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Hahn Gets Tough on Deadbeat Agencies

Business: Mayor pays one firm a long overdue $15,000 and orders more timely city remittances.


For South Los Angeles businesswoman Judith Cowan, it was a hardship when one customer was late paying her small company $15,000 for supplies, with some of the unpaid bills going back seven months.

The situation was all the more painful because the deadbeat customer was the city of Los Angeles, to which she pays taxes.

Mayor James K. Hahn settled the overdue bill Friday, handing Cowan a check for the outstanding amount and announcing that from now on, city agencies are under orders from him to pay their bills within 30 days of receipt.

"Especially during this economic downturn, we don't want our local businesses to suffer because the city is not paying its bills," Hahn said at a news conference in front of WISE Inc., Cowan's industrial supply store on South Vermont Avenue.

Of the $15,000 owed to Cowan, about 80% represented billings more than 90 days old. One of the invoices went back to April 4, according to Dan Cowan, vice president of the firm. The unpaid bills were for hand and power tools.

If the late-paying customer had not been the city, Judith Cowan said, she probably would have taken the client to court. But Cowan's firm has done business with the city since 1979 and decided to be patient.

City Controller Laura Chick said it is only fair that the city pay its bills on time.

"If we owe checks of $15,000 to a small woman-owned business, you better believe we are creating problems for that business," Chick said.

Such delays were supposed to have been eliminated when the city created a new automated supply management system, but glitches have resulted in continuing delays.

Chick said there are still too many cases where bills take too long to get proper signatures or validation that the purchased equipment or services were provided.

More than 11,500 bills on the books have gone unpaid for more than 30 days, Chick said, including 3,450 that have been carried for more than 90 days. The city general fund departments pay contractors $300 million annually for goods and services, with the average invoice totaling $3,500.

The mayor said he is giving city managers three months to clear the backlog, after which he will insist that all bills be paid within 30 days.

The late payments don't just hurt companies.

Chick estimated the city misses out on $2.1 million each year in discounts offered by vendors as incentive for prompt payment, usually within 30 days.

Taxpayers lose in another way, because when vendors know the city is going to pay its bills late, fewer bid on city contracts, potentially depriving the city of lower bids, Chick said.

"That's another waste of taxpayer dollars that is going to be avoided by this program," Chick said.

Under the new City Charter, the mayor has authority to hold city department managers more accountable, and Hahn vowed to follow up his order by demanding reports on all bills not paid within 30 days.

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