HomeMy WebLinkAbout14 - Resolution Amending the Schedule of Rents, Fines and Fees to Provide a Pass-Through of Credit Card Transaction Fee Charged by Third PartiesQ �EwPpRT
CITY OF
s NEWPORT BEACH
`q44:09 City Council Staff Report
February 11, 2025
Agenda Item No. 14
TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
FROM: Jason AI -Imam, Finance Director/Treasurer - 949-644-3126,
jalimam@newportbeachca.gov
PREPARED BY: Jessica Kan, Revenue Manager — 949-644-3153,
jkan@newportbeachca.gov
TITLE: Resolution No. 2025-8: A Resolution of the City Council of the City of
Newport Beach, California, Amending the Schedule of Rents, Fines
and Fees to Provide a Pass -Through of Credit Card Transaction Fee
Charged by Third Parties Directly to the Consumer
/_1 16"t I:7_T91 6
The City of Newport Beach has expanded online payment options across departments,
leading to increased credit card usage, which incurs processing fees paid to credit card
companies, payment vendors, and banks. A variety of payment methods, including cash,
check, credit card, ACH, and e-check, are accepted for services such as utility bills,
permits, and fines. To recover service costs, the City Council previously approved a
2.85% credit card convenience fee, but processing fees vary due to different card types,
third -party vendors, and payment platforms. With 10 different merchant processors
charging varying rates, the City seeks flexibility to pass through actual processing costs.
Customers who opt out of the pass -through fee can pay via ACH or e-check, with the City
continuing to cover those transaction costs.
RECOMMENDATIONS:
a) Conduct a public hearing;
b) Determine this action is exempt from the California Environmental Quality Act (CEQA)
pursuant to Sections 15060(c)(2) and 15060(c)(3) of the CEQA Guidelines because
this action will not result in a physical change to the environment, directly or indirectly;
and
c) Adopt Resolution No. 2025-8, A Resolution of the City Council of the City of Newport
Beach, California, Amending the Schedule of Rents, Fines and Fees to Provide a
Pass -Through of Credit Card Transaction Fee Charged by Third Parties Directly to the
Consumer.
DISCUSSION:
To provide more convenient and efficient payment options for the City's customers, online
payment opportunities have expanded across various City departments. As a result, the
City has seen an increase in customer payments made via credit card.
14-1
Amending the Schedule of Rents, Fines and Fees to Provide a Pass -Through of
Credit Card Transaction Fee Charged by Third Parties Directly to the Consumer
February 11, 2025
Page 2
While credit card payments offer multiple benefits to both the City and its customers —
such as convenience and improved efficiency —the City is responsible for paying fees
associated with each credit card transaction. These fees are paid to credit card
companies, the City's payment processing vendor, and the bank that handles the
transactions.
The City currently offers a wide range of payment options across departments, including
the Community Development Department, Finance Department, Recreation &
Senior Services, Police Department, and Library, among others. These options cover
services such as utility bills, business licenses, permit fees, parking tickets, citations, and
tax payments. Payment methods accepted at City Hall and satellite locations include
cash, check, and credit card, while online payment methods include credit card, ACH,
and e-check.
The City's Schedule of Rents, Fines, and Fees (SRFF) generally includes cost -of -service
fees designed to recover expenses associated with providing specific services.
Previously, the City Council approved a 2.85% credit card convenience fee for online
payments, based on a review of credit card fees incurred from online utility payments.
However, credit card processing fees vary due to several factors. For example, the City
utilizes 10 different merchant card processors, each charging different rates. Fees also
vary depending on the credit card type —such as rewards, corporate, or premium
cards —since certain cards carry higher interchange fees. Additionally, different
departments use various third -party platforms for payment processing, each with unique
cost structures that impact fees.
As a result, the City requires flexibility to pass through the actual costs incurred by the
payment processor. For online payments, if a customer chooses not to pay the
pass -through fee set by the third -party vendor, they will have the option to pay via ACH
or e-check. In these cases, the City will continue to absorb the associated processing
costs for ACH and e-check transactions.
FISCAL IMPACT:
In fiscal year 2024, the City incurred approximately $2.1 million in credit card processing
fees. The introduction of the pass -through fee is projected to achieve full cost recovery
for the City's credit card transaction fees over the course of several years through a
phased implementation of various departments and third -party payment processors.
Under the proposed fee structure, the City will fully recover these costs over time, thereby
redirecting resources to support other public services and programs.
ENVIRONMENTAL REVIEW:
Staff recommends the City Council find this action is not subject to the California
Environmental Quality Act (CEQA) pursuant to Sections 15060(c)(2) (the activity will not
result in a direct or reasonably foreseeable indirect physical change in the environment)
and 15060(c)(3) (the activity is not a project as defined in Section 15378) of the CEQA
Guidelines, California Code of Regulations, Title 14, Chapter 3, because it has no
potential for resulting in physical change to the environment, directly or indirectly.
14-2
Amending the Schedule of Rents, Fines and Fees to Provide a Pass -Through of
Credit Card Transaction Fee Charged by Third Parties Directly to the Consumer
February 11, 2025
Page 3
NOTICING:
The agenda item has been noticed according to Government Code Sections 66018(a)
and 6062a (published for 10 days, on two publication dates separated by at least five
dates between them: notices were published on January 30, 2025, and February 6, 2025);
Government Code Sections 66016(a) (a notice mailed at least 14 days prior to the
meeting to any interested party who files a written request: notices were mailed to Building
Industry Association of Southern California, Southern California Edison, Southern
California Gas Company, and AT&T on January 27, 2025); and the Brown Act (72 hours
in advance of the meeting at which the City Council considers the item).
ATTACHMENTS:
Attachment A — Resolution No. 2025-8
Attachment B — Exhibit 1 to Resolution No. 2025-8 (SRFF, All Departments, item no. 9,
"Credit Card Convenience Fee," and corresponding comment "[e].")
14-3
Attachment A
Resolution No. 2025-8: A Resolution of the City Council of the City of Newport Beach,
California, Amending the Schedule of Rents, Fines and Fees to Provide a Pass -Through
of Credit Card Transaction Fee Charged by Third Parties Directly to the Consumer
14-4
RESOLUTION NO. 2025- 8
A RESOLUTION OF THE CITY COUNCIL OF THE CITY
OF NEWPORT BEACH, CALIFORNIA, AMENDING THE
SCHEDULE OF RENTS, FINES AND FEES TO PROVIDE
A PASS -THROUGH OF CREDIT CARD TRANSACTION
FEES CHARGED BY THIRD PARTIES DIRECTLY TO
THE CONSUMER
WHEREAS, Section 3.36.010 (Findings) of the Newport Beach Municipal Code
("NBMC") provides that services and programs that primarily benefit a person requesting
the service are traditionally funded in whole, or in part, from fees charged to the person
_requesting the service;
WHEREAS, Subsection (A) of Section 3.36.030 (Cost Recovery Percentages) of
the NBMC provides that the cost recovery percentage appropriate for each user service
shall be one hundred percent (100%), unless the amount is modified by Exhibit A to
Section 3.36.030 (Cost Recovery Percentages) of the NBMC;
WHEREAS, Subsection (B) of Section 3.36.030 (Cost Recovery Percentages) of
the NBMC provides that the City Council shall establish, by resolution, the actual fee or
charge for each user service based upon the actual cost of providing the user service;
WHEREAS, Subsection (C) of Section 3.36.030 (Cost Recovery Percentages) of
the NBMC provides that the City Council may, by resolution, modify the amount of fee or
charge upon a determination that there has been an increase or decrease in one or more
cost factors relevant to the calculation of the actual cost of providing the service;
WHEREAS, on April 23, 2024, the City Council adopted Resolution No. 2024-29,
which revised the City's Schedule of Rents, Fines and Fees ("SRFF"), in part, to add a
credit card convenience fee of 2.85% to offset the cost charged to the City by payment
processors for credit card transactions;
WHEREAS, third parties may provide services directly to the customer, which
may include a credit transaction fee charged directly to the customer which differs from
the fee charged by the City; and
WHEREAS, the City Council desires to revise the credit card convenience fee
within the SRFF to include a pass -through of the credit card transaction fee charged by a
third party when charging the fee directly to the customer.
NOW, THEREFORE, the City Council of the City of Newport Beach resolves as
follows:
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Resolution No. 2025-
Page 2 of 3
Section 1: The City Council does hereby revise the SRFF, All Departments,
Item No. 9, "Credit Card Convenience Fee," and corresponding comment "[e]," as set
forth in Exhibit 1, which is attached hereto and incorporated herein by reference. Except
as explicitly revised by Exhibit 1, all other provisions of the SRFF shall continue in full
force and effect.
Section 2: Direct pass through, or actual, fees may vary, without further action
by the City Council, and rates may be updated by the Finance Director as necessary
based on actual cost or to ensure recovery of cost incurred by the City.
Section 3: The changes to the SRFF adopted by this Resolution shall be
effective immediately. Any portion of any prior resolution or SRFF that conflicts with this
resolution is hereby repealed and of no further force or effect.
Section 4: The recitals provided in this resolution are true and correct and are
incorporated into the operative part of this resolution.
Section 5: If any section, subsection, sentence, clause or phrase of this
resolution is, for any reason, held to be invalid or unconstitutional, such decision shall not
affect the validity or constitutionality of the remaining portions of this resolution. The City
Council hereby declares that it would have passed this resolution, and each section,
subsection, sentence, clause or phrase hereof, irrespective of the fact that any one or
more sections, subsections, sentences, clauses or phrases be declared invalid or
unconstitutional.
Section 6: The City Council finds the adoption of this resolution is not subject to
the California Environmental Quality Act ("CEQA") pursuant to Sections 15060(c)(2) (the
activity will not result in a direct or reasonably foreseeable indirect physical change in the
environment) and 15060(c)(3) (the activity is not a project as defined in Section 15378)
of the CEQA Guidelines, California Code of Regulations, Title 14, Division 6, Chapter 3,
because it has no potential for resulting in physical change to the environment, directly or
indirectly.
14-6
Resolution No. 2025-
Page 3 of 3
Section 7: This resolution shall take effect immediately upon its adoption by the
City Council, and the City Clerk shall certify the vote adopting the resolution.
ADOPTED this 11th day of February, 2025.
Joe Stapleton
Mayor
ATTEST:
Leilani I. Brown
City Clerk
APPROVED AS TO FORM:
CITY TTORNEY'S OFFICE
Aar n C. Harp
City Attorney
Attachment: Exhibit 1 — SRFF, All Departments, Item No. 9, "Credit Card Convenience
Fee," and corresponding comment "[e]."
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Attachment B
Exhibit 1 — SRFF, All Departments, item no. 9, "Credit Card Convenience Fee," and
corresponding comment "[e]."
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City of Newport Beach - Schedule of Rents, Fines and Fees
ALL DEPARTMENTS
_-rdConvenience Fee
nla - New 2.85%, or
through, as
appLicahle
[e] When the City is charged For processing the credit card transaction, the City's fee to the customer is 2.850ro to Offset the cost to the City. When the customer is
charged directly to process the transaction, the fee is a pass -through directtyto the customer.
M