Bill would ban foreclosures for unpaid utility bills

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Capital News Service
LANSING— New legislation could alleviate one source of home foreclosures—delinquent municipal utility bills.
But, the number of foreclosures caused by delinquent municipal utility bills is very low, said Bill Anderson, legislative liaison for the Michigan Townships Association.
When homes go into foreclosure it’s usually for multiple reasons, and most of the overdue money is normally owed to banks and lending institutions, not to the local government, said Anderson.
Although foreclosures because of delinquent water, sewer and power bills are “pretty infrequent,” he said, “at the same point, we don’t want to encourage people to think, oh well, I’m just not going to pay my utility bill.”
If a homeowner simply refuses to pay a bill for whatever reason, counties should still be able to take measures to collect the debt, Anderson said.
Rare situations, like a toilet running for a month, could result in an extremely high sewer and water bills, he said. But most of the time when such things happen, a city treasurer can work with a resident to spread the amount owed over several payments, Anderson said. In large metropolitan areas, however, that’s harder to do and the legislation could help, he said.
Just one foreclosure because of delinquent utility bills is one too many, said Rep. Bettie C. Scott, D-Detroit, the bill’s sponsor.
“Fees are hard for taxpayers to pay already. They should not be additionally burdened by taxes,” she said.
She noted that additional fees are added to delinquent utility bills as well, which would hurt residents.
Michelle LaBar, housing specialist and foreclosure counselor for Northeast Michigan Affordable Housing, a nonprofit organization based in Alpena, said, “After time, delinquent city utility bills are transferred to the county, counties are then responsible for collecting the money owed, including property taxes on the delinquent bill.”
Its service area covers 11 counties, including Cheboygan, Presque Isle and Otsego.
LaBar said there have been no incidents of delinquent utility-based foreclosures in the area recently, but with the economy not improving, that doesn’t mean it won’t happen.
However, losing the tax penalty could hurt local governments and other users of utilities, said Thomas Hickson, director of legislative affairs at the Michigan Association of Counties.
“There is a flat cost to providing utility services, and if that cost is not paid the burden will spread to local government and other homeowners,” he said.
He said the Legislature needs to maintain tools to allow local governments to still collect delinquent payments.
That’s what Scott said she intends to do.
“My bill is not against cities or counties. It will assist them. None of us benefit when homes are foreclosed on, and we have a duty and obligation to protect our residents and homeownership,” she said.
© 2009, Capital News Service, Michigan State University School of Journalism. Not to be reproduced without permission.

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