Why Are Payments for City Water Bills and Taxes Sent to Chicago?

A frequent question asked of staff (and sometimes posted on MLive) is “Why does the City of Muskegon have residents send property tax and utility bill payments to Chicago? Wouldn’t it be better to keep this work local to create jobs?”

These are fair questions that deserve a thorough response.

Like many utilities and other organizations that receive standard, recurring payments through the mail, the City of Muskegon utilizes a service through its bank called lock-box remittance processing.

Using a lock-box for City payments greatly increases efficiency. Unfortunately, choices are limited when it comes to cities where lock-box processing centers are located.

With lock-box processing, payments are sent to a special PO Box that is used only for receiving payments. Bank personnel are authorized to remove mail from the lock-box several times a day. The bank then processes and deposits the payments directly to the City’s bank account on the same day.

Each day the City receives from the bank digital files including customer account numbers and amounts paid that are uploaded to our computer systems to update customer records. Additionally, the City receives electronic files with scanned images of the front and back of each customer’s check and payment stub.

So why is the PO Box in Chicago and not in Muskegon?

Lock-box processing is highly automated and banks make a large investment in the processing and scanning equipment used. Typically, lock-boxes are located in postal centers where the banks’ biggest customers want their payments sent. When the City set up it’s lock-box arrangement, it had three choices:

  1. route payments to Chicago
  2. route payments to Cincinnati or,
  3. route payments to Grand Rapids with next day forwarding to either Chicago or Cincinnati

We chose Chicago since this is the Midwest’s major postal hub and would receive payments from Muskegon residents the fastest.

What about keeping local jobs?

The use of lock-box processing has not resulted in any lost jobs at the City. Lock-box processing automates several mundane, repetitive tasks like opening envelopes, scanning checks, and entering payment data. This work is performed more efficiently and with more accuracy than could ever be achieved with manual processing. Moreover, the City could not afford the investment in equipment that would be required to automate these tasks in-house.

Lock-box processing has allowed us to focus our limited staff on more important and productive matters. The lock-box system gets the City’s funds securely deposited and earning interest more quickly. Since payments go directly to the bank, there is less handling of the mail and less chance for payments to be lost or stolen in transit.