February 11, 2025
Agenda Item No. 14
TO:
HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
FROM:
Jason Al-Imam, Finance Director/Treasurer - 949-644-3126, [email protected] PREPARED BY:
Jessica Kan, Revenue Manager – 949-644-3153,
[email protected]
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 ABSTRACT:
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.
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.
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
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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
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