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By Chris Frost
Tri County Sentry
Oxnard-- The Finance and Governance Committee, Tuesday, July 13, voted to discontinue its subsidy for convenience fee costs associated with credit and cards and electronic payments for certain city services.
The approval of transaction fees for its consumers is estimated to cost the city approximately $500,000 each year.
The full city council will conduct a public hearing to discuss establishing fees to cover the cost, then adopt a resolution to establish fees for the convenience fees associated with certain city services and fees.
Eden Alomeri, assistant city treasurer and building and licensing director, made the presentation to the committee and said in 2003; the city council approved the use of credit cards to pay for city services. The staff estimated the cost at $17,800 for every $1 million in credit card transactions.
The city accepts credit cards for utility payments, business taxes, short-term rentals, building permits, fire inspections, recreation class fees, parking citations, false alarm citations, and parking meters. The city accepts eChecks for utility payments over the phone.
"In actuality, the city has subsidized customers’ use of payment cards and eChecks," she said. "In 2018, the city subsidized $492,617.64. In 2019, $534,832.30, and in 2020, $520,565.20."
Although credit, debit, and eChecks offer convenience for the customer, she said the city paid fees for transactions to the gateway, merchant, and credit card companies like Visa and Mastercard or the eCheck processor.
"Each of which performs a function to complete a transaction and enables the city to collect payments," she said.
Alomeri showed the committee a list of charges that Visa Mastercard, Telecheck, and Elavon charges and said there are more charges on the list but not shown.
"There are some services which the city is already charging a fee for using credit cards, so the city is not currently subsidizing those usages," she said. "In the past, departments implemented different programs using various vendors and software to address their needs, and this fee varies. In some cases, they are just using a different credit card processor. In other cases, the processor is selected by the vendor that offers the larger program. The variety is great."
She said some programs charge a flat fee while others charge a percentage. In community development, short-term rentals use Stripe, and they charge $2.95 plus .30 cents per transaction.
"The police department's admin citation uses the Pheonix Group that charges $3.95 or 3.25 percent per transaction," Alomeri said. "Due to contractual obligations, the city cannot change the rate that is currently being used by their service providers. The city will continue to use the rate that was set in the contract with the various service providers. As each of these contracts come due, the staff will evaluate the value and viability of switching over to the vendor used for utility billing."
She said; eventually, the city may be able to implement the credit card processing fee to all departments accepting credit, debit cards, and eChecks across the city's payment locations.
"There are instances where the city is subsidizing the fee, and staff recommends continuing that subsidy, at least temporarily," she said. "The programs don't allow us to pass along the credit card processing fee to the customer, so if we are intent on doing so, we will have to opt-out of those programs."
The big question to the council, she said, is whether the city should continue to subsidize the use of credit cards where the convenience fee has not already been passed on to users and where is it possible to pass along fees to users.
"If not, the various companies charging the fee have asked the city what transaction fee it should charge," she said. "Staff is targeting the percentage that recovers as much as possible of the actual subsidy without inadvertently charging extra. To arrive at the proposed rate to charge as a transaction fee, staff performed an analysis of the fees paid in the past three years."
In relation to the amount collected, using only the regular, no discount rate, the city paid over the past three years for credit card transactions over the counter, 2 percent, and electronic check payments over the phone, 2.7 percent.
"The rate of 2.35 percent is on the low end of the range when compared with some other agencies that charge transaction fees," she said. "An analysis shows that the average cost to the city is 2.35 percent."
In comparison, she said the City of Thousand Oaks charges 2.65 percent for charges over $500 and $2.75 for charges below $500.
"The City of Ventura charges 3 percent for in-person payments, $3.95 for online payments, and $4.25 for payments over the phone," Alomeri said. "Ventura County charges 2.15 percent."
If the full council adopts the fees, she said the implementation period would take place over a few months. The city will go through its testing phase with Paymentus, the gateway, complete the test in the fall, and update the council when the program takes effect.
Committee Member Gabe Teran asked if customers know that fees due to the city paid with a credit card, the city absorbs that cost and pays the gateway company.
"There are many programs in the city, and some are already passing them on to the customer," Alomeri said. "There are some that are not, and the reason for that is because different departments had a contract at the initiation of their programs with different vendors. There are vendors that allow us to pass the fees, and there are vendors that do not allow us to do that."
Teren asked what the average ratepayer pays for their utility bill, and he also asked if developers would be affected.
"A single-family home on average would pay about $150-$180 per month for their utility bill," Alomeri said. "So, $150 times 2.35 percent would have a $3.53 fee. This will also cover the developers, the business owners who pay taxes."
Committee Member Gabriela Basua asked how the city will determine the convenience fee and, once they set the rate if the city will still have a subsidy.
"Our proposed rate of 2.35 percent will be across the board," Alomeri said. "The 2.35 percent may need to be increased at a future date because this is the average of the past three years. Based on our study, every year, the costs go up."
Basua asked Alomeri to define the term electronic check.
"An electronic check is used when a customer calls our interactive voice response system, a phone number where they can pay their utility bills, and they can use either a credit card or a check," Alomeri said.
Alomeri noted the city has many ways to pay bills.
"For utility bills, they can send us a check by mail, and that is no charge to them," she said. "They can come in person, put it in our dropbox, and the easiest way is by autopay. They can enroll in an autopay system, and the city will automatically draft from their account for their monthly bill. That is free."
Basua said she supports the item, but she asked the staff to educate residents who pay via credit card or electronic checks.
The service center is open from 8 a.m. until 12 p.m. Monday through Friday.
Mayor John Zaragoza said the city has been spending a lot of money subsidizing its electronic payments.
"We'll be spending $500,000 a year, and that is a tremendous amount of money to be subsidizing," he said. "Especially at this time."
The item passed unanimously.