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Home My WebLink About25A - AGMT - CREDIT CARD TRANSACTIONSREQUEST FOR COUNCIL ACTION CITY COUNCIL MEETING DATE. JUNE 21, 2016 TITLE: SECOND AMENDED AGREEMENT FOR MERCHANT PAYMENT SERVICES WITH TRANSFIRST, LLC INCREASING ANNUAL EXPENDITURE CAP AND ADOPTING A MAXIMUM CREDIT CARD TRANSACTION LIMIT (STRATEGIC PLAN NO. , 5F; 4,1) CITY MAN R RECOMMENDED ACTION ® As Recommended ® As Amended ❑ Ordinance on I't Reeding ® Ordinance on 2nd Reading ® Implementing Resolution ❑ Set Public Hearing For CONTINUED TO FILE NUMBER 1. Authorize the City Manager and the Clerk of the Council to execute a Second Amended Agreement with TransFirst LLC, for merchant payment services to increase the annual credit card merchant payment services expenditure cap to $165,000 for the current 2015 -16 fiscal year as well as for the additional optional 2016 -17 fiscal year period, subject to non - substantive changes approved by the City Manager and City Attorney. 2. Approve adoption of a maximum credit card transaction limit in the amount of $5,000 dollars for credit card transactions occurring at City facilities. DISCUSSION The Finance and Management Services Agency, Treasury and Customer Service Division ( "Treasury") is responsible for maintaining all banking related services for the City. Beginning in 1997, Treasury embarked on a program to allow payment of taxes, permits, fees, fines and City services through the use of credit cards. A component of allowing the use of credit cards by patrons is the establishment of merchant credit card payment processing. Currently, customers may utilize a credit card to pay City of Santa Ana assessed taxes, permits, fees, fines and other monies due for City services. Acceptance of a credit card as a form of payment involves utilizing a merchant payment services company such as TransFirst, LLC. TransFirst, LLC presents MasterCard and Visa transactions on behalf of the City for all credit card payments made at City facilities, including but not limited to: City Hall Cashiering Counters, Payment Kiosk, Police Department Traffic and Records Divisions, and the Santa Ana Zoo. Increase of Annual Expenditure Cap - On March 12, 2012, City Council authorized a moratorium on the imposition of City credit card processing fees in order to promote electronic payments and attract more on -line payments by customers. In March 2013, Treasury negotiated the reduction 25A -1 Second Amended Agreement For Merchant Payment Services with TransFirst, LLC Increasing Annual Expenditure Cap And Adopting A Maximum Credit Card Transaction Limit June 21, 2016 Page 2 of the TransFirst discount fee from 1.5% to 0% resulting in a savings of over $55,000, which assisted in offsetting existing City expenditures. TransFirst has agreed to maintain the reduced rate for the term of this agreement. As a result of this concession the annual cap for credit processing fees was reduced from $165,000 to $70,000. On June 16, 2015, City Council approved a First Amended Agreement with TransFirst to extend the term of the existing agreement with TransFirst (Agreement #A- 2014 -071) through June 30, 2016 with a further option to extend the agreement for one additional year from July 1, 2016 through June 30, 2017. The resulting First Amended Agreement (Agreement #A- 2015 -117) included an increase in the annual expenditure cap to $95,000. However, due to the rapid growth in credit card payments made by residents and business because of the option to pay online and with the enhancement of the City's Electronic Billing and Payment Presentation, staff anticipates the annual cap will be exceeded by as much as $55,000 at the conclusion of the 2015 -16 fiscal year requiring an increase in the annual cap from the current $95,000 level to $165,000. Comparisons over the course of a 12 month period ending April 30, 2016, indicate that credit card transactions at City facilities have increased from 40,167 transactions involving $5,383,722 which totaled $80,210 in credit card processing fees to 43,746 transactions involving $7,567,573 totaling $124,634 in credit card processing fees. While this comparison indicates only a 9% increase in number of transactions, it reflects a 41% increase in total dollar amount transacted and a 29% increase in the average transaction amount, together with a 35.64% increase in credit card processing fees. To be prudent, staff recommends an increase in the cap to $165,000 for both the current fiscal year as well as the additional optional 2016 -17 fiscal year period. Adoption of a Maximum Credit Card Transaction Limit - Currently, the City does not have a maximum transaction limit on credit card payments. However, merchant payment processing charges for large dollar credit card transactions are costlier than small dollar transactions. The City incurs a variety of fees for each transaction, the most variable and largest of which is an interchange fee set by MasterCard and Visa based on a percentage of the dollar value of the transaction. This amount varies from card to card, based on criteria established by the issuer. For example, a 2% fee for a $100,000 transaction costs the City $2,000 while a 2% percent fee for a $1,000 transaction costs the City $20. Paying high fees for accepting large dollar value credit card transactions is contrary to the City's financial interest and is not in the spirit of the City's moratorium on credit card processing fees, which was intended to be a convenience for City residents and small businesses. Over the 12 month period from May 1, 2015 through April 30, 2016, 120 transactions over $5,000 occurred. These transactions totaling $2,481,100 represented 0.76% of all City facility credit card transactions, but made -up 37.98% of the total $6,553,091 in City facility credit card payments (see table below). Due to the high dollar value authorizations of these transactions, they were frequently accompanied by the use of high interchange fee specialty credit cards offering users 25A -2 Second Amended Agreement For Merchant Payment Services with TransFirst, LLC Increasing Annual Expenditure Cap And Adopting A Maximum Credit Card Transaction Limit June 21, 2016 Page 3 specialty bonus redemption points and cash back allowances, resulting in excess merchant payment processing costs to the City. Proposed Credit Card Transaction Limit —12 Month Analvsis (5/1/2015 — 4/30/2016) Proposed Credit Card Transaction Limit t $ of Credit Card Sales % of Credit Card Sales # of Credit Card Transactions % of Credit Card Transactions `Up to $5,000 $ 4,051,991 62.02% 15,590 99.24% Greater Than $5,000 $ 2,481.100 37.98% 120 0.76% Total 6 553 091 100.00% 15.710 100.00°0 t Proposed limit for single credit card payment transaction. Where transaction amount exceeds $5,000 limit, customer will be allowed to complete transaction using another form of tender; i.e., cash, check, cashier's check or money order. Proposed credit card transaction limit will apply only to walk -in credit card customers paying in City Facilities. To reduce these excess credit card processing costs, a $5,000 maximum credit card transaction limit is recommended for credit card payments processed at all City facilities. The maximum transaction limit would apply regardless of whether or not a credit card transaction represents a single or bundled payment; i.e., the payment of more than one assessment, bill, charge, fine, or permit in a single transaction. Bundled items totaling over $5,000 would be allowed to be unbundled and presented as individual transactions. The balance of transaction(s) that exceed the $5,000 limit could be paid with another form of tender; i.e., by cash, check, cashier's check or money order. Splitting a transaction that exceeds the maximum transaction limit into multiple credit card payments would be prohibited. Thus, an amount owed that exceeds the City's $5,000 maximum credit card transaction limit may not be split into two or more payment transactions using either a single credit card or using multiple credit cards, nor could the dollar amount be split into two or more transactions over multiple days by using one or more credit cards. Staff recommends that the proposed $5,000 maximum credit card limit applicable to all credit card transactions occurring at City facilities become effective October, 1, 2016. STRATEGIC PLAN ALIGNMENT Approval of this item allows the City to meet Goal #7 Team Santa Ana, Objective #5F (explore opportunities to engage with outside agencies, both private and public, to share information and increase efficiencies) and Goal #4 City Financial Stability, Objective #1 (maintain a stable, efficient and transparent financial environment). 25A -3 Second Amended Agreement For Merchant Payment Services with TransFirst, LLC Increasing Annual Expenditure Cap And Adopting A Maximum Credit Card Transaction Limit June 21, 2016 Page 4 FISCAL IMPACT 1. Funds up to the amount of $70,000 are budgeted and available to meet increased merchant payment costs in account no. (various- 62300) allocated among various departmental accounts for fiscal year 2015 -16. 2. Funds up to the amount of $165,000 in account no. (various- 62300) will be budgeted and available, upon Council approval of the fiscal year 2016 -17 budget on an allocated basis in various departmental accounts. APPROVED AS TO FUNDS AND ACCOUNTS: A Francisco Gutierrez Executive Director Finance & Management Services Agency Exhibit: 1. Second Amended Agreement 25A -4 SECOND AMENDMENT TO AGREEMENT THIS SECOND AMENDMENT TO AGREEMENT, is entered into on this 21st day of June 2016, by and between TransFirst, LLC, (hereinafter "Consultant "), and the City of Santa Ana, a charter city and municipal corporation organized and existing under the Constitution and laws of the State of California (hereinafter "City"). RECITALS: A. The parties entered into a payment processing services agreement (Agreement #A- 2014-071) dated April 18, 2014 (hereinafter "said Agreement ") by which Consultant has provided payment processing services to the City. B. The parties subsequently entered into a First Amendment to that Agreement (A -2015- 117) on June 17, 2015 to increase the Compensation and Term of said Agreement. WHEREFORE, in consideration of the covenants contained in said Agreement, and subject to all the terms and conditions of said Agreement, except those amended in the aforementioned First Amendment to said Agreement, the parties agree as follows: 1. The parties hereto now desire to amend Section 2. of said Agreement (Compensation) to increase annual compensation under said Agreement from $95,000 to $165,000 for the fiscal year beginning July 1, 2015 and ending June 30, 2016 and for the optional extension period of July 1, 2016 through June 30, 2017. 2. The parties hereto now desire to amend Section 2. of said Agreement (Scope of Services) to provide for a change order process in connection with the implementation and on -going support of credit card processing services as set forth in Exhibit A and Exhibit 'B of said Agreement. Any change order mutually agreed to by the parties hereto in connection with these services will be calculated using Consultant's current schedule of charges, provided that the professional Consultant labor rate charged shall not exceed $175.00 per hour. 3. This Second Amendment to said Agreement must be signed below and may be signed in counterpart and delivered by fax, email as a PDF (Portable Document Format) file attachment, or by other means that displays the original or a copy of the signatures. Any subsequent amendments may be signed and delivered in the same manner. /// {Signatures on following page) EXHIBIT 1 1 25A -5 IN WITNESS WHEREOF, the parties hereto have executed this Second Amendment to Agreement on the date and year first written above. ATTEST: MARIA D. HUIZAR Clerk of the Council APPROVED AS TO FORM: SONIA R. CARVALHO City Attorney By: 'mom r Lisa Storck Assistant City Attorney RECOMMENDED FOR APPROVAL: Francisco Gutierrez, Executive Director Finance & Management Services Agency CITY OF SANTA ANA DAVID CAVAZOS City Manager TransFirst, LLC. Name: Title: Tax ID# PA 25A -6