CITY OF HALLANDALE BEACH

MEMORANDUM

 

 

DATE:             August 6, 2007

 

TO:                  D. Mike Good, City Manager

 

FROM:            Patricia Ladolcetta, Director of Finance

 

SUBJECT:     Discussion of Credit Cards      CAD #004/07

 

 


PURPOSE:

 

To discuss the utilization of the City’s new credit card payment system and how processing or transaction fees will be charged.

 

 

BACKGROUND:

 

The Commission approved the implementation of accepting credit and debit cards as payment for various City charges.  The City Commission agreed to initially implement the acceptance of utility payments only, then progressing to the inclusion of other City charges.  At that time, the Commission approved assessing a convenience charge to our customers to pay for the transaction fees charged by the third party company, American Merchant Systems (AMS).

 

Following this approval, staff has taken the necessary steps to procure the necessary hardware and software to implement credit card payments.  During this period, staff also completed research on the advantages and disadvantages of credit card paying customers also being charged a convenience fee. 

 

Based on this research, staff recommends consideration of the City absorbing all fees and charges from the credit card companies (MasterCard and Visa) and AMS in order to promote use of the system and to achieve other benefits, as discussed below.

 

DISCUSSION

 

The costs involved in processing credit card transactions vary by transaction type, credit card used, and amount. According to AMS, the average cost is 1-2% of the transaction amount. For the City of Hallandale Beach, the average utility bill is $90.00 which would mean the cost would be $1.20. Depending on usage the total yearly cost could range from $15,000 on up.

 

There are two methods by which the City can process the payment of charges and fees by credit cards.  These two methods are as follows: 

 

a)      Charge the Customer – A flat “convenience fee” would be assessed for internet payments only, resulting in a charge of approximately 2.5% of the transaction, or $2.50 for the average utility bill.  Payments at the counter must be offered without charge in order for the convenience fee to be allowed for internet payments. Only utility bills would be able to be paid by internet.

 

b)      City absorbs the fees – Cost to the City would be an average of 1-2% or $1.20 for the average utility bill.  Payments may be made by internet or face-to-face payment.  All fee types including payment of fees at the Parks Department may be paid in person; only utility bills may be paid via internet.

 

1)      Choosing to charge credit card fees to the residents or charging convenience fees for internet transactions would cause the City to lose the 1% incentive rate included in the VISA/MasterCard Utility Fee Program, thus increasing the processing cost.

 

2)      Per an HTE discussion forum, 29 out of 35 cities absorb fees.  Additional information from the most recent survey follow:

 

3)      The City of Greenacres began implementing the acceptance of credit cards at the end of April, after almost 2 years of studies and surveys.  Greenacres has decided to absorb the costs.  The outcome of their study of 7 or 8 municipalities in Palm Beach County was that they all absorbed the fees.

 

4)      The City of Lake Worth absorbs fees.  Payments received for the month of March totaled $1,561,402.99.  The amount absorbed for receiving these charges via credit card totaled $17,377, less than 2%.

 

5)      Responses from cities within a closer proximity to the City of Hallandale Beach are as follows:

·         Cooper City accepts VISA/MC for utility only and absorbs fees, but charges a convenience fee for online transactions

·         City of Coral Springs accepts VISA/MC and absorbs fees

·         City of Deerfield Beach accepts VISA/MC and absorbs fees for utility payments, being charged 1.8% - 3.5%, depending upon size of transaction and card type

·         City of Miramar accepts VISA/MC and absorbs fees; this city was paying approximately 3%, but plans were made to change providers to acquire a lower rate of 1.25%

·         City of Pembroke Pines accepts VISA/MC and American Express and absorbs fees

·         City of Wilton Manor accepts VISA/MC and absorbs fees

 

6)      Reasons given by other cities as to why fees should be absorbed include:

·         to encourage the use of credit cards as a payment option to reduce traffic in the lobby area,

·         to aid in the reduction in check processing and to serve as a convenience to the citizens,

·         to save staff time and better utilize staff capabilities,

·         a cost of doing business,

·         save costs of preparing and mailing delinquent notices as well as disconnecting service,

·         improve cash flow

 

The City of Hallandale Beach would begin accepting credit cards for utility payments and other fees within two months of a decision on the absorption of transaction costs. 

 

RECOMMENDATION:

 

The City Commission authorize absorbing the transaction costs involved with processing credit card payments.

 

Reviewed:

 

  

_______________________________                                                          __________

D. Mike Good, City Manager                                                                             Date

 

 

_____Approved                _____Disapproved                _____Hold for Discussion

 

 

 

 

 

 

PML/rf