SR 09-23-2014 3CCity Council Meeting: September 23, 2014
Agenda Item: 3`C
To: Mayor and City Council
From: Gigi Decavalles- Hughes, Director of Finance
Subject: Second Modification to Agreement with TransFirst Health and
Government Services, Inc. for Credit Card Processing Services
Recommended Action
Staff recommends that the City Council authorize the City Manager to negotiate and
execute a second modification to contract 9082 (CCS) in the amount of $1,000,000 with
TransFirst Health and Government Services, Inc. (TransFirst), a Kansas -based
company, to continue to provide merchant account processor services for credit card
payments related to City fees and services. This will result in a five -year amended
contract with a new total not to exceed amount of $7,350,000, with future year funding
contingent on City Council budget approval.
Executive Summary
The City requires the services of a merchant account processor in order to accept credit
card payments from the public for the majority of City fees and services. As a result of
continued increases in use of credit cards as a mode of payment to the City, staff
estimates that credit card costs will exceed the current contract authority by
approximately $1,000,000 through the end of the contract period. The existing contract
with TransFirst expires March 4, 2015. This second modification to the contract will
result in a five -year amended contract with a new total not to exceed amount of
$7,350,000.
Background
On January 19, 2010, Council awarded contract no. 9082 (CCS) to TransFirst for credit
card processing services related to City fees and services in an amount not to exceed
$3,350,000. On March 19, 2013, Council authorized a first modification to the contract
in the amount of $3,000,000, which resulted in an amended five -year agreement for a
total amount not to exceed $6,350,000. Since the March 2013 estimate, credit card
usage has continued to rise with increased use of credit cards for on- street parking
meters, as well as the installation of approximately one hundred additional credit card
1
enabled parking meters, the reopening of Parking Structure 6, other new locations
accepting credit cards as a mode of payment, and an increase in on -line payment
activity.
In FY 2013 -14, the City processed approximately 8.1 million total credit transactions.
This translates to approximately $2,200,000 in total credit card processing costs, a 15%
increase from FY 2012 -13. The City pays a fee for each credit card transaction
processed. The fees paid for transactions processed by TransFirst are 0.15% of the
amount of the transaction plus an interchange fee assessed by the various credit card
providers (Visa, Mastercard, Discover). These interchange fees vary based on the type
of credit card used and the amount of the transaction, with smaller transactions seeing
the highest charges as a percentage of the transaction amount. Parking - related
transactions, which account for 98% of the total credit card transactions, tend to be
small and therefore incur a higher amount of processing fees as a percentage of the
actual transaction amount. For example, credit card fees for parking meter transactions
average 10% of the amount of the transaction. The fees for other parking - related
charges average about 5% of the transaction amount. Fees for non parking - related
transactions average under 2% of the transaction amount.
In FY 2013 -14, parking - related credit card usage increased by 10% over the prior year.
Since these are also the most expensive transactions, the increase in credit card fees
has continued. Usage for non - parking services increased by 19% over the same time
period, particularly from on -line payments. By the end of FY 2013 -14, total cumulative
credit card expenses had exhausted 90% of the total contract authority. Staff
recommends increasing the TransFirst contract by an additional $1,000,000 to cover
projected credit expenses through March 4, 2015, the expiration date of the current
contract. Much of this increase was anticipated in the FY 2014 -15 budget for credit card
fees, so no budget increase is being requested at this time. Staff will be conducting a
request for proposals (RFP) process for credit card processing services later this year
and will return to Council with recommendations for a new contract award.
F
Financial Impacts & Budget Actions
The contract modification to be awarded to TransFirst Health and Government Services,
Inc. is for an amount of $1,000,000. Funds for the modification are available at account
01221.522230 in FY 2014 -15.
Prepared by: Oscar Santiago, Principal Budget Analyst
Approved: Forwarded to Council:
� Pvw
Gigi Decavalles- Hughes
Director of Finance
3
Rod Gould
City Manager
Reference:
Modified Contract No 9082
(CCS)