HomeMy WebLinkAboutItem 91
City of Lakeville
Finance Department
Memorandum
To: Mayor and City Council
Justin Miller, City Administrator
From: Jerilyn Erickson, Finance Director
Date: October 28, 2019
Subject: Credit Card fee analysis
The purpose of this agenda item is to discuss credit card payments for building permits, special
assessments, and miscellaneous billings.
Currently, the City accepts credit card payments as follows:
Type Location Fee
Building Permits Online Only for E-Permits $2.50
Utility Billing Online & In-Person No Fee
Recreation Online & In-Person No Fee
Arts Center Online & In-Person No Fee
Staff regularly receives inquiries about the City taking payments via credit card for other bills
including building permits, special assessments, miscellaneous billings (i.e. code enforcement,
etc.). These requests are primarily coming from homeowners/residents and contractors versus
the builders of new homes.
Staff has conducted research and analysis on credit card fee options including the concept of
absorbing the credit card processing fees. In addition, staff reviewed activity in each of the
areas to determine if there would be a logical threshold for allowing credit card payments, if
the council didn’t want to accept credit card payments for all activity.
Building Permits
Based on permit activity for January through September 2019, ninety-two percent (92%) of the
permits issued have been valued at less than $1,000. The average permit value (in the <=$1,000
category) is about $73. E-permits (permits that do not require a plan review that can be
submitted and paid for online) are included in the <=$1,000 category.
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Permit Value Permits Issued Fees Collected
Value >$1,000 597 8% $2,076,402 80%
Value <=$1,000 7,085 92% $516,346 20%
Total 7,682 100% $2,592,748 100%
If credit card payments were capped at $1,000, this would prohibit accepting a credit card
payment for the following products or services:
Building permits with a valuation over $90,000
Commercial permits with a valuation over $95,000
Well permits with a valuation over $164,000
Permits for single family homes
Escrows
Certain grading, excavation and mining permits
Water meters/pressure reducing valves – large meters or multiple residential meters
purchased at one time
Staff estimates the following costs:
Fees Threshold Annual Cost to City
Absorb Fees – Counter/Online* $1,000 maximum $24,000
Absorb Fees – Counter Only $1,000 maximum $9,000
Service Fee – ~2.75% $1,000 maximum $0
Absorb Fees No maximum $109,000
Service Fee – ~2.75% No maximum $0
*This assumes that the e-permit fee of $2.50 is eliminated.
A sample cost for a permit if a 2.75% service fee were charged:
Permit Cost Service Fee Total Cost
$75.00 $2.06 $77.06
$500.00 $13.75 $513.75
$1,000.00 $27.50 $1,027.50
$10,000.00 $275.00 $10,275.00
Special Assessments
Based on residential special assessment prepayments received from January through
September 2019, ninety-five percent (95%) of the payments exceed $1,000. The average
residential prepayment was $4,470.
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Staff estimates the following costs:
Fees Threshold Annual Cost to City
Absorb Fees $1,000 maximum $1,000
Service Fee – ~2.75% $1,000 maximum $0
Absorb Fees No maximum-based
on $1.5 million
$65,000
Service Fee – ~2.75% No maximum $0
A sample cost for a special assessment payment if a 2.75% service fee were charged:
Special
Assessment Cost
Service Fee Total Cost
$500.00 $13.75 $513.75
$1,000.00 $27.50 $1,027.50
$4,470.00 $123.00 $4,593.00
$5,000.00 $137.50 $5,137.40
$10,000.00 $275.00 $10,275.00
Commercial assessments are often significantly higher than residential assessments.
Other Miscellaneous Billings
The City issues invoices to residents and businesses for miscellaneous expenses such as code
enforcement, property damage, false alarms, etc. Most of these invoices are less than $1,000.
Staff would like to consider offering a credit card payment option for these types of
miscellaneous bills.
The City also issues invoices to developers (legal, staff expenses), churches/schools (police
security), etc. It is not staff’s intention to request a credit card payment option for these types
of invoices.
Other Comments
The Finance Committee briefly discussed the concept of charging credit card fees for building
permits and they thought it was appropriate to charge a fee.
COUNCIL DIRECTION
Staff is seeking direction regarding credit card fee options for building permits, special
assessments and miscellaneous billings.