DATE: October 7, 2026
TO: Honorable Mayor and City Councilmembers
FROM: Financial Services Department
TITLE: AMENDMENT 5 TO PROFESSIONAL SERVICES AGREEMENT WITH STATES RECOVERY SYSTEMS, INC. FOR DEBT COLLECTION SERVICES
RECOMMENDATION
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Staff recommends that the City Council approve Amendment 5 to the Professional Services Agreement (PSA) with States Recovery, Inc. (“States Recovery”), extending the term of the agreement for one year through September 25, 2027, in the amount based on percentage of collections received for debt collection services; and authorize the City Manager to execute the amendment.
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BACKGROUND AND ANALYSIS
In September 2019 the City Council approved a three-year PSA with States Recovery in an amount based on percentages ranging from 12 to 50 percent of collections received from debt collection services. The Agreement includes the option to extend for two additional one-year terms.
In September 2022, the City Council approved Amendment 1 executing the first one-year extension option extending the term of the Agreement through September 25, 2023.
In September 2023, the City Council approved Amendment 2, the second one-year extension option; extending the term of the Agreement through September 25, 2024. Amendment 2 provided three additional one-year extension options for a total contract term of eight years.
In November 2024, the City Council approved Amendment 3, executing the first one-year extension since Amendment 2 provided the three additional extension options, extending the term of the through September 25, 2025.
In September 2025, the City Council approved Amendment 4, executing the second one-year extension option; extending the term of the agreement through September 25, 2026
Amendment 5 executes the last one-year extension option; extending the term of the Agreement through September 25, 2027.
States Recovery is an owner-operated firm that has been providing collection services since 1988. The owner remains directly involved in the collection process, providing oversight to ensure efficient and effective collection efforts on delinquent accounts. The agency’s customer portal provides City staff with real-time access to account information and payments received through the collection agency. In addition, States Recovery annually assists the City by submitting delinquent accounts to the Franchise Tax Board’s Interagency Intercept Program, providing an additional mechanism for the recovery of outstanding debts owed to the City.
Throughout the term of the agreement, States Recovery has consistently demonstrated a high level of responsiveness to City staff requests and has provided timely and professional assistance to customers with outstanding debts owed to the City. States Recovery has maintained satisfactory collection rates and has continued to meet or exceed the City’s expectations for service and performance. The collection rates charged by States Recovery remain competitive and consistent with current industry standards.
FISCAL IMPACT
The fiscal impact is based on the amount collected by States Recovery, thus not definitive at this time. Based on the historical amount collected since the beginning of this contract, staff projects that the amount collected in FY 2026-27 will be approximately $332,000 and an estimated amount of $56,000 paid in commission to States Recovery.
The commission rates remain unchanged through the remainder of the contract.
• Primary Assignments - 17 percent of all revenue collected
• Primary legal - 30 percent of all revenue collected
• Primary Interest Rate - 50 percent of all revenue collected
• Secondary Assignment - 20 percent of all revenue collected
• Franchise Tax Board Intercept - 12 percent of all revenue collected
As reference, revenue recovered is recorded in the fund for which the debt was owed.
|
Description |
Collected |
Commission |
|
FY 2019-20 |
$176,577 |
$29,699 |
|
FY 2020-21 |
$252,188 |
$39,516 |
|
FY 2021-22 |
$419,714 |
$67,547 |
|
FY 2022-23 |
$266,711 |
$43,833 |
|
FY 2023-24 |
$389,898 |
$61,815 |
|
FY 2024-25 |
$383,550 |
$65,213 |
|
FY 2025-26 |
$437,084 |
$73,971 |
COMMISSION OR COMMITTEE REPORT
Does not apply
CITY ATTORNEY’S ANALYSIS
The referenced documents have been reviewed by the City Attorney and approved as to form.
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Prepared by: Donna Trevizo, Financial Services Division Manager
Reviewed by: Jill Moya, Financial Services Director
Submitted by: Jonathan Borrego, City Manager
ATTACHMENTS:
1. Amendment 5