Landlord pleads case for unpaid utility bill at city public hearing

Luverne landlord Darwin Vandenberg was the only property owner to attend the Oct. 8 public hearing on proposed assessments for unpaid city bills.
His rental tenant on Estey Street owes $332.78 for utilities, and since the city hasn’t received payment after several notices, the property will be assessed that amount through taxes.
“I don’t see how I can be assessed this, and I’m not really happy with the way you’re doing it,” Vandenberg said, speaking as personal representative of the Lylamae Vandenberg estate.
“It’s not my bill. … You’re kinda putting me in a requirement to pay it. It’s like I don’t have any choice in the matter.”
At the hearing he acknowledged that city staff had explained the process to him more than once, but he said he didn’t agree with it.
“I have four houses in Worthington and they don’t do this over there,” said Vandenberg who has five rental properties in Luverne.
City finance director Barb Berghorst explained that Luverne’s ordinance stems from a 1906 Minnesota Supreme Court ruling that determined city ordinances can require owners of properties to be responsible for utility charges.
“This is something that has been a common practice since 1906, that — with adequate notice, landlords are responsible for payment,” said Berghorst, who said most cities she’s aware of have similar ordinances.
“I understand how people feel about it, but our code requires it.”
She said the city collects a one-month deposit from new utility users, but by the time the unpaid bill gets assessed to owners, additional months of unpaid utilities accrue and surpass the deposit amount.
Berghorst said she’s discovered that it pays to use a collections agency, which charges a fee.
“They take 30-40 percent of anything they collect, and we only get the rest back,” she said. “We go the extra mile to do that.”
She pointed out that billing tenants directly, and paying for the collections agency, is a service for landlords.
Mayor Pat Baustian said new collection methods have reduced annual unpaid utilities from an average of $8,000 to roughly $2,000, which means fewer costs are being assessed to landlords.
“… We’ve enacted different procedures here at City Hall where the owner gets notified when a renter is behind on utilities,” he said.
“That’s to help property owners carry on their business and not get gamed for these types of assessments.”
Councilwoman Caroline Thorson asked Vandenberg if the process was successful in the past to get tenants to pay what they owe.
“No. In fact these same tenants owe me money too,” Vandenberg said. “They’re usually behind on rent, as well as their utilities.”
Baustian reminded Vandenberg that ultimately it's the property owner’s responsibility to pay utility bills. The city won’t write off the loss at taxpayers’ expense.
“The citizens of Luverne can’t take on your bill for property you’re owning to earn income on,” Baustian said. “It wouldn’t be fair.”
Councilman Kevin Aaker, who also owns rental property, empathized with Vandenberg.
“I’ve been in your shoes. I’ve had tenants leave and stick me with that, and a lot of times they’ve stuck us with rent too,” Aaker said.
“It’s a tough place to be and we want to try to help people … but they don’t pay.”
Vandenberg said, “And a lot of times they won’t leave until you actually shut them off. When they do leave, then I have to pay it on taxes too.”
He said he’s considered including utilities payments in rental amounts. “But then they abuse the utilities,” he said. “They’ll leave the windows open with the air conditioner running.”
Baustian said, “It’s part of the headaches that go along with income-generating property.”
Vandenberg’s property was among 13 this year with unpaid utility bills ranging from $77 to $489 totaling $2,241.74 that will be assessed onto the owners’ property taxes.
The interest rate on the assessment is 4 percent, but no interest will be charged if the amount is paid within 30 days.