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Home My WebLink About2010-11-04 Council Packet - Work Sessioni COUNCIL WORK SESSION THURSDAY, NOVEMBER 4, 2010 KENAI COUNCIL CHAMBERS 6:00 P.M. TOPIC: CREDIT CARD ACCEPTANCE PROGRAM \MC 4 of KENAI, ALASKA Nye, "Village with a Past, C/ y with a Future FINANCE DEPARTMENT 210 Fidalgo Avenue, Kenai, Alaska 99611 -7794 Telephone: 907 - 283 -7535 ext 221 / FAX: 907 - 283 -3014 To: Mayor Porter Council Members Thru: Rick Koch, City Manager From: Terry Eubank, Finance Director Date: November 2, 2010 Re: City of Kenai Credit Card Acceptance Policy The purpose of this memo is to discuss the City's credit card acceptance policy, propose three possible changes to the current policy and make a recommendation for implementation. Current Policy The City's current credit card acceptance policy is attached for your review. The current policy is limited in scope primarily due to the fees associated with credit card acceptance. Unlike retail business, the City would not see any significant increase in sales to offset the fees associated with credit card acceptance. Credit card acceptance is being pursued as a customer convenience. This is quite different from the motivations of retail businesses. The goal has been to develop a credit card acceptance policy to enhance customer convenience while limiting the burden on those customers not paying via credit card and limiting negative financial impact on the City. The following three options are offered for your consideration: Proposed Options Option 1 Do nothing. The City would continue its current policy of credit card acceptance at limited locations and for limited fees. Advantages Simplicity is the greatest advantage of this solution. This would require no modifications to the City's accounting system or training of City staff. There would be no costs associated with this option including initiation of no new credit card acceptance fees, no requirements to purchase or lease equipment, and no need to modify the current accounting system.. Disadvantages The current level of credit card acceptance is viewed by many customers as inadequate leading to low customer satisfaction with the current policy. Option 2 Implement full credit card acceptance for all City fees with no change to the current fee amount(s) and no use fees passed on to the credit card user. Advantages Ease of administration. A 100% change across all depaihuents is simpler to administer than specific changes which only apply to certain fees. This option will provide the highest level of customer convenience. Disadvantages Cost will be significant to the City. The attached graphs show the estimated annual cost for all City funds to range from ($18,191.34) to ($72,985.29) depending upon the percentage of payments received via credit card. This option will also require the greatest amount of equipment, staff training, and system modifications. Any fee absorbed by the City for credit card acceptance is paid by those not using credit cards as a form of payment. The City will no longer receive equal revenue from a fee depending upon its payment method. Options 3 Implement a blended acceptance policy that will exclude transactions creating high fees to the City and benefiting very few customers, increase fees on for high volume transactions and offer cash discounts to those paying by methods other than credit cards, and absorb credit card fees on transactions benefiting many customers and significantly reducing the revenue of the City. Advantages Meet the goal to enhancing customer convenience while limiting the burden on those customers not paying via credit card and limiting the revenue impact on the City. Reduces the negative revenue impact of a full acceptance policy. Attached are cost estimates for Option 3. Disadvantages Cost. While significantly less than full implementation, this option has and estimated annual cost of between ($1,029.56) and ($907.34) depending upon the percentage of payments received via credit cards. This will require purchase and operation of multiple credit card terminals at City Hall, the Library, the Senior Center, Public Safety, and Animal Control. Sufficient funds are budgeted for purchase of all equipment needed for implementation. Staff training will be significant and will include multiple departments. Recommendation Option 3 is recommended for implementation. Option 3 best meets the administration's goals. It will provide credit card acceptance to the majority of City fee payors. Option 3 also provides a reasonable level of fees to be absorbed. Full implementation could cost the City the equivalent of 0.12 mills of property tax. The FY II mill rate reduction was 0.15 mills. Fee Type By Fund Airport Terminal Parking Fees Terminal Rents and Leases Non - Signatory Landing Fees Aircraft Parking and Tie Down Fees Miscellaneous Fees Water & Sewer Water Fees Hook -up /Disconnect Fees Miscellaneous Fees Vintage Pointe Apartment Rent Deposits Senior Center Donations General Fund Animal Shelter Fees Library Fees Parks & Recreation Fees Police Fees (Not Citations) Improvement District Payments Dipnet Fees Miscellaneous Fees Car Rental Commissions Signatory Landing Fees Fuel Flowage Fee Land Leases Float Plane Basin Fuel Sales Sewer Fees Deposits Miscellaneous Fees Center Rents Licenses & Permits Cemetery Fees Ambulance Fees Traffic Citations Land Lease Payments Multipurpose Facility Fees Current Policy By Fund Airport Currently the City's Airport accepts credit cards for the following transactions: Terminal Parking Fees Aircraft Parking and Tie Down Fees Float Plane Basin Fuel Sales Non - Signatory Landing Fees Miscellaneous Fees The Airport is currently absorbing all costs associated with accepting credit cards. No fees have been increased or fees passed on to the consumer. Land lease and terminal rent payments can be automatically debited from the payor's account monthly upon request. There is no charge for this service. Water & Sewer Water & Sewer bills may be paid online or over the phone by credit card with a $3.50 fee paid by the customer and retained by the online payment service provider. Customers may have their monthly bill automatically debited from their bank account monthly at no charge. Vintage Pointe Vintage Pointe rents cannot currently be paid via credit card. Customers may have their monthly rent automatically debited from their bank account monthly at no charge. Senior Center Credit Cards are not currently accepted at the City's Senior Center. General Fund The General Fund does not currently accept credit cards as a form of payment. Monthly land lease payments can be automatically debited from the payor's account monthly upon request. There is no charge for this service. $0 - $10,000 — - $20,000 - $30,000 - $40,000 - $50,000 - $60,000 - $70,000 - $80,000 FINANCIAL IMPACT OF CREDIT CARD ACCEPTANCE - OPTION 1 ASSUMING NO INCREASE IN FEES BY % OF CARD USEAGE BY FUND PER FISCAL YEAR ?S% 30% 40% 50% 60% 70% 80% 90% 100% Airport Fund ® W & S Fund st, Vintage Pointe E Senior 0 General Fund J 25% 30% 40% 50% 60% 70% 80% 90% 100% Airport Fund $ (5,002.75) $ (5,932.27) $ (8,079.55) $ (9,993.27) $ (11,853.71) $ (13,808.21) $ (15,730.34) $ (17,535.37) $ (19,349.88) W & S Fund $ (8,024.06) $ (9,625.01) $ (12,823.22) $ (16,030.78) $ (19,192.10) $ (22,387.04) $ (25,615.20) $ (28,780.94) $ (31,953.36) Vintage Pointe $ (1,465.69) $ (1,773.90) $ (2,354.88) $ (2,971.66) $ (3,575.01) $ (4,181.52) $ (4,791.46) $ (5,426.47) $ (5,989.54) Senior $ (85.83) $ (96.31) $ (126.44) $ (163.19) $ (196.31) $ (233.87) $ (270.19) $ (297.91) $ (330.73) General Fund $ (3,613.01) $ (4,421.31) $ (5,991.23) $ (7,479.00) $ (9,074.95) $ (10,785.76) $ (12,300.02) $ (13,787.83) $ (15,361.78) $ (18,191.34) $ (21,848.81) $ (29,375.32) $ (36,637.89) $ (43,892.08) $ (51,396.40) $ (58,707.21) $ (65,828.52) $ (72,985.29) FINANCIAL IMPACT OF CREDIT CARD ACCEPTANCE - OPTION 1 ASSUMING NO INCREASE IN FEES BY % OF CARD USEAGE PER FISCAL YEAR 40% 50% 60% 70% 80% 90% 100% $(20,000.00) $(30,000.00) $(40,000.00 $(50,000.00) $(60,000.00) • $(70,000.00) $(80,000.00) - -- Total CC Fees 25% 30% 40% 50% 60% 70% 80% 90% 100% $ (18,191.34) $ (21,848.81) $ (29,375.32) $ (36,637.89) $ (43,892.08) $ (51,396.40) $ (58,707.21) $ (65,828.52) $ (72,985.29) Proposed Blended Policy By Fund Airport Continue with current credit card acceptance policy for the following fees with no change in fee structure or costs passed on to the customer. Terminal Parking Fees Aircraft Parking and Tie Down Fees Float Plane Basin Fuel Sales Non - Signatory Landing Fees Miscellaneous Fees Credit cards will not be accepted for the following fees: Terminal Rents and Leases Signatory Landing Fees Land Leases Car Rental Commissions Fuel Flowage Fee The estimated revenue impact of this policy change would be ($332.40) to ($1,127.97) annually. Water & Sewer The Water & Sewer Fund would offer credit card acceptance at City Hall, via the internet, and over the phone. Customers could continue to have their monthly bill automatically debited from their account at no cost. Pin debit cards would be accepted at City Hall. All water and sewer fees would be increased 2% with a 2% cash discount offered to those paying by any means other than credit card. The estimated revenue impact of this policy change would be $509.42 to $4,471.80. Vintage Pointe Vintage Pointe would offer credit card acceptance at the Senior Center office, City Hall, via the internet, and over the phone. Customers could continue to have their monthly rent automatically debited from their account at no cost. Pin debit cards would be accepted at City Hall and the Senior Center Office. All Vintage Point Rents would be increased 2% with a 2% cash discount offered to those paying by any means other than credit card. The estimated revenue impact of this policy change would be $61.11 to $651.64 annually. 1Pa,ge Proposed Blended Policy By Fund Senior Center The Senior Center would offer credit card acceptance for all fees. Fees for rental of the Senior Center facilities would be increased 5% to offset the revenue loss from fees on center donations. The estimated revenue impact of this policy change would be ($0.33) to $20.51 annually. General Fund The General Fund would accept credit card payments at City Hall, Kenai Library, Animal Control, and the Public Safety Building. Credit card payment would be accepted for the following fee types: Animal Shelter Fees Library Fees Parks & Recreation Fees Police Fees (Not Citations) Miscellaneous Fees Licenses & Permits Cemetery Fees Ambulance Fees Traffic Citations Multipurpose Facility Fees ( >$500.00) Credit card payments will not be accepted for the following fees: Improvement District Payments Land Lease Payments Dipnet Fees Multipurpose Facility Fees ( <$500.00) Animal shelter fees would be increased 2% with a 2% cash discount offered on all payment methods except payments via credit card. All other fees will remain unchanged and no fees will be passed on to the credit card user. The estimated revenue impact of this policy change would be ($1,267.36) to ($4,923.32) annually. 21 Page $6,000 $4,000 $2,000 $0 - $2,000 - 54,000 - $6,000 - $8,000 FINANCIAL IMPACT OF CREDIT CARD ACCEPTANCE - OPTION 3 BLENDED POLICY BY % OF CARD USEAGE BY FUND PER FISCAL YEAR Airport Fund ® W & 5 Fund Vintage Pointe m Senior im General Fund 25% 30% 40% 50% 60% 70% 80% 90% 100% Airport Fund $ (332.40) $ (376.49) $ (502.57) $ (629.36) $ (728.00) $ (827.54) $ (912.23) $ (1,016.16) $ (1,127.97) W & S Fund $ 509.42 $ 738.65 $ 1,272.66 $ 1,752.02 $ 2,249.55 $ 2,760.18 $ 3,412.81 $ 3,896.76 $ 4,471.80 Vintage Pointe $ 61.11 $ 100.22 $ 178.04 $ 254.80 $ 333.80 $ 414.46 $ 492.22 $ 573.01 $ 651.64 Senior $ (0.33) $ 1.66 $ 5.27 $ 8.18 $ 11.29 $ 13.42 $ 15.43 $ 18.46 $ 20.51 General Fund $ (1 267.36) $ (1471.99) $ (2,016.96) $ (2,500.90) $ (2,908.67) $ (3,392.78) $ (3,888.14) $ (4,434.74) $ (4,923.32) $ (1,029.56) $ (1,007.94) $ (1,063.57) $ (1,115.25) $ (1,042.05) $ (1,032.26) $ (879.90) $ (962.68) $ (907.34) FINANCIAL IMPACT OF CREDIT CARD ACCEPTANCE - OPTION 3 BLENDED POLICY BY % OF CARD USEAGE PER FISCAL YEAR 30% 40% 50% 60% 70% 80% 90% 100% $(2,000.00) 25% 30% 40% 50% 60% 70% 80% 90% 100% Total CC Fees $ (1,029.56) $ (1,007.94) $ (1,063.57) $ (1,115.25) $ (1,042.05) $ (1,032.26) $ (879.90) $ (962.68) $ (907.34) PUBLISHER'S AFFIDAVIT UNITED STATES OF AMERICA, STATE OF ALASKA Denise Reece every day consecutive following dates: November 1, 2010 X day NOTARY PUBLIC in favor for the State of Alaska. My Commission ex -es 26- Aug -12 s s: being first. duly sworn, on oath deposes and says: That 1 am and was at all tithes here in this affidavit mentions, Supervisor of Legals of the Peninsula Clarion, a news- paper of general circulation and published at Kenai, Alaska, that the Council Work Session PO #93476 a printed copy of which is hereto annexed was published in said paper one each and for o successive and in the issues on the SUBSCRIBED AND SWORN to me before yr� 10th of November 2010 PUBLIC NOTICE Vice is hereby given, the Kenai City Council wi i meet in a work ession o n Thursday, November 4, 2010 at 6:00 p.m to discuss a Ci credit card acceptance program. un session will be held in the Kenai C ity Cocil Chambers 210 Fidaigo Avenue, Kenai,: Alaska and is open to the Ceuta ct the Kenai City Clerk's office at 283 7535, extension 231 with questions. Carol L. Frees, City Cle s of Kenai The evork located a public,... D4721211" PUBLIC NOTICE Notice is hereby given, the Kenai City Council will meet in a work session on Thursday, November 4, 2010 at 6:00 p.m. to discuss a City of Kenai credit card acceptance program. The work session will be held in the Kenai City Council Chambers located at 210 Fidalgo Avenue, Kenai, Alaska and is open to the public. Contact the Kenai City Clerk's office at 283 -7535, extension 231 with questions. Carol L. Freas, City Clerk D/211