AgdaPkt 2013-02-11 - Laserfiche WebLink

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6.1.D. - Page 1 RE PO RT To the Honorable Mayor and City Council From the Cit Mana er February 11, 2013 SUBJECT Wells Fargo Bank Merchant Card Services RECOMMENDATION Authorize the City Manager to execute a contract with Wells Fargo Bank for the provision of inerchant card services. BACKGROUND The City has accepted payments by credit and debit cards for over 15 years. Although there is a cost of doing so, the City adopted this payment method in response to requests from those who do business with the City as paying by credit or debit card is a preferred method of payment for many people and businesses. Presently the City accepts credit and debit card payments for utility services, development fees, recreation classes, parking fees, and library fines. The total annual transaction volume is about $11.8 million and is comprised mostly of payments for utility services. ANALYSIS The annual cost to the City for accepting credit and debit card payments has been escalating in recent years due to the increased popularity of this payment channel. This is particularly evident in situations where residents or businesses desire to pay for services via the internet. The total annual cost to the City to accept credit and debit card payments (merchant service fees) is about $132,000 annually and allocated primarily to the water fund and sewer fund due to the high number of utility customers paying with credit and debit cards. Wells Fargo receives about $16,100 of the total fees while Visa and Mastercard receive $115,900 as "interchange" fees. The interchange fees are non- negotiable and remain the same regardless of who is processing the transactions for the City at the front end. On a percentage basis Wells Fargo charges 0.135% of each transaction. This is the rate that Wells Fargo charges the State of California under a pricing arrangement agreed to by the State and Wells Fargo through a competitive process. After we migrate all of our utility customers off the former automatic utility billing payment system to the new system that was deployed in July 2012 we expect the fees paid to Wells Fargo to drop from $16,100 a year to less than $12,000 a year as these transactions are being handled by a different processor. The term of the recommended agreement is for one year, with an additional one year extension.