DATE: November 6, 2024
TO: Honorable Mayor and City Councilmembers
FROM: Financial Services Department
TITLE: AMENDMENT 3 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 3 to the Professional Services Agreement (PSA) with States Recovery Systems, Inc. (“States Recovery”), extending the term of the Agreement for one year through September 25, 2025, in an 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 for 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. After all extension options have been exhausted staff will initiate a Request for Proposal for collection services.
Amendment 3 executes the first one-year extension since Amendment 2 provides the three additional extension options, extending the term of the Agreement through September 25, 2025.
States Recovery is a smaller, owner operated firm. The owner is actively involved in interfaces with city software programs and vendors, meets regularly with staff and has demonstrated their commitment to Oceanside’s debt collection efforts.
Over the term of the agreement, States Recovery has quickly responded to all City staff requests, has been effective in communicating with other third-party vendors, and has been responsive to customers with outstanding debt owed to the City. States Recovery has maintained highly satisfactory collection rates and continues to exceed the City’s expectations. Additionally, the commission rates charged by States Recovery are typical for collections services in the industry.
FISCAL IMPACT
The fiscal impact is based on the amount collected, thus not definitive at this time. Based on the past five years, staff projects that the amount collected will be approximately $301,000 and the commission amount will be approximately $49,000. The commission rate for the majority of accounts will continue to be 17 percent for primary assignments. All commission rates remain the same as follows:
• 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
For reference, commission during the first five years of this Agreement are as follows. FY 2021-22 was unusually high due to the large volume of collection accounts that were placed on hold during COVID-19 restrictions. Revenue recovery 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 |
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: Jill Moya, Financial Services Director
Reviewed by: Michael Gossman, Assistant City Manager
Submitted by: Jonathan Borrego, City Manager
ATTACHMENTS:
1. Staff Report
2. Amendment 3