The URL can be used to link to this page

Home My WebLink About2021-07-13; City Council; ; Credit Card FeesMeeting Date: July 13, 2021 To: Mayor and City Council From: Scott Chadwick, City Manager Staff Contact: Ryan Green, Finance Director ryan.green@carlsbadca.gov, 760-602-2414 Subject: Credit Card Fees District: All Recommended Action •Hold a public hearing on adding a 2% credit card fee for transient occupancy tax, business license tax and development fee payments to the city’s Master Fee Schedule •Adopt resolution adding the fee to the city’s Master Fee Schedule with an effective date of Sept. 13, 2021 Executive Summary On March 16, 2021, the City Council directed staff to consider and present options for implementing an administrative fee for credit card transaction costs. On June 8, 2021, staff provided a report to the council with such options and the City Council adopted a resolution to hold this public hearing to consider including a 2% fee on all transient occupancy tax, business license tax and development fee payments made by credit card. The next required step in the process is for the City Council to hold this public hearing. At the conclusion of the public hearing, the City Council may adopt a resolution adding the fee to the city’s Master Fee Schedule with an effective date of Sept. 13, 2021. Discussion As a part of an internal audit on the transient occupancy tax, or TOT, the city’s internal auditor recommended staff consider options for potentially implementing an administrative fee for credit card transactions and present them to the City Council for its consideration. Staff presented, and the City Council considered, the following issues: •Public vs. private benefit of the city’s different transaction types (utility billing, park and recreation, library, development, transient occupancy tax, and business license tax) •Volume of the city’s different transaction types •Average value of the city’s transaction types, •System limitations •Different fee structures •Average cost the city is charged by the credit card entities (2.3%) •Potential effects of charging a fee July 13, 2021 Item #12 Page 1 of 5 o Efficiency of city operations o Efficiency and cost to the city’s customers o The possibility customers will use an alternative payment method if a credit card fee is charged Those considerations were deliberated, and the City Council set a public hearing to add a 2% credit card fee on all TOT, business license tax and development fee payments, allowing the city to recover the costs of accepting credit card fees. The City Council requested staff bring back additional information on the cost the city incurs when an alternative method is used to pay for TOT, business license tax and development fees, specifically comparing payments made by check and by credit card. Estimated cost to process payments Payment type Paid by check Paid by credit card1 Business License Tax $24 $17 Development Fee $17 $17 Transient Occupancy Tax $18 $138 1 This includes the average 2.3% credit card rate on average business license and development fee transaction of $600 and average TOT transaction of $6,650. Estimated transaction volume based on calendar year 2020 data Payment type Paid by check Paid by credit card Total transactions Business License Tax and Development Fee1 7,096 or 43% 9,245 or 57% 16,341 Transient Occupancy Tax2 1,072 or 89% 128 or 11% 1,200 1 Business license tax and development fee transactions are presented together because they are processed in one system and payment data is comingled. Credit card transactions ranged from $4 to $306,000. 2 The city implemented a new system in July 2020. The figures provided are estimates based on six months of actual data. Credit card transactions ranged from $47 to $28,500. Estimated transaction value based on calendar year 2020 data Payment type Paid by check Paid by credit card Total value Business License Tax and Development Fee $14,166,195 or 72% $5,549,080 or 28% $19,715,275 Transient Occupancy Tax1 $13,265,708 or 94% $851,224 or 6% $14,116,932 1 The city implemented a new system in July 2020. The figures provided are estimates based on six months of actual data and include business improvement district assessments since those are paid with TOT. Fiscal Analysis The fiscal impact to the General Fund ranges from $0 if the fee is rejected, to approximately $130,000. July 13, 2021 Item #12 Page 2 of 5 Next Steps If adopted, the credit card fee will go into effect Sept. 13, 2021. Staff will inform local businesses and other community stakeholders of this change. Environmental Evaluation (CEQA) In keeping with California Public Resources Code Section 21065, this action does not constitute a “project” within the meaning of the California Environmental Quality Act in that it has no potential to cause either a direct physical change in the environment, or a reasonably foreseeable indirect physical change in the environment, and therefore does not require environmental review. Public Notification and Outreach This item was noticed in accordance with the Ralph M. Brown Act and it was available for public viewing and review at least 72 hours prior to the scheduled meeting date. In addition, notices on the proposed fee changes were published in a newspaper of general circulation and sent to the Building Industry Association. Exhibits 1. City Council resolution July 13, 2021 Item #12 Page 3 of 5 RESOLUTION NO. 2021-168 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CARLSBAD, CALIFORNIA, ADOPTING THE ADDITION OF A CREDIT CARD FEE ON THE CITY'S MASTER FEE SCHEDULE WHEREAS, the City Council directed staff to consider and present options for potentially implementing an administrative fee for credit card transactions; and WHEREAS, the City Council of the City of Carlsbad has the authority to establish fees for city services; and WHEREAS, from time-to-time said fees are reviewed and evaluated to maintain an adequate fee structure recovering costs for city services; and WHEREAS, the City of Carlsbad currently absorbs the processing costs for the payment of City fees and charges by credit card; and WHEREAS, the City Council finds it necessary to recover some of these costs; and NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Carlsbad, California, as follows: 1.That the above recitations are true and correct. 2.That the Master Fee Schedule will include a two percent (2%) credit card fee to all credit card payments for transient occupancy tax transactions. 3.This modification to the Master Fee Schedule shall become effective on September 13, 2021. // 1/ // // July 13, 2021 Item #12 Page 4 of 5 PASSED, APPROVED AND ADOPTED at a Regular Meeting of the Carlsbad City Council, held on the 13th day of July, 2021, by the following vote to wit: AYES: Hall, Blackburn, Acosta, Bhat-Patel. NAYS: None. ABSENT: None. -Itov&71 ce/(/ MATT HALL, Mayor VI &1714(v-yo BARBARA ENGELSON, City Clerk (SEAL) July 13, 2021 Item #12 Page 5 of 5 NOTICE OF PUBLIC HEARING CITY OF CARLSBAD CITY COUNCIL MASTER FEE SCHEDULE — INCLUSION OF A TWO PERCENT CREDIT CARD FEE FOR TRANSIENT OCCUPANCY TAX, BUSINESS LICENSE TAX AND DEVELOPMENT FEE PAYMENTS NOTICE IS HEREBY GIVEN to you, because your interest may be affected, that the City of Carlsbad City Council will hold a public hearing at the Council Chamber, 1200 Carlsbad Village Drive, Carlsbad, California, at 6:00 p.m. on Tues., July 13, 2021 to consider including, and possibly take action to include, a 2% credit card fee for transient occupancy tax, business license tax, and development fee payments in the City of Carlsbad Master Fee Schedule. Interested parties are invited to attend this meeting and present their views and comments during the public hearing. A copy of the proposed fee change is available for public inspection on the city's website at www.carlsbadca.gov/finance. A copy of the staff report regarding the proposed fee change will be available on or after Fri., July 9, 2021. Written and telephone inquiries may be directed to Ryan Green (ryan.green@carlsbadca.gov) at the Finance Department, 1635 Faraday Avenue, Carlsbad, 760-602-2414. If you challenge the credit card fee in court, you may be limited to raising only those issues raised by you or someone else at the public hearing described in this notice, or in written correspondence to the City of Carlsbad, Attn: Office of the City Clerk, 1200 Carlsbad Village Drive, Carlsbad, 92008, at or prior to the public hearing. PUBLISH DATES: JULY 2, 2021 & JULY 8, 2021 CITY OF CARLSBAD I CITY COUNCIL Credit Card Fees Ryan Green, Finance Director Finance Department July 13, 2021 {city of Carlsbad CREDIT CARD FEE PUBLIC HEARING BACKGROUND 2021 Feb. Transient occupancy tax audit report published March 16 Staff to consider adding an admin fee to credit card transactions July 13 Public hearing June 8 Staff presented options to the City Council 0 0 0 0 {city of Carlsbad CONSIDERATIONS •Types of transactions •Transaction volume •Typical transactional value •Public vs. private benefit {city of Carlsbad CONSIDERATIONS •System limitations •Different fee structures •What are other agencies doing •Potential effects of charging a fee •Average cost the city {city of Carlsbad ESTIMATED TRANSACTION VALUE & VOLUME Payment type Paid by check Paid by credit card Total transactions Business License Tax & Development Fee $14,166,195 7,096 $5,549,080 9,245 $19,715,275 16,341 Transient Occupancy Tax $13,265,708 1,072 $851,224 128 $14,116,932 1,200 $600 $6,650 • I • ... Payment type Paid by check Paid by credit card Business License Tax $24 $17 Development Fee $17 $17 Transient Occupancy Tax $18 $138 ESTIMATED COST TO PROCESS PAYMENTS •Pick up the mail •Open mail and date stamp •Renew the license in city’s system •Generate an invoice •Match the payment amount on the check to the invoice •Open a file in a separate system to process the check •Audit the record and issue the license •Consider errors •Audit record and issue license •Credit card fee •Used average transaction value of $600 x 2% = $12 RECOMMENDED ACTION Hold a public hearing adding a 2% credit card fee for transient occupancy tax, business license tax and development fee payments to the Master Fee Schedule Adopt resolution adding the fee to the city’s master fee schedule with an effective date of September 13, 2021 {city of Carlsbad