This is a request for the City Council to approve an ordinance amending sections 2-209, 2-211, 2-213, and 2-215 of Chapter 2 of the Peoria City Code (1992), authorizing the City to impose a service fee of 2.25 percent on all credit card and debit card transactions for development-related services.

For several years, the City has accepted credit cards as payment for development-related services such as plan review and permits. The City has always absorbed the administrative fees that come with credit card usage. These fees have increased substantially in the development services area—from $37,514 in fiscal year 2014 to $103,907 in fiscal 2015 to $185,541 in fiscal 2016—and they are being borne by the taxpayers of Peoria.

Staff is proposing that the burden of paying credit card administrative fees be shifted from the taxpayers to those customers who choose to use credit cards to pay for their development fees. This will be accomplished by imposing a service fee on all credit card and debit card transactions to cover the full cost of the administrative fees. The service fee will apply only to development services; credit card and debit card payments for other City services will not be subject to this fee. Such fees are legal, subject to certain rules and limitations, and are becoming increasingly common in the Valley. Gilbert, Chandler, and Maricopa already impose service fees, and other Valley cities intend to do so in the near future.

The City is working on a project to provide the ability for customers to pay for their development fees online through the existing permitting system, Accela Automation. When this service becomes available later this fall, customers will be able to pay online with credit cards and debit cards, but also with e-check and trust accounts. These last two payment methods will be free to the customer. Thus, only those customers that choose to pay with credit cards will be subject to the service fee. Staff is recommending that the service fee become effective at the same time online payments become available.

As part of the online payment project, the City has contracted with a third-party vendor to settle payments made over the Internet. The cost to the City for credit card transactions will be 2.25 percent, with a minimum fee of $1.00 per transaction. The proposed service fee is intended to recover these costs by passing them to the customers. The City will absorb the comparably small cost of e-check fees ($0.75 per transaction), providing customers with a cost-free alternative to credit cards.

City staff presented the proposed service fee to the development community at a development forum held on June 28 in the Development and Community Services Building. No comments or questions about the proposed service fee were received from the 20-plus people in attendance.

On July 13, the City sent an email blast to more than 1,700 customers in our permitting system database to again inform stakeholders of the proposed service fee, as well as the new online payment system. One customer wrote back in support of the service fee. Three customers expressed concern that the new fee would negatively affect them, but these concerns were assuaged when it was explained that they will still have several cost-free payment options.

The Home Builders Association of Central Arizona is aware of this proposal and has indicated that it does not oppose it.

The City Council has not previously considered a service fee on credit card transactions used as payment for development-related services. However, the last two years, the Development and Engineering Department has requested budget amendments to cover the escalating costs of credit card fees. On April 5, 2016, Council approved a $50,000 budget amendment for development-related credit card fees in excess of the approved budget for this purpose. On May 19, 2015, Council approved a $40,000 budget amendment for the same purpose.

A:     Approve an ordinance amending sections 2-209, 2-211, 2-213, and 2-215 of Chapter 2 of the Peoria City Code (1992), authorizing the City to levy a service fee of 2.25 percent on all credit card and debit card transactions for development-related services.

B:     Deny or defer an ordinance authorizing the City to levy a service fee of 2.25 percent on all credit card and debit card transactions for development-related services. This will cost the City an estimated $200,000 in fiscal year 2017, and this amount will be borne by Peoria’s taxpayers rather than by those who choose to pay with cards.

Discussion and possible action to adopt ORD. 2016-27, amending Chapter 2 of the Peoria City Code (1992 Edition), by amending sections 2-209, 2-211, 2-213, and 2-215, authorizing the City to levy a service fee of 2.25 percent on all credit card and debit card transactions for development-related services.

If approved, the effective date of the service fee will be concurrent with the go live of a new online payment system through the City’s permitting software, Accela Automation. The online payment system is expected to go live later this fall.