Kelly Elsten has been arguing with the city over late fees on her utility bill. She was charged more than 0 in late fees over the last three years without realizing it. The city’s utility bills don’t have a charge that says late fee; instead, it is called an “adjustment.” Plus, she says her payments haven’t been late. Elsten is pictured in her home with her son Jack, 6.

Kelly Elsten thinks there’s something odd with the city utility bills she and other Lawrence residents pay. And she thinks she’s found out about it the hard way.

By at least one measurement, she’s correct. After asked by the Journal-World, the city’s utility billing division determined that about 30 percent of all Lawrence utility bills have a late fee attached to them. That is more than two to three times higher than several other utilities.

Ed Mullins, who oversees the utility billing operations as the city’s director of finance, said the Lawrence numbers were eye-opening.

“It did seem high to me,” Mullins said. “I was surprised by that.”

Finding an industrywide average has been difficult, but the Journal-World confirmed the city of Manhattan has late fees on only about 10 percent of its bills. The Board of Public Utilities, which provides electric and water service to parts of Kansas City, Kan., averages 17 percent. Douglas County-based Rural Water District No. 4 has an average of 7 percent.

Elsten has a theory about Lawrence’s high numbers: Many Lawrence residents don’t know they’re paying a late fee.

‘A late fee is a late fee’

Elsten wasn’t quite sure what she thought the word “adjustment” meant on her city utility bill.

After all, the bill is for water, sewer and trash service. That trifecta probably isn’t an exact science. The water part involves reading a meter that spins around like an antique clock, and the sewer and trash, well, nobody wants to spend time thinking about sewer and trash.

But in October, Elsten’s city utility bill was messed up like bills sometimes get. It was showing an amount that looked too high, so she called the city. When she called, she wasn’t particularly concerned about the adjustment. It only amounted to a dollar or some change most months.

Then, she learned what it was. In the world of Lawrence city utility bills, the word “adjustment” means a late fee.

“I was livid,” Elsten said. “It is very unethical and misleading to have a customer pay a late fee under the name of an adjustment. A late fee is a late fee and an adjustment is an adjustment.”

Mullins said the city’s use of the term adjustment to describe a late fee isn’t ideal, but he doesn’t believe it is misleading to most people.

“I think it is pretty clear to most people that it is a late fee,” Mullins said.

But the city is hoping to change the wording in the future. Cindy Naff, the city’s customer service supervisor, said the department’s current billing system doesn’t allow for the word ‘adjustment’ to be changed to late fee without reprogramming the system. The city doesn’t own the system, but rather operates it under a license agreement and thus can’t reprogram it. But the department is hopeful of getting new billing software, perhaps by the end of the year, that would allow for the change.

Mullins, though, said he’s still unsure why somebody would pay an “adjustment” on a bill without knowing what it is.

“I think it is pretty common that if you see an ‘adjustment’ on your bill, and you don’t know what it is, you’re going to ask about it,” Mullins said

Three years of late fees

If Elsten — who has lived in Lawrence for 18 years — is any indication, not everybody does. By the time Elsten figured out what an adjustment was, she had paid three straight years worth of them.

Every month since 2007, Elsten had unknowingly been paying a 2 percent late fee. A simple solution, of course, is to pay your bill on time.

And that brings Elsten to the second part of her theory about the city’s late fees: People are getting charged a late fee when they shouldn’t.

Elsten insists that she’s been paying her city utility bill on time — and she points to documentation from an online bill paying system that she uses with US Bank.

Elsten says — and bank officials agree — that she initiated her city utility bill payment in a timely manner. Elsten admits that she designed her bill-paying strategy to have the money taken out of her account on the actual due date, but she contends she always gave the bank at least four business days prior to the due date to complete the transaction. The bank agrees with that assertion.

Because of a technical glitch that has since been corrected, US Bank was creating an actual paper check to send to the city each month. The check would be dated to be cashed on the bill’s due date, but the bank insists it was sent four business days in advance. The U.S. Postal Service estimates the average delivery time for first-class mail to be one to three business days.

The city, though, says it simply wasn’t getting the check by the due date.

“There’s no way for us to verify when that check was sent,” Mullins said. “We just know when we got it, and it wasn’t by the due date.”

US Bank uses an out-of-state contractor to process and mail the checks. The company mails in such volume that it uses a special category of first-class mail called “presorted first class.” The envelopes the checks are mailed in do not have a standard stamp, and also do not have a standard postmark showing when they were entered into the system. A spokeswoman at the Lawrence post office, said it would be difficult to determine when the check was actually mailed.

Terri Kaase, a manager for US Bank who oversees the online bill-paying system, said she’s confident the contractor was mailing the checks in a timely manner. She was seeking written verification of that at press time, but she said the company does thousands upon thousands of checks and that a problem with late mailings would have been spotted quickly.

“For the most part, the number of complaints we get of this nature are few and far between,” Kaase said.

$187,000 in late fees

Even if Elsten’s check is the one rare check that happens to get lost in the system, that doesn’t explain why the percentage of Lawrence bills with a late fee appears to be significantly higher than several other utilities.

Elsten has her theory about that too. She thinks the city’s utility billing staff gets swamped with checks near the due date and just does not get them entered into the system in a timely manner.

Mullins flatly disagrees with that. He said his staff processes checks the day it receives them. He said checks sent from these bill-paying systems often are more difficult to process because they don’t come with a return bill stub, and often the account number on the check is not entirely accurate. That means the staff has to look the account up by name, but Mullins said the city wouldn’t use that as a reason to levy a late fee.

“If for some reason we wouldn’t get to it until the next day, we would trick the computer to make it think we were entering it on its due date,” Mullins said.

Elsten even has wondered whether the city has a financial incentive to keep the late fee totals high. Mullins said that’s not the case either. In 2010, the city collected $187,947 in late fees through its utility operations.

“I realize that $187,000 is still a good amount of money, but it is nothing to run a utility on,” Mullins said.

The city collects about $30 million in fees through its utility each year. He said the city from a cash flow management standpoint has a much greater incentive to get the money that is due in a timely manner than it does to collect a relatively small amount in late fees.

“We would be much happier if everybody paid their bill on time than having 30 percent not paying it on time,” Mullins said.

In fact, Mullins said the high numbers have him wondering whether the city is providing enough of a disincentive for people to pay their bill late. The city currently charges a 2 percent late fee. That means on a $40 bill, the late fee will be 80 cents. That penalty is lower than in some cities. Manhattan, which deals with a similar college population and has only 10 percent of its bills with late fees, charges a flat $25 penalty for being late.

“Maybe our 2 percent is not enough to get people to pay on time,” Mullins said.

That won’t be the answer Elsten wants to hear. She’s been made financially whole from all this — the bank credited her account about $43 to cover the three years worth of late fees — but she still thinks the city has problems with its billing system.

“I just think it is misleading,” Elsten said. “They’re not telling you that it is late. They are telling you that it is an adjustment, and that could be anything. But the big thing is, I think there are a lot of them that aren’t late.”