SR 06-14-2016 3F
City Council
Report
City Council Meeting: June 14, 2016
Agenda Item: 3.F
To: Mayor and City Council
From: Gigi Decavalles-Hughes, Director, Finance Department, Treasury
Subject: First Amendment to Subscription Agreement for American Express Credit
Card Acceptance Services with American Express Travel Related Services
Recommended Action
Staff recommends that the City Council authorize the City Manager to negotiate and
execute a first amendment to Subscription Agreement No. 2404 in an estimated amount
of $1,772,000 for an additional five year term with American Express Travel Related
Services Company (AMEX), a New York-based company, for American Express credit
card acceptance services. This will result in a nine year and eight month amended
agreement for an estimated total of $3,000,000. The actual contract amount will vary
based on credit card usage and assumes annual increases of 5.5%.
Executive Summary
The City requires the services of a merchant account processor in order to accept credit
card payments from the public. The City currently contracts with American Express
Travel Related Services Company, Inc. (AMEX) for American Express card processing.
In accordance with Municipal Code 2.24.080, the City is allowed to forego competitive
bidding if the competitive bidding process has been utilized by another government
agency or if the procurement is part of cooperative purchasing with another agency,
where the same
under this exception. The State amended its contract with AMEX on May 17, 2016.
Staff recommends a first amendment to the existing agreement using the same terms
as the State modification, which includes no change to the merchant processing fee.
Based on a historical average, staff estimates the cost to be approximately $354,400
per year, or $29,500 per month. Actual costs will depend on usage.
Background
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On June 11, 2013 (Attachment A), Council approved a subscription agreement with
AMEX through June 30, 2014 with an option to extend the agreement for an additional
two years. The subscription agreement will expire on June 30, 2016. The City has
maintained a separate agreement with AMEX to accept American Express credit cards
since 2011. Following a competitive process conducted on November 6, 2014, the City
also contracts with TransFirst Health and Government Solutions (TransFirst) for
MasterCard, Visa, Discover, and some American Express card processing services that
are not currently covered under the American Express agreement. The subscription
agreement with AMEX, which piggybacks off the State contract, provides a lower
processing rate than if the charge was processed through TransFirst. Council last
approved a contract with TransFirst on April 28, 2015 (Attachment B).
Discussion
The City accepts credit card payments for a variety of services and fees as a
convenience to customers and to provide quick and efficient payment collection.
Parking-related transactions account for 98.5% of the American Express transactions.
Credit cards have become a more widely used form of payment and the costs of
accepting credit cards will continue to increase due to higher volume, transaction
amounts, and incentives/rewards offered by credit card companies that encourage
customer usage.
AMEX, Inc. is for a period of nine years and 8 months and the agreement terminates on
June 30, 2021. Based on the historical data, the cost associated with this rate would be
approximately $29,500 per month.
agreement would maintain the lower processing rate until the agreement terminates.
Vendor/Consultant Selection
to the lower processing rate offered by AMEX to the State of California compared to that
offered directly to the City during its 2015 bidding process for credit card processing
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services. 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 pursuant to Municipal Code 2.24.080.
The Master Agreement between the State of California and AMEX was executed on
July 1, 2009 and expires on June 30, 2021.
AMEX would continue for as long as the Master Agreement is in effect. Staff
recommends that Council approve a first amendment to the subscription agreement to
maintain the 2.15% processing rate.
Financial Impacts and Budget Actions
The agreement modification to be awarded to AMEX is for an estimated amount of
$1,772,000, for an amended agreement estimated total of $3,000,000. Funds are
available in the FY 2015-16 and FY 2016-17 budgets in the Finance, Community and
Cultural Services, and Public Works Departments for the General Fund, and in the
Beach Fund, Airport Fund and Cemetery Fund portions of credit card charges.
Payments will be processed and charged based on credit card usage to the following
accounts:
012241.522230 (for General Fund charges)
012241.556010 (for utility bill AMEX charges)
11523.522230 (Beach Fund charges)
33431.522230 (Airport Fund charges)
37641.522230 (Cemetery Fund charges)
Future funding is contingent upon Council approval and budget adoption.
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Prepared By:
Yolanda Nunez, Senior Administrative Analyst
Approved Forwarded to Council
Attachments:
A. June 11, 2013 Staff Report (Web link)
B. April 28, 2015 Staff Report (Web link)
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Amended
AgreementNo.10322
(CCS)