SR-06-11-2013-3HCity Council Meeting: June 11, 2013
Agenda Item: 33N
To: Mayor and City Council
From: Gigi Decavalles- Hughes, Director of Finance
Subject: Authorization to Continue with the Subscription Agreement for American
Express Card Acceptance
Recommended Action
Staff recommends that the City Council authorize the City Manager to continue to
accept American Express cards under the current subscription agreement for American
Express Card Acceptance with American Express Travel Related Services Company
(AMEX), a New York -based company, through June 30, 2014 with an option to extend
the agreement for an additional two years in an estimated amount of $240,000 per year.
Executive Summary
The City requires the services of a merchant account processor in order to accept credit
card payments from the public. In accordance with Municipal Code 2.24.080, the City is
allowed to forego competitive bidding if competitive bidding procedures have been
utilized by another State of California agency. The participation of the City on the State
of California's agreement with American Express Travel Related Services Company,
Inc. allows the City to accept American Express credit cards. Since the charges have
exceeded the City Manager's authority, Council approval is needed to continue with the
subscription agreement. Based on the historical average, the cost will be approximately
$20,000 per month with actual cost based on customer usage.
Background
On January 19 2010, Council approved a five -year contract with TransFirst Health and
Government Solutions, Inc. to provide merchant account processing for credit cards.
The TransFirst agreement included processing for Mastercard, Visa, and Discover
cards. The bid included an option to accept American Express cards. At the time, the
City elected to not accept American Express because TransFirst's cost to process
American Express credit cards was not cost effective. In discussions directly with
AMEX, staff became aware of the opportunity to "piggyback" onto the State of
California's agreement with American Express Travel Related Services Company, Inc.
which offered a lower processing rate of 2.15 %. The subscription agreement for
American Express Card Acceptance was executed on October 28, 2011.
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Discussion
Credit cards have become a more widely -used form of payment, resulting in a large
increase in the costs of accepting credit cards as a form of payment. Under the State of
California's contract with AMEX, charges are incurred at the rate of 2.15% of the
transaction amount. The State of California's contract with AMEX, Inc. was for a five -
year period with one two -year renewal option. The agreement terminates on June 14,
2014 with an option to extend for an additional two -year period.
At the time the City's agreement with AMEX was executed, the potential for use of
AMEX cards was uncertain. However, usage has been stronger than originally
anticipated and charges have exceeded the $100,000 amount, requiring Council
approval of the agreement. Based on the historical data, the cost would be
approximately $20,000 per month. The City's continued participation in the subscription
agreement would maintain the lower processing rate until the agreement terminates.
Vendor Selection
Given the lower processing rate offered by AMEX to the State of California compared to
that offered directly to the City during its 2010 bidding process, staff opted to piggyback
on the State of California's Master Agreement with AMEX. Piggybacking is the post
award use of a contractual process that allows an agency not involved in the original
competitive process to contract the same firm through that original process (Municipal
Code 2.24.080). When the City entered into an agreement with AMEX on October 28,
2011, there was no established amount since charges are incurred per transaction and
there was no historical data.
The. Master Agreement between the State of California and AMEX was executed on
July 1, 2009 and expires on June 30, 2014 with one two -year renewal option. The
City's subscription agreement with AMEX would continue for as long as the Master
Agreement is in effect. Council's approval of the continuance of the subscription
agreement is recommended in order to maintain the 2.15% processing rate.
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Financial Impacts & Budget Actions
Funding for the current subscription agreement with AMEX is available in accounts
01224.556010 (for utility bill AMEX charges) and 01224.522230 (for all other City
charges) through FY 2012 -13. Funding has also been included in the FY 2013 -14
proposed budget in accounts 01221.522230 and 01224.556010. Future funding is
contingent upon Council approval and budget approval.
Prepared by: Yolanda Nunez, Senior Administrative Analyst
Approved: Forwarded to Council:
Gigi Decavalles- u es, r' Rod Gould
Director of Finance City Manager
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Reference Contract No.
9082 (CCS)