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CC:PA - CONSENT: Approval of a Three-Year Agreement with First Data Merchant Services LLC for Credit Card Payment Processing.
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Meeting Date: June 26, 2023
Contact Person/Dept.: Elizabeth Shavelson/Finance Department
Phone Number: (310) 253-6018
Fiscal Impact: Yes [X] No [] General Fund: Yes [] No [X]
Attachments: Yes [] No [X]
Public Notification: (E-Mail) Meetings and Agendas - City Council (06/22/2023)
Department Approval: Lisa Soghor, Chief Financial Officer (06/20/2023)
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RECOMMENDATION
Staff recommends the City Council and Parking Authority Board approve a three-year agreement with First Data Merchant Services LLC (First Data) for credit card payment processing.
BACKGROUND/ DISCUSSION
The City accepts credit card payments for a wide array of fees and through various payment channels. This includes Transient Occupancy Tax, Cannabis Business Tax, permits, parking, refuse service, and other services and accounts receivable invoices. Credit card payments may be collected 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 currently utilizes First Data to process most of the City’s electronic credit card payments for which First Data receives a transaction fee. The City first entered into an agreement with First Data in 2018 utilizing the State’s Leveraged Procurement Agreement (LPA) with the company. The LPA with First Data was a result of a competitive solicitation process conducted by the State of California Department of General Services (DGS). Culver City Municipal Code Section 3.07.055.G. exempts bidding requirements where competitive bid procedures have already been utilized by the City, another public agency, including, but not limited to, federal, state and county governments, including state of California agencies.
The City was recently notified that the City’s agreement with First Data expired on May 31, 2023 which coincided with the expiration of the State’s agreement. In anticipation of the LPA’s expiration, the State conducted a competitive bid process. The DGS published an Invitation to Negotiate for Electronic Payment and Credit Card Acceptance (EPAY) Services <https://caleprocure.ca.gov/event/77601/0000013655> in July 2019. Due to the State’s shifting priorities in response to the COVID-19 pandemic, the State didn’t finalize the LPAs with the two successful vendors, Elavon Inc. and First Data, until 2022 and 2023 respectively.
Finance staff recommends utilizing the State’s LPA and entering into a new agreement with First Data. This will allow the City to take advantage of the State’s superior negotiating position and capitalize on the favorable terms the State negotiated with First Data through its competitive bid process. This arrangement will also allow the City to avoid the time and effort associated with a City solicitation process. First Data has been providing credit card payment services to the City’s satisfaction and continuing with First Data will minimize any disruption to ongoing City business operations. Changing credit card processing vendors at this time would pull staff resources away from essential duties and established Work Plan priorities and create processing delays.
Staff recommends that Council authorize the City Manager to execute an agreement with First Data Merchant Services, LLC (First Data) for credit card payment processing services, beginning on June 1, 2023 through June 1, 2027.
Under terms of the LPA with First Data, the transaction fees will be adjusted annually based on the total number of transactions conducted through the LPA. Staff will continue to monitor the fees as well as the services provided by First Data to evaluate the agreement and determine if the City should consider exploring alternatives and will bring an item to Council if appropriate.
FISCAL ANALYSIS
The amount charged by First Data is on a per transaction fee basis and is based on the amount and volume of credit card transactions at the various points of service. The anticipated annual amount remitted to First Data is approximately $200,000.
Use of credit cards has been steadily increasing since the start of the pandemic. The City pays fees to several companies that handle credit card transactions for the City. There is sufficient funding in the Revised Budget for Fiscal Year 2022-2023 and the Adopted Budget for Fiscal Year 2023-2024 in Account Nos. 47516100.520200 (Parking Authority Non-Departmental - Credit Card Fees) and 10116100.520200 (General Fund Non-Departmental - Credit Card Fees) to cover credit card fees. $400,000 has been budgeted in the General Fund, and $150,000 has been budgeted in the Parking Authority Fund in both fiscal years. Staff will continue to monitor the use of credit cards and the associated fees.
The City is currently conducting a comprehensive fee study. As part of the study, staff will explore the possibility of passing along credit card processing fees to the card holders.
ATTACHMENTS
None.
MOTIONS
That the City Council:
1. Approval of a three-year agreement with First Data Merchant Services LLC for credit card payment processing; and,
2. Authorize the City Attorney to review/prepare the necessary documents; and,
3. Authorize the City Manager to execute such documents on behalf of the City.