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Second Amended Agreement For Merchant Payment Services with TransFirst, LLC Increasing
<br />Annual Expenditure Cap And Adopting A Maximum Credit Card Transaction Limit
<br />June 21, 2016
<br />Page 2
<br />of the TransFirst discount fee from 1.5% to 0% resulting in a savings of over $55,000, which
<br />assisted in offsetting existing City expenditures. TransFirst has agreed to maintain the reduced
<br />rate for the term of this agreement. As a result of this concession the annual cap for credit
<br />processing fees was reduced from $165,000 to $70,000.
<br />On June 16, 2015, City Council approved a First Amended Agreement with TransFirst to extend
<br />the term of the existing agreement with TransFirst (Agreement #A- 2014 -071) through June 30,
<br />2016 with a further option to extend the agreement for one additional year from July 1, 2016
<br />through June 30, 2017. The resulting First Amended Agreement (Agreement #A- 2015 -117)
<br />included an increase in the annual expenditure cap to $95,000. However, due to the rapid
<br />growth in credit card payments made by residents and business because of the option to pay
<br />online and with the enhancement of the City's Electronic Billing and Payment Presentation, staff
<br />anticipates the annual cap will be exceeded by as much as $55,000 at the conclusion of the
<br />2015 -16 fiscal year requiring an increase in the annual cap from the current $95,000 level to
<br />$165,000.
<br />Comparisons over the course of a 12 month period ending April 30, 2016, indicate that credit
<br />card transactions at City facilities have increased from 40,167 transactions involving $5,383,722
<br />which totaled $80,210 in credit card processing fees to 43,746 transactions involving $7,567,573
<br />totaling $124,634 in credit card processing fees. While this comparison indicates only a 9%
<br />increase in number of transactions, it reflects a 41% increase in total dollar amount transacted
<br />and a 29% increase in the average transaction amount, together with a 35.64% increase in credit
<br />card processing fees. To be prudent, staff recommends an increase in the cap to $165,000 for
<br />both the current fiscal year as well as the additional optional 2016 -17 fiscal year period.
<br />Adoption of a Maximum Credit Card Transaction Limit - Currently, the City does not have a
<br />maximum transaction limit on credit card payments. However, merchant payment processing
<br />charges for large dollar credit card transactions are costlier than small dollar transactions. The
<br />City incurs a variety of fees for each transaction, the most variable and largest of which is an
<br />interchange fee set by MasterCard and Visa based on a percentage of the dollar value of the
<br />transaction. This amount varies from card to card, based on criteria established by the issuer.
<br />For example, a 2% fee for a $100,000 transaction costs the City $2,000 while a 2% percent fee
<br />for a $1,000 transaction costs the City $20. Paying high fees for accepting large dollar value
<br />credit card transactions is contrary to the City's financial interest and is not in the spirit of the
<br />City's moratorium on credit card processing fees, which was intended to be a convenience for
<br />City residents and small businesses.
<br />Over the 12 month period from May 1, 2015 through April 30, 2016, 120 transactions over $5,000
<br />occurred. These transactions totaling $2,481,100 represented 0.76% of all City facility credit card
<br />transactions, but made -up 37.98% of the total $6,553,091 in City facility credit card payments
<br />(see table below). Due to the high dollar value authorizations of these transactions, they were
<br />frequently accompanied by the use of high interchange fee specialty credit cards offering users
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