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 Okay, it's 9 o'clock and we do have a quorum, so let's call to order the Public Utilities

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 Board on Monday, June 10th to order.

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 Before we begin, I'd like to move the closed meeting to the end of the agenda.

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 It will make it more efficient for the staff.

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 So the first item will be the work session, receive a report and hold a discussion regarding

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 the fee charged to commercial accounts when utilizing the online and phone payment system.

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 Good morning Madam Chair, PUB, Tiffany Thompson, Director of Customer Service.

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 We're here this morning, Krista Foster, our customer service manager, is going to be giving

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 a presentation.

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 During our budget discussions, we did mention that we're going to have to make a change

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 with our merchant services contract and specifically how we charge fees for our commercial customers.

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 Right now there's a 2.7% fee when they pay with a credit card or a debit card.

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 We're currently in a contract extension and needing to seek council direction, your direction

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 on next steps for that.

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 We did have this discussion with council last week just because of the timing of the city

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 council meetings and how quickly we need to move on the implementation, but we wanted

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 to bring forth what our options were and then what council ultimately did decide.

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 We did brief Madam Chair Parker a couple weeks ago prior to going to council, so she was

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 aware of it, but we wanted to come back to the entire board so you're aware of what we

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 were working through and then what we're going to, our next steps are.

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 So with that, I'll bring up Krista Foster, our customer service manager.

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 Madam Chair, PUB, I'm Krista Foster, customer service manager, and I am here to speak with

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 you this morning about some of the credit card fee regulation changes that impact the

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 way that we assess payment fees to our commercial customers.

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 So we're gonna look at a little bit of background on this, talk about what we do currently,

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 the regulations that have changed, we're gonna go through some options and then talk about

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 what council has directed us to move forward with.

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 So in 2011, customer service began looking at the $4.95 fee that we charge to all credit

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 card transactions, both commercial and residential.

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 We received a lot of complaints about that from both residential and commercial customers,

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 and in June of 2011, it was decided to eliminate that fee.

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 It did a great thing for our credit card adoption rate, it more than doubled, but what we began

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 to see was the growth of the fees outpaced the growth of utilization.

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 And as we looked into that in 2014, we found that many commercial entities, larger businesses,

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 were using reward credit cards, so it had caused our credit card fees to go up from

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 about $34,000 a month or $30,000 to about $58,000 a month, and that was related specifically

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 to those reward cards, they were about 58% of our monthly cost, while only representing

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 8% of our transactions in total.

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 So in December of 2014, we elected to put in place a 2.7% convenience fee that only

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 applied to commercial customers, it did change those behaviors.

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 At the time when we put that fee into place, the average fee for a commercial customer

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 would have been $31.

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 As of last year, that same average fee would now be $10.50.

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 So our current fee structure is that we do not charge any residential fees, so whether

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 that's e-check or a credit or debit card, for commercial customers, they do have a free

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 of charge e-check option on our website, but they do pay that 2.7% fee for credit card

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 transactions, the fee covers all of the commercial costs, and we do get about 99% of our commercial

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 transactions at this point being small business customers.

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 That is the customers who are continuing to pay via credit card online today.

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 As Tiffany had mentioned, we are on a contract extension that ends in May of next year, so

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 we are needing to move forward with making changes and implementing a new structure that

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 will prevent us from having interruption of service to any of our customers in their payment

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 channels.

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 Right now, we have been able to utilize the structure that we are under because although

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 we are seen as a utility entity, we are able to be designated as a general government designation.

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 Going forward, that will not be possible.

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 Credit card regulations have changed since we had started our contract with Elevan in

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 2013, and we can no longer be designated as a general government entity.

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 We have to follow the same rules as any other utility provider.

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 Additionally, we live in the state of Texas.

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 Texas is one of 11 states which restricts all utility providers to if you choose to

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 charge a fee, it must fall under the convenience fee model.

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 So we are even more greatly limited by being in the state of Texas.

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 What that means for a convenience fee model is it has to be a flat fee and a fixed rate.

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 We cannot tier it, we cannot cap the maximum payment size, and we cannot do any type of

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 a percentage-based structure.

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 It does have to apply to all of our convenient options, so that's online payments that are

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 both debit and credit card, as well as our e-check options, and it also has to apply

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 to telephone and online, as long as it's not in person.

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 So the final thing that we have with that is we can no longer accept recurring payments

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 by e-check or credit card from our website.

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 So if we choose to charge any form of a fee, it must fall within these guidelines.

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 And as you can see, they're very restrictive.

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 We've looked through and will provide four different options that we were able to identify,

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 but none of these options are favorable.

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 The first option that we have is to absorb the cost of all credit card processing.

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 This would have no impact to any of our current customers, with exception of the small businesses

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 now getting a free of charge option so that they can continue to pay by credit card.

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 It does have an annual cost of about $800,000 more than what we're paying today for the

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 cost of processing credit card and debit card transactions.

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 We would have to anticipate that without the cost containment in place, that the old payment

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 behaviors would be returning, and we have a larger customer base and a larger revenue

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 base, which accounts for that money.

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 The positives on this is it absolutely has no negative impact to our small businesses.

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 It does leave the recurring payments as an option for all of our customers, and it exists

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 with our functions with our existing web portal.

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 This is also consistent with all of our area municipalities, of 32 municipalities that

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 we reviewed, 11 of them actually absorb the cost of all credit card processing.

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 Option two is if we were to charge a fee to our commercial credit card customers only,

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 we could segregate our payment channels to separate residential from commercial.

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 That would mean that the average fee would be $10, because it is flat, no matter the

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 payment amount.

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 That does mean that if we have a small business customer who's paying a $100 bill, they pay

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 the same $10 processing fee as one of our larger customers paying a million dollar bill.

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 They pay the same $10 fee.

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 For this particular method, it does require that we would have to create a new commercial

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 website for all of our online payment transactions, and every commercial customer would have to

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 re-register with that.

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 It does mean that commercial customers would no longer be able to do recurring payments.

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 Right now, we receive about $1,100 a month, and that is about $450,000 a month that we

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 receive on recurring payments from commercial customers today, and they would have to find

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 new means of payment for all of those.

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 It is a little more cost efficient than absorbing the cost of all fees at $520,000, but for

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 only a $280,000 a year savings, it has a significant impact to our small businesses.

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 Mission number three is if we charged a lower fee, but applied it across all customers,

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 that would be residential or commercial.

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 We could move to a $3 fee, but again, it damages our relationship with all of our customers

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 at this point.

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 We would lose 8,600 recurring payments a month that right now is totaling $1.3 million in

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 revenue that's being paid that the customers would need to find a new means of taking care

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 of.

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 If we were to move this to a $4 fee, that would actually be enough that it would become

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 a revenue production, so we went with the lowest possible amount to cover the cost.

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 It still does entail a slight increase to what we're paying today at about $17,000 a

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 year.

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 And then option number four, we have the option of taking no commercial credit card payments

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 at all.

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 If we were to do this, it absolutely would exist with our web portal that we have today.

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 It does damage our customer service relationship with some of our small businesses because

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 all of the customers who would be, 90% of the customers who would be impacted with no

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 longer being able to pay by credit card are actually small business customers.

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 It does stabilize the credit card cost, this is a cost containment strategy if we were

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 to look for doing that, but it would definitely have impacts to our customers.

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 It is also very inconsistent with the area municipalities.

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 Of all 32 of the municipalities surveyed, none of them restricted credit card payments

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 based on the class of customer.

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 They allowed customers to pay no matter that class.

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 What customer service recommends after looking through the options is that the city moved

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 to absorb the cost of all processing fees for credit cards, debit cards, and e-check.

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 This is something that is consistent with our mission.

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 This is something that would have a negligible impact to our rates.

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 All of the balances that we are dealing with are very healthy and it has a minimal impact.

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 It would still allow all of our customers to have good relationships with us and it

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 would actually improve our relationships with some of our small businesses and keep to remain

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 that flexibility that they need to maybe be able to put charges on a credit card versus

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 having to have a greater cash flow.

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 This is actually what was accepted by city council and they gave us direction to move

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 forward to go ahead and absorb the cost of all fees.

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 Good.

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 Questions?

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 Go ahead.

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 I do have a few.

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 Sure.

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 It seems a little moved because they have already provided direction.

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 Your presentation raises a few questions in my mind.

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 You say fee.

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 Credit card transaction fees are divided into convenience fees and surcharges.

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 Correct.

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 Are we talking about convenience fees or surcharges?

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 Convenience fees.

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 Do we charge a surcharge?

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 Currently we charge a surcharge or is it a surcharge currently?

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 Okay.

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 I'm sorry.

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 What did you say?

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 I'm sorry.

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 We're calling it a convenience fee currently but the way the fees are structured, if it

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 is a percentage fee, it's actually a surcharge, a convenience fee is actually a flat rate

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 charge that applies to all payments and that's one of the restrictions that the state of Texas

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 has is that if you are designated as a utility provider, you only have an option to use the

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 convenience fee model that charges a flat rate fee.

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 Does your group use certain legal counsel within the city to analyze those regulations

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 that you're talking about?

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 We have not.

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 One of the things that counsel did direct us to do was to move forward to prevent any

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 interruption of service and to actually look into with either a consultant or legal counsel

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 is there some way that we could restructure part of our operation so that we could be

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 viewed as a government entity again?

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 Right.

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 I think you'll find that last year those laws all changed.

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 Texas is no longer one of those 11 states.

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 It came under some freedom of speech stuff from the U.S. Supreme Court and so Texas really

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 doesn't fall under some of the rules that I think you're referencing to anymore and

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 so I just like to know that you guys went through and checked all your bases just because

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 I know that those regulations are difficult to understand and they've changed very recently.

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 I apologize.

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 We actually had been in discussion with both our current merchant services provider and

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 Wells Fargo who would be the new merchant services provider regarding that and we were

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 under the impression that some of those things had changed they have not yet adapted to that

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 if it had happened but it is something that we are watching because if that were to become

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 an option then that's something that we've kept to watch.

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 How many of the so you mentioned that we have an existing provider and we've already decided

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 on a new one I guess.

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 A percentage of this project is being driven by the fact that we're going to Wells Fargo.

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 This is not being driven by the move to Wells Fargo.

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 This is being driven because our contract with Elevon has expired.

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 What we were doing we were looking to migrate to Wells Fargo because the city elected Wells

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 Fargo as the merchant services provider and awarded them that contract in 2015 but our

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 contract with Elevon has already technically ended.

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 We are on an extension that as we began transitioning is when we discovered that the rules had changed.

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 We actually have spoken with Elevon as well.

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 Even at the end of the contract we're on with them now they also confirmed that if they were

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 to create a new contract with us that it would fall under the same guidelines.

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 So the rules would be the rules regardless of the motion.

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 And we actually even looked at dare I say it allowed dropping visa and saying what happens

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 if we just say we're not going to play with visa.

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 And we discovered that the credit card rules are basically the rules that MasterCard follows

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 the same rules so we did not have an option for that as well.

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 And one more final question.

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 So we'll just roll the $800,000 that it costs us to accept credit cards into the total cost

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 of service and make everybody else pay a little share of that?

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 As of right now because it is a minimal impact to any of the funds that we're talking about

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 it is not anticipated that there would be any form of a rate increase.

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 The amount in the allocations to each of these groups is less than a quarter of a percent.

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 So it's less than about $2,500 per million as an impact to any of their budgets.

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 How was the convenience fee justified in the first place then if it was an insignificant

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 amount of money?

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 That I would not have.

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 Tiffany would you like to speak to that?

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 But there was none for residential.

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 It was just commercial.

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 Right.

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 I understand that.

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 But the reason you charge a convenience fee is you demonstrate that it's going to actually

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 cost you something in providing that service.

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 But then you just answer that question that's saying it's really not that much money.

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 It's not really that much to do.

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 So that seems weird.

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 So it's a great question.

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 So we implemented the fee based off of a cost containment strategy.

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 The costs were increasing.

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 We were paying almost $56,000 a month and we were like what can we do?

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 And we found it was a small credit card adoption with these commercial reward cards that were

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 driving up the majority of our costs and then we assessed are we able to implement a fee

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 structure and once we found out that we were able to do that, that's when we implemented

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 that.

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 But the rules have changed and now we can't charge it the same way we do currently with

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 it.

229
00:17:00,640 --> 00:17:03,440
 So that's why we wanted to bring it back to say these are the rules we're operating from

230
00:17:03,440 --> 00:17:04,440
 now.

231
00:17:04,440 --> 00:17:06,960
 But it came forth based off of a cost containment strategy.

232
00:17:06,960 --> 00:17:07,960
 Okay.

233
00:17:07,960 --> 00:17:10,960
 And one more question.

234
00:17:10,960 --> 00:17:17,560
 How do you decide where this increased annual cost goes to in each utility?

235
00:17:17,560 --> 00:17:18,560
 We actually.

236
00:17:18,560 --> 00:17:19,960
 That's got to be complicated.

237
00:17:19,960 --> 00:17:25,000
 We actually have our allocations based on the percentage of work that we're doing for

238
00:17:25,000 --> 00:17:29,120
 those different groups and the funds that we're collecting and the amount of time that

239
00:17:29,120 --> 00:17:31,520
 we're spending in each of those different areas.

240
00:17:31,520 --> 00:17:35,760
 So it is based on a percentage by how much of the volume belongs to that group.

241
00:17:35,760 --> 00:17:38,800
 Based on the cost of your usual customer service budget.

242
00:17:38,800 --> 00:17:39,800
 Correct.

243
00:17:39,800 --> 00:17:40,800
 Okay.

244
00:17:40,800 --> 00:17:41,800
 Correct.

245
00:17:41,800 --> 00:17:42,800
 Thank you.

246
00:17:42,800 --> 00:17:43,800
 You're welcome.

247
00:17:43,800 --> 00:17:47,360
 Which is another reason why you're trying to get this so you can include that in the

248
00:17:47,360 --> 00:17:48,360
 budgets.

249
00:17:48,360 --> 00:17:49,360
 Correct.

250
00:17:49,360 --> 00:17:50,360
 So we know what the impact will be.

251
00:17:50,360 --> 00:17:53,160
 It's very unfortunate timing and normally we would not want to come to you guys after

252
00:17:53,160 --> 00:17:58,320
 we've had to go to council but if we were to continue to wait until July, it would become

253
00:17:58,320 --> 00:17:59,320
 more problematic.

254
00:17:59,320 --> 00:18:00,320
 Yeah.

255
00:18:00,320 --> 00:18:01,320
 Any other questions?

256
00:18:01,320 --> 00:18:02,320
 No.

257
00:18:02,320 --> 00:18:03,320
 All right.

258
00:18:03,320 --> 00:18:04,320
 Thank you.

259
00:18:04,320 --> 00:18:13,200
 All right since we moved the closed meeting, we'll go into the consent agenda.

260
00:18:13,200 --> 00:18:16,280
 Does any board member wish to pull an item?

261
00:18:16,280 --> 00:18:20,240
 I'd like to pull item number F, please.

262
00:18:20,240 --> 00:18:21,240
 Okay.

263
00:18:21,240 --> 00:18:24,240
 Any others?

264
00:18:24,240 --> 00:18:35,160
 We have a motion to approve A through E and G, H.

265
00:18:35,160 --> 00:18:41,240
 All in favor say aye.

266
00:18:41,240 --> 00:18:42,240
 Aye.

267
00:18:42,240 --> 00:18:43,240
 Aye.

268
00:18:43,240 --> 00:18:44,240
 Motion carries.

269
00:18:44,240 --> 00:18:45,240
 Item F.

270
00:18:45,240 --> 00:18:53,000
 Just another house cleaning question for item number F. Since this is coming through the

271
00:18:53,000 --> 00:19:01,560
 utility and other departments will use this, is that just, why is it just coming through

272
00:19:01,560 --> 00:19:05,080
 public utilities board if it's going to be used by a lot of different other entities?

273
00:19:05,080 --> 00:19:12,760
 I ask the same question Mr. Cheek as Cassie comes to the podium and she can correct me

274
00:19:12,760 --> 00:19:18,360
 and my understanding is some of the utility departments use barricades when they're doing

275
00:19:18,360 --> 00:19:22,840
 their projects so it was just a means to bring that forward to you all because an expenditure

276
00:19:22,840 --> 00:19:25,560
 hitting those water and wastewater budgets.

277
00:19:25,560 --> 00:19:28,880
 It'll start out in our budget but it'll get divvied up to the other departments as they

278
00:19:28,880 --> 00:19:30,360
 use them of course, right?

279
00:19:30,360 --> 00:19:33,720
 Because you're talking about special events in here and.

280
00:19:33,720 --> 00:19:37,880
 I believe all those funds are allocated within each respective budget.

281
00:19:37,880 --> 00:19:43,520
 It's just that the overall contract comes through a number of departments can utilize

282
00:19:43,520 --> 00:19:49,480
 that contract and again those expenses are charged to that respective budget parks, streets,

283
00:19:49,480 --> 00:19:55,800
 water, wastewater, but it's just because again there is an expense line in those utility

284
00:19:55,800 --> 00:19:56,800
 budgets.

285
00:19:56,800 --> 00:20:00,800
 It's just coming to you all just for approval but it doesn't mean that you're.

286
00:20:00,800 --> 00:20:02,960
 A little later to go through the utility this way?

287
00:20:02,960 --> 00:20:03,960
 Correct.

288
00:20:03,960 --> 00:20:04,960
 Okay.

289
00:20:04,960 --> 00:20:07,080
 Since our budget is a little bit bigger than a lot of them.

290
00:20:07,080 --> 00:20:10,240
 Well I mean again at the end of the day it's going to go to council as well but again those

291
00:20:10,240 --> 00:20:16,720
 expenses are portioned out by the department it's just giving, it's just that's been vetted

292
00:20:16,720 --> 00:20:23,000
 through the PUB because there are expenses that are hitting barricades in one or a wastewater

293
00:20:23,000 --> 00:20:28,120
 budget but it doesn't mean that all the funds are being spent out of those those departments.

294
00:20:28,120 --> 00:20:29,120
 Okay fair enough.

295
00:20:29,120 --> 00:20:30,120
 I'll move approval.

296
00:20:30,120 --> 00:20:31,120
 Second.

297
00:20:31,120 --> 00:20:35,040
 Okay we have a first and a second.

298
00:20:35,040 --> 00:20:36,520
 All in favor?

299
00:20:36,520 --> 00:20:37,520
 Aye.

300
00:20:37,520 --> 00:20:38,520
 Opposed?

301
00:20:38,520 --> 00:20:39,520
 Motion carries.

302
00:20:39,520 --> 00:20:45,680
 Okay items for individual consideration the consider approval of the public utility board

303
00:20:45,680 --> 00:20:51,640
 minutes does anybody, of May 20th, does anyone have any changes or corrections and they're

304
00:20:51,640 --> 00:20:53,600
 approved as presented.

305
00:20:53,600 --> 00:20:55,600
 ACM update.

306
00:20:55,600 --> 00:20:56,600
 Mario.

307
00:20:56,600 --> 00:20:57,600
 Yes.

308
00:20:57,600 --> 00:20:58,600
 Good morning.

309
00:20:58,600 --> 00:21:03,760
 In your packet there is a informal staff report that was sent over to the council back in

310
00:21:03,760 --> 00:21:12,920
 early June regarding a follow-up item about credit and collections follow-up a summary.

311
00:21:12,920 --> 00:21:18,000
 If you all have any questions we're here to answer those Krista Foster can answer those

312
00:21:18,000 --> 00:21:22,240
 questions if you have anything specific but just as a matter of routine anytime we have

313
00:21:22,240 --> 00:21:26,720
 an item an informal staff report that goes out to city council that involves utilities

314
00:21:26,720 --> 00:21:31,320
 we'd like to just as a courtesy continue passing those on to the PUB and this just as an opportunity

315
00:21:31,320 --> 00:21:33,280
 to put in the record.

316
00:21:33,280 --> 00:21:41,520
 Thank you and then we do concluding items okay any concluding items any items that someone

317
00:21:41,520 --> 00:21:47,760
 would the board member would like added in the future.

318
00:21:47,760 --> 00:21:54,640
 Alright so now I always forget how to do this do I adjourn and we go into a closed meeting

319
00:21:54,640 --> 00:21:58,680
 okay do we have a motion to adjourn into closed meeting?

320
00:21:58,680 --> 00:21:59,680
 So moved.

321
00:21:59,680 --> 00:22:02,600
 Okay all in favor say aye.

322
00:22:02,600 --> 00:22:03,600
 Aye.

323
00:22:03,600 --> 00:22:04,400
 Alright closed meeting.