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HomeMy WebLinkAboutItem 8.2 CreditCardPaymentProg CITY CLERK File # AGENDA STATEMENT CITY COUNCIL MEETING DATE: June 15, 2004 SUBJECT: Expansion of the Credit Card Payment Program for Selected City Services [')19 Report Prepared by Joni L. Pattillo, Assistant City Manage ATTACHMENTS: None RECOMMENDATION: .~/ Authorize Staff to implement Phase Two of the E-Commerce Program that would allow for Visa and MasterCard credit card acceptance to pay for City Services, with a minimum threshold of $10.00 and a maximum transaction amount not to exceed $1,000.00. FINANCIAL STATEMENT: Sufficient funds ($2,020) are included in the Fiscal Year 2003-2004 Budget in CIP 93321 (E-commerce and Payment Processing), to complete the purchase of the required equipment for the Phase Two proposal. The estimated annual cost for projected Merchant Discount and Transaction Fees is $7,640. BACKGROUND: The City Council adopted as part of the Fiscal Year 2003-2004 Goals and Objectives a high priority goal to investigate the feasibility of expanding the Electronic Commerce (E-Commerce) program. E- Commerce is defined as the ability for citizens to complete business transactions with the City from their home or office at their convenience using the Internet. For the past year the City has' accepted credit card and Internet registration for it recreation classes and facility rentals. Citizens have widely used the benefit of credit card acceptance to register both in-person and through the v~-,~v.iDublinlRecGuide.com website. The Parks and Community Services Department has seen an increase in revenues of approximately $34,000 (or 14%), over the same period the prior year (July 1-March 31). In October 2003, the City's Information Systems Manager conducted a survey of various California cities asking specific questions about E-Commerce. The goal of the survey was to identify the significant and common trends in this industry, in order to make an informed recommendation for the City's next steps in the development of a CitYWide E-Commerce program. The survey was sent to 135 different agencies throughout California. A total of 20 agencies responded (14.8%); 12 (60%) of which have implemented some form of E-Commerce. Some of the key findings are as follows: COPIES TO: ITEM NO. throughout California. A total of 20 agencies responded (14.8%); 12 (60%) of which have implemented some form of E-Commerce. Some of the key findings are as follows: I. Category of E-Commerce Transactions: Recreation Class Registration 42% Building Permits 33% Utility Bill Payments 25% II. Lessons Learned from Implementing E-Commerce: A. Implementation of recreation class registration was very successful, while on-line Permitting proved more problematic. B. A strong collaboration between Information Services, Finance, and the originating department is essential for smooth implementation. III. Public's Perception of E-Commerce "Excellent," "very positive, .... favorable," and "pleased" were words used to describe the public's response to E-Commerce offerings. In some cases the public acceptance began slowly, but certainly gained momentum. One interesting observation was related to on-line permitting, which noted that homeowners tended to use this convenience more than contractors. IV. Were additional Revenues realized with the implementation of E-Commerce? A majority of the respondents to the survey stated that E-Commerce is still a fairly new concept for the public. On average those agencies offering E-Commerce have been doing so for less than two years; therefore, there is not yet a long-term history established to track the revenues activity. V. Benefits Derived from E-Commerce One of the primary goals set by several of the agencies that have implemented E-Commerce was to offer E-Commerce as a convenience to the public. There was acknowledgment "up front" by most of these agencies that there would not necessarily be the capability to recoup the additional. implementation and operational cost associated by offering E-Commerce services. VI. Credit Card Limits On average, the maximum amount accepted using credit cards was $1,000. The critical component supporting setting such a limit is connected to managing costs and efficiencies. Generally, as permit and fee transaction levels increase, so do the complexities surrounding the transaction (requiring more detailed and direct staff time with an applicant); and possibly ~also effecting an increase in the merchant discount fee. With the experience gained from the Parks and Community Services E-Commerce implementation, a proposed Phase Two is recommended to permit credit card acceptance by all City Departments for selected services. The proposed Phase Two would allow that credit cards be accepted over-the-counter at Police, Community Development, Public Works and Administrative Services Departments, Proposed Credit Card Acceptance The Community Development, Public Works, Administrative Services and Police Staff have investigated the potential acceptance of credit cards. The departments met, discussed and developed some uniform recommendations to be considered, if the City is to move forward with the acceptance of credit cards: I. $10.00 would be the minimum threshold for credit card charge acceptance. Justification: Based on the current fee structure for Police Services, it was determined that most fee collections fall into the $10.00 range (considering the cost of their more common permits and fees). Staff also contacted other agencies and in a majority of instances they have established a minimum threshold of $10.00 to $15.00. II. $1,000 would be the maximum credit charge allowable. Justification: The potential largest user of credit card acceptance would be the Community Development Department; when permit fees exceed more than $1,000, it generally denotes that the work is probably for new construction or major tenant improvements, that would require more personal attention from staff. III. Acceptance of VISA and MasterCard Only. Justification: American ExpresS and Discover merchant charges are significantly higher. Currently, Bank of America is charging the City 1.65% of each sale and $0.20 per transaction cost, as compared to a range of from 3% to 4% for American Express and Discover. ~ Unlike, Parks and Community Services (where there has been a confirmed positive increase in revenues for those agencies that have implemented an E-Commerce program for recreation type services), Staff is projecting that there may not be an increase in revenues, if the City expands credit card acceptance to other departments (specifically, Community Development, Public Works, Administrative Services, Fire and Police Departments). Those departments that cannot logically predict a marked increase in revenue tied to credit card acceptance, are actually offering the City's customer base a convenience and a customer service tool that the public would utilize and appreciate. In those instances, it should be noted that any additional costs of providing this service would probably be absorbed by the General Fund. Staff has explored the possibility of charging a convenience fee to customers who pay by credit card, however, any agreement with the credit card company would prohibit the City from charging a surcharge for use/acceptance of credit cards. Information provided to Staff indicated that the Dublin San Ramon Services District (DSRSD) charges credit card customers an additional fee. However, this additional fee is allowable because DSRSD has contracted with a third party to process credit card payments and therefore the customer is paying a processing fee to the third party contractor. Staff would not recommend using a third party contractor to process credit card payments, since it is Staff's eventual goal to have credit card acceptance integrated within the City's various program. The key benefit of having the ability of a credit card acceptance process that would integrate with the City's computer programs is that it would allow for Staff to perform one-stop entering of data, which in turn would enhance efficiency. In order to fully analyze the potential cost implications of accepting credit cards for the various departments, Staff has looked at the Fiscal Year 2002-2003 revenues for the permits and fees that fall within the $10.00 to $1,000 range: 2002-2003 $122,234 $12,705 $111,646 $123,172 $16,000 $385,757 Revenues Merchant $2,347 $260 $2,289 $2,267 $477 $7,640 Fees (1.65% plus .20 per transaction) on a 100% of the Revenues Merchant $1,408 $156 $1,373 $1,360 $286 $4,583 Fees on 60% of the Revenues* * In establishing the Parks and Community Services E-Commerce program, the 60% of tOtal transaction was used to establish projected merchant and transaction fees. The 60% was based on surveying other agencies, where on average credit cards were accepted for 60% of the total transactions. Conclusion If the City Council direction is to implement an E-Commerce program that goes beyond the Parks and Community Services Department, then the next proposed stage would be the Phase Two acceptance of credit cards for the remaining City Departments that is outlined in this report. It appears that on average the City receives about 50 inquires concerning credit card acceptance a week. Due to the successful implementation of E-Commerce for Parks and Recreation Services, the foundational pieces have already been developed to assist staff in accepting and reconciling credit card payments, as well as protecting the City and its customers from unauthorized credit card usage. RECOMMENDATION: Authorize Staff to implement Phase Two of the E-Commerce Program that would allow for Visa and MasterCard credit card acceptance to pay for City Services, with a minimum threshold of $10.00 and a maximum transaction amount not to exceed $1,000.00.