In 2008, the City Council approved a contract with Metavante, doing business as Fidelity National Information Services, Inc., (FIS), to implement an electronic payment processing service. This enabled the City to offer convenient payment options to our residents and customers, and provide for efficient payment collection for utility services, permit fees, business licenses, recreation fees, public safety and other City services.  The electronic payment services include:  credit and debit cards, electronic checks, and pay-by-phone services.  FIS charges transaction fees to the City for the processing of these payments. At the inception of the electronic payment program, customer participation was low and therefore, the estimated total annual processing fees were deemed manageable (under $30,000 annually).

Over the years, online electronic payments have become more secure and widely acceptable.  In addition, due to various cardholder rewards programs, the use of credit and debit cards have become increasingly popular.   There has been a marked increase in the use of credit and debit cards for payment of City services resulting in an unsustainable increase in the associated costs borne by the City.  The annual processing fee portion charged to the City for credit and debit card payments for Fiscal Year 2015/2016 was approximately $165,000. This is a substantial increase from the initial estimate of $30,000 in 2008. 

Acceptance of debit and credit cards for payment of government services is deemed a convenience provided to the customer and hence, the associated costs can be passed on to the user. California Government Code Section 6159 empowers government agencies to accept credit card payments and charge a reasonable fee to the credit card users to offset the costs incurred to provide this convenience.

Staff is recommending that the City Council approve passing on a convenience fee directly to the customers using the credit or debit card method of payment. The fee will be assessed by FIS at the time of payment and no part of this fee goes to the City. The convenience fee negotiated with FIS for credit and debit card payments would be 2.49 percent of each transaction amount, with a $1.99 minimum for non-utility payments. The fee for utility payments would be a flat fee of $2.99 per transaction.  The online option of electronic check payments for utilities will remain available at no cost to the customer.  If approved, the convenience fee would become effective on May 1, 2017.

The annual processing fee portion charged to the City for credit and debit card payments made to the City for Fiscal Year 2015/2016 was approximately $165,000. If the convenience fee is approved, it would then be the customer’s responsibility to pay the card convenience fees and the City would be relieved of the processing portion of the credit and debit card fees.

It is recommended that City Council:

• Adopt the attached Resolution approving a convenience fee for credit and debit card transactions.

By:  Ann Eifert, Principal Administrative Analyst