlson School of Management, University of

       Minnesota 28 pages. Accessed: 7 October 2009

       <https://www.misrc.umn. edu/workshops/2002/spring/Au_Kauffman_042602.pdf>.

City of Newark. 2009. Department of Administration, Office of Management and Budget.

       2009 Operating Budget. Newark, New Jersey



Friedman, Alexi. 2009. “Newark Property Owners Swarm City Hall to Halt Water Shut-Offs.”

       The Star Ledger. n. pag. Accessed: 7 October 2009


Gillespie, Penny and John Ragsdale. 2002. “The Total Economic Impact of Electronic Bill

       Presentment and Payment.”

Hayashi, Fumiko and Elizabeth Klee. 2003. “Technology Adoption and Consumer Payments:

       Evidence from Survey Data.” Review of Network Economics 2 (20): 175-190.

Posnett, John and Stephen Jan. 1998. “Indirect cost in economic evaluation: The opportunity cost

       of unpaid inputs.” Health Economics 5 (1): 13-23.

Rispoli, Michael. “Newark Plans to Shut Off Water to Thousands of Property Owners.” The

       Star-Ledger. n. pag. Accessed: 7 October 2009


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