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CC - CONSENT ITEM: (1) Approval of an Amendment to the City’s Agreement with Tyler Technologies for the Ongoing Annual Maintenance of Tyler Payments and Related Software Integration in the Amount of $7,500 Annually Subject to a 5% Annual Increase Until Substantially Changed or Superseded; and (2) Authorization of Annual Expenditures with Tyler Technologies and Chase Paymentech for Payment of Credit Card Processing Fees for Credit Card Transactions Processed by Tyler Payments up to the Annual Budget Established for Non-Departmental Credit Card Fees Until Substantially Changed or Superseded.
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Meeting Date: October 28, 2024
Contact Person/Dept: Elizabeth Shavelson/Finance Department
Phone Number: 310-253-5865
Fiscal Impact: Yes [X] No [] General Fund: Yes [X] No []
Attachments: Yes [] No [X]
Public Notification: (E-Mail) Meetings and Agendas - City Council (10/23/2024)
Department Approval: Lisa Soghor, Chief Financial Officer (10/15/2024)
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RECOMMENDATION
Staff recommends City Council (1) approve an amendment to the City’s agreement with Tyler Technologies for the ongoing annual maintenance of Tyler Payments and related software integration in the amount of $7,500 annually subject to a 5% annual increase until substantially changed or superseded; and (2) authorize annual expenditures with Tyler Technologies and Chase Paymentech for payment of credit card processing fees for credit card transactions processed by Tyler Payments up to the annual budget established for Non-Departmental credit card fees until substantially changed or superseded.
BACKGROUND
In 2011, the City Council approved a professional services agreement with Tyler Technologies to provide software and professional services to implement a new enterprise resource planning (ERP) system. Since then, the City has used the Tyler Munis ERP to process, track and report its core finance functions and has purchased additional software modules over the years including payment-related modules such as Tyler Cashiering and Citizen Self Service to further streamline and support finance operations and respond to the evolving operations needs of the City and its customers.
The City currently accepts credit card payments for an array of taxes and fees through various payment channels. Depending on the type of payment, the City accepts credit card payments online, in-person and via other point-of-sale equipment such as parking meters. In order to accept credit card payments from customers, the City must engage with a credit card payment processor. Payment processors primarily coordinate the movement of funds between the customer’s bank and the City’s bank and provide other services including payment processing equipment and rules for payment dispute resolution.
The City accepts web payments for Accounts Receivable Invoices, Transient Occupancy Tax, and Quarterly Cannabis Tax through the Tyler Technologies’ Citizen Self Service web portal. The City also accepts certain in-person credit card payments through Tyler Technologies’ Tyler Cashiering software, a cash receipting system.
On June 26, 2023, the City Council authorized an agreement with First Data to process the City’s credit card transactions based on the State of California’s Leveraged Procurement Agreement (LPA) with the company. First Data charges a processing fee on each credit card transaction. Currently, all City’s credit card transactions administered directly through Citizens Self Service and Tyler Cashiering are processed by First Data. Credit card transaction fees from credit card payments processed in Citizen Self Service and Tyler Payments as well as the City’s other payment systems are paid for out of Account No. 10116100.520200 (Non-Departmental - Credit Card Fees). The budget for these services has increased in recent years due to the increased demand in online payments.
DISCUSSION
Earlier this year Tyler Technologies announced that it is discontinuing the support of outside credit card payment processors on its Citizen Self Service and Tyler Cashiering systems effective December 31, 2024. In its place, Tyler Technologies is encouraging cities to transition to its new credit card payment processor, Tyler Payments.
The City and its customers rely on Citizen Self Service and Tyler Cashiering to process certain payments as part of normal City operations and cannot continue to do so without the ongoing support of Tyler Technologies.
Staff reached out to neighboring cities that currently use Tyler Munis ERP to learn how they are handling this recent development. All three cities that the City contacted are in the process of implementing Tyler Payments.
In order to transition to Tyler Payments, the City needs to upgrade the automated program interface between the City’s cash receipting system and permitting system to process payments. Staff was able to negotiate the fees with Tyler Technologies for the automated program interface between systems, as well as the credit card processing fee for each credit card transaction. The estimated one-time costs for integrating Tyler Payments to Citizen Self Service web portal and cash receipting system and upgrade interface for permitting system is approximately $26,000. The ongoing costs to maintain and support this integration are estimated to be $7,024 and will be subject to an annual increase of approximately 5%.
Unfortunately, Tyler Payments is unable to match the fee structure that First Data is currently charging the City under the terms of the State leveraged agreement. However, staff was able to negotiate the credit card processing fee structure with Tyler Technologies and minimize the transaction processing fee. Based on the review of the Fiscal Year 2023-2024 credit card transactions in Citizen Self Service and Tyler Cashiering, staff estimates that switching to Tyler Payments and Chase Paymentech will result in an increase of approximately $10,000. The actual amount will fluctuate based on the number of credit card payments the City receives.
All other credit card transactions that are not directly processed through Tyler Munis ERP modules will continue to be processed by First Data and will be subject to the First Data fee schedule.
Pursuant to Culver City Municipal Code (CCMC) Section 3.07.055.B, competitive bidding requirements shall not apply when the equipment is a component for equipment or a system of equipment previously acquired by the City and is necessary to repair, maintain or improve the City's utilization of the equipment. In addition, pursuant to CCMC Section 3.07.055.E. competitive bidding requirements shall not apply where the items to be purchased are computer software, hardware maintenance services or software maintenance services. This procurement falls within both exceptions.
FISCAL ANALYSIS
The Adopted Budget for Fiscal Year 2024-2025 includes sufficient funding in Account No. 42080000.730100.PZ636 (Finance System Replacement) to cover the initial $26,000 for integrating Tyler Payments into the City’s existing Tyler Cashiering system which can be found in the Capital Improvements section of the budget book in Capital Improvements and Acquisitions Fund (Fund 420) on page 479. If approved, future maintenance and support costs related to Tyler Payments will be included in the budget in Account No. 10124100.600200 (Information Technology - R&M Equipment) in subsequent fiscal years.
The Adopted Budget for Fiscal Year 2024-2025 includes $500,000 in Account No. 10116100.520200 (Non-Departmental - Credit Card Fees) for credit card processing fees which can be found on Non-Departmental Expenditures Section of the budget Book on page 226. Credit card fees associated with Tyler Payments will be paid out of this account along with fees from First Data and other companies. Staff will monitor the costs for the credit card processing fees associated with Tyler Payments and, if additional funds are needed, staff will request additional funding during the Mid-Year budget review.
Credit card transaction fees have increased substantially in recent years and particularly since the COVID-19 pandemic as more people conduct business on-line. Currently, the City does not pass the transaction fees for credit card processing along to its customers. City Council will be asked to consider that practice as part of the User Fee Study discussion.
ATTACHMENTS
None.
MOTIONS
That the City Council:
1. Approve an amendment to the City’s agreement with Tyler Technologies for the ongoing annual maintenance of Tyler Payments and related software integration in the amount of $7,500 annually subject to an 5% annual increase until substantially changed or superseded; and
2. Authorize annual expenditures with Tyler Technologies and Chase Paymentech for payment of credit card processing fees for credit card transactions processed by Tyler Payments up to the annual budget established for Non-Departmental Credit Card Fees until substantially changed or superseded.