HomeMy WebLinkAboutItem 1d - Amendment to Contract for Electronic Web-Payment ServiceAupusc i, IYU3
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DATE:
TO:
FROM
STAFF REPORT
Administrative Services Department
March 17, 2015
Honorable Mayor and City Council
Hue Quach, Administrative Services Director
Shannon Huang, Financial Services Manager /Treasurer
SUBJECT: AMENDMENT TO CONTRACT WITH HP ENTERPRISE SERVICES, LLC
FOR ELECTRONIC WEB- PAYMENT SERVICE
Recommendation: Approve
SUMMARY
On February 21, 2012, the City Council approved a three -year contract with HP
Enterprise Services, LLC to host the City's electronic bill payment services for water
utility and parking citation payments, and to collect the convenience fees from the users
on per transaction basis. After almost three years of implementation, the participation
rate is still low. Staff further evaluated the program and re- negotiated with the vendor.
As a result, the vendor offered a favorable proposal to reduce the convenience
processing fee if the City opted to absorb the costs rather than charging the fees directly
to the customer. Based on the experiences of other municipal agencies, the
participation of electronic payments increased once the convenience processing fee
was eliminated. With more participation in electronic payment, there is a direct benefit
that results in the efficiency of the overall collection process. It is recommended that
absorb the fees associated with electronic payment through HP's service, and to extend
the contract for three additional years. Changing the current policy to begin absorbing
the convenience processing fees requires an additional appropriation of $11,200 from
the General Fund; the extra processing cost will be added to the fee structure in the
next fiscal year.
DISCUSSION
The City accepts payments by credit card, check, and cash through mail or at the City
Hall Cashier counter. Automatic debit services are also available to our water utility
customers by setting up an Automated Clearing House transfer (ACH) from their bank
account. In early 2012, web electronic payment was added as an additional payment
option; however, it included an added charge of a convenience processing fee.
HP Enterprise Services LLC. Contract Renewal
March 17, 2015
Page 2 of 5
HP Enterprise Services, LLC was selected through a Request for Proposals process,
among vendors who provide a hosted Payment Card Industry Data Security Standard
(PCI -DSS) compliant electronic bill payment services. All services, including both
hardware and software, were implemented and maintained by the vendor. The web -
based electronic bill payment service accepts credit card and e -check through the
Internet and payment by phone (IVR) services 24 hours a day and 7 days a week. The
users are required to pay a convenience processing fee of $2.95 for credit card
transaction and $2.50 for e -check payment for the option of paying water utility charges
online, and $2.50 for parking citation payment. The fees are disclosed upfront prior to
the authorization of any payments, with the entire amount of the convenience
processing fees collected by the vendor and the City receiving payments for the water
billing or citation amounts.
After negotiation with HP Enterprise on reducing the fees, they have proposed a
favorable rate of $0.45 per transaction on the condition that the City pays for the credit
card fees through our own merchant vendor. The reduced fee proposed by HP was
with the anticipation that the number of electronic payment will increase significantly
once it is free to the user, so their overall service fee will not reduce. The increased
volume on electronic payments will also improve both efficiencies and accuracy of the
collection process within the Financial Services Division.
The City supplies water and sewer services to approximately 15,000 households in the
City, and issues 7,500 bi- monthly bills each month. The level of participation for water
utility payment has been low due to the convenience processing fee charged: we
currently receive approximately 130 -150 web - payments a month, which is equal to
approximately 2% of the monthly bills. Once the convenience processing fee is
eliminated, the City will need to pay approximately $1 of credit card fee on an average
water bill of $125 in addition to the $0.45 charged by HP. The total per web payment is
estimated to be $1.45 on average versus the current charge of $2.50 per transaction
Staff attempted to survey surrounding cities on their current credit card fees but only
received responses from the City of Monrovia and Monterey Park. The City of Monrovia
has an average credit card fee rate of $0.75 per transaction. However, Monrovia is on a
monthly billing cycle as opposed to the bimonthly cycle in Arcadia. As such, when
adding the total billed amount of both cities on a similar cycle, both cities have similar
credit card fees at the rate of $1.45 - $1.50. The City of Monterey Park has a
transaction fee of $2.50. Depending on the level of participation, the aggregate fees for
water utility are estimated to be as follows:
HP Enterprise Services LLC. Contract Renewal
March 17, 2015
Page 3 of 5
TABLE I - Water Utilitv
Level of Participation
No. of Payments per
month
Total Annual Cost
20%
1,500
$26,100
30%
2,250
$39,150
40%
31000
$527200
50%
+_37750
$657250
Currently, approximately 25% of citations are paid through the online portal. Due to the
lower cost of parking citations, the total per transaction costs charged will be higher, at
approximately $1.94. The estimated costs in total are as follows based on 10,200
citations collected in a year depending on the level of participation:
TABLE II - Parkinq Citations
Level of Participation
No. of Payments per
month
Total Annual Cost
30%
255
$5,900
40%
340
$7,900
50%
425
$9,900
Staff conducted a survey with the neighboring agencies and found that the majority of
agencies offer free online options for utility payment, but still charge a fee for parking
citation web payment. Table III below includes both fee charges and participation rates
provide by other water agencies. Participation rates for parking citation were not
generally available. The result is significantly different from the last survey conducted
before the implementation of electronic payment option. Many agencies have eliminated
the convenience processing fee for online water payment transactions over the last
three years.
HP Enterprise Services LLC. Contract Renewal
March 17, 2015
Page 4 of 5
TABLE III — City Survey of Online Usage (Water)
Water Utility Citation
Agency
On -line per
transaction fee
Particiation %
City of Pasadena
No fee
30%
City of Monrovia
No fee
20%
City of Monterey Park
No fee,
effective
November 1st
N/A
City of La Verne
No fee
N/A
City of Glendora
No fee
20%
City of Glendale
No fee
N/A
City of Alhambra
No fee
55%
City of Azusa
$3.25 up to
$500
N/A
Cucamonga Valley Water
No fee
30%
Sunny Slope Water
$3.75
N/A
California American Water
$1.80
N/A
Golden State Water
N/A
N/A
San Gabriel County Water
N/A
N/A
On -line per
transaction
fee
0
$3.50
$3.95 for
$100 and
under, then
5%
$3.00
$3.50
$3.95
$3.00
$3.00
Although the survey showed that the majority of cities still charge a convenience fee for
citation web payments, it is recommended that the City eliminate this charge for both
water utility and parking citation payments in order to eliminate confusion and the
frustration that the public may have as a result of charging a fee for one type of payment
versus another. The straightforward access to the web payment option could lead to
efficiencies in processing payments and curtail overall costs.
As part of the ongoing water rate study, the cost of absorbing credit card charges for
online payments will be built into the proposed rate structure. The additional charges
for parking citations will also be considered when User Fees are reviewed in the
upcoming Fiscal Year. In the meantime, the City will need to absorb the additional
costs.
The contract with HP Enterprises will expire in April of 2015. It is recommended that the
City continue using the services provided by HP Enterprises and extend the contract for
three more years. Staff is satisfied with the services provided by HP and has received
positive feedback from users. HP Enterprises was first established in 1994 and has
provided web payment services to more than 400 clients nationwide including higher
education and state and local government. The contract provides the option to
terminate the agreement at any time with 60 days written notice.
HP Enterprise Services LLC. Contract Renewal
March 17, 2015
Page 5 of 5
FISCAL IMPACT
The cost of absorbing online fees for water utility and parking citation payments is
estimated to be between $32,000 and $75,150 annually, depending on the level of
participation. For the remainder of the current fiscal year, the costs are estimated to not
exceed $11,200. An additional appropriation is required from the General Fund for this
activity and sufficient funds are available.
RECOMMENDATION
It is recommended that the City Council authorize and direct the City Manager to
execute an amendment to the contract with HP Enterprise Services, LLC for electronic
web - payment service from a convenience fee method to the City absorbing the costs,
and extend the contract for three years.
Approved.
Dominic Lazzar t
City Manager