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 Good morning and welcome to the regularly scheduled Public Utilities Board meeting for

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 the City of Denton on March 9th.

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 It is 9 a.m. and the meeting is called to order.

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 Our first item is presentations from the public.

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 Do we have any presentations?

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 All right moving on to the consent agenda, does anybody have any questions about items

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 on the consent agenda?

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 Seeing none, the chair would entertain a motion.

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 We have a motion and a second.

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 All in favor please say aye.

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 Opposed sign the same.

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 Consent agenda passes unanimously.

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 Moving on to items for individual consideration.

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 Our first item is consider approval of the February 23rd minutes.

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 We have a motion and a second.

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 All in favor say aye.

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 Any opposed?

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 The motion carries unanimously.

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 The next item is item B, consider recommending adoption of an ordinance establishing schedule

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 of rates for electric service, I believe we have a presentation.

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 Hi good morning Chair, PV members.

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 My name is Melissa Cuevas with DME and we have our quarterly review of our energy cost

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 adjustment and our transmission cost recovery factor today.

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 So just a quick overview of what our current rates are.

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 So our native load ECA is currently set at 0.0462 cents per KWH and it does provide

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 a buffer, a balance buffer of plus or minus 20 million dollars.

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 We're not recommending any changes for this one.

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 Our large load ECA is currently set at 0.0577 cents per KWH and we are recommending a slight

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 increase to 0.0606 per KWH.

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 Our transmission cost recovery factor rates are shown below and we are recommending a

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 decrease to this as well.

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 So for our native load ECA balance, like I mentioned, our balance buffer is plus or minus

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 20 million dollars and we look ahead 12 months.

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 So we are recommending maintaining that rate, we'll be at a healthy balance of 16 million

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 by December of this year.

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 On the right is a table where it shows all the changes we've made since October 2023.

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 So didn't make any changes in '25 and again, we're not recommending a change for this quarter.

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 Our TCRF forecasted account balance, we are recommending a slight decrease to 0.0156 cents.

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 That'll leave our balance December of '26 at 2.8 million.

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 And then our table to the right just shows what the changes have been from October 23

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 and on.

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 So this shows a monthly rate impact.

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 So as you see, if we decrease the TCRF, there's going to be about a 1.5% decrease to our customers'

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 bills that'll show residential through our three commercial rate classes as well.

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 And so a few weeks ago, both PUB and City Council provided direction regarding how we change our commercial customers between rate classes based on their demand.

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 So for our ordinance, we did update the wording.

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 The new practice will be following the 12-month lock-in period.

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 We'll now be reviewing the accounts retroactively to determine if they should remain in that rate class,

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 decrease to GS general service small or increase to general service large.

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 So our recommendation is to maintain our native load ECA, increase our large load ECA to 0.0606 per KWH,

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 decrease the TCRF to the 0.0156 cents per KWH, and then make the revisions in our ordinance to follow what the direction was from PUB and council.

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 Any questions?

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 >> Mr. Rayner.

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 >> Does this correlate to what we had last Monday in discussing going back reviewing bills, whether they were overpaid or underpaid?

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 >> Yes, correct.

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 And there was a separate item on the consent agenda that you just approved that also addressed some of those items.

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 >> I was just curious.

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 Thank you very much.

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 >> Thank you, Mr. Chairman.

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 >> I have a question.

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 On the slides you had with the rate projections, it said as of October 23.

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 >> Yeah, so that's just what the changes have been.

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 >> I was just modestly confused since we're talking about it.

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 >> Sorry, no, yeah, that is just showing what changes we've made in the past.

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 So you guys can see, obviously, our goal is to keep our rates as consistent as we can.

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 But that's just reflecting any changes we've made since October 23 and now effective April 26.

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 >> Thank you.

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 >> Any further questions?

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 Mr. Newquist.

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 >> What's the target balance in the TCRF?

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 >> The TCRF, we don't have a target balance.

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 So essentially, let's say it's our transmission cost of service.

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 The total we kind of divided over 12 months and we pay that monthly.

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 Our year closes out in September.

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 So ideally, we'd like to be closer to a million around there, which is what this is forecasting.

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 >> Any further questions?

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 >> And Mr. Chair, we also have a close session item, as I mentioned earlier, that is a placeholder.

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 But certainly, you know, one of the recommendations here is to increase the EC for large loads.

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 So if there are questions regarding that, we would have to go into close session.

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 If there's none, then we can certainly proceed with your direction on this item.

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 >> I think it's been really beneficial for the PUB to see this quarterly.

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 You know, it's given us, I think, a good understanding.

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 You know, and every quarter, there's always the rates and balances of the accounts.

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 But usually, there's a little bit of education.

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 And so I feel like we've gotten pretty good education on, you know, the targets for the ECA accounts.

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 You know, and I think it's good to see this just kind of moving along on plan.

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 You know, seeing those fund balance projections, having a good idea.

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 You know, it feels like they're pretty stable.

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 We're changing rates, 0.02 cents.

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 You know, that's like, that's a nice, that's not a shock to anybody.

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 And honestly, they're moving in the right direction too, which is nice.

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 So, I mean, I think this is, this has been a good process.

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 I feel like we're getting a good handle on it.

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 And with that, I would entertain a motion for approval.

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 We have a motion for approval.

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 >> Second.

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 >> And a second.

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 All in favor, say aye.

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 >> Aye.

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 >> Any opposed?

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 Motion carries unanimously.

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 Our next item for individual consideration is management reports.

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 >> So, Mr. Chair, members of the PUB, so we, staff did provide to you a memo on the Pecan Creek Water Reclamation Plant.

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 Certainly, if there are questions on Stephen and Matt are here as well.

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 So, if you have any questions on that.

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 And then we have, on the future agenda, we did make a change from the information we provided at the last meeting, a request by Mr. Rybak.

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 So, we did change their first kind of work session item to April 13 from March 23rd, because I believe he was going to be absent.

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 >> Thank you, sir, I did notice that, appreciate it.

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 >> Yeah, great.

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 And so, you know, I'll just continue to point out to you on that agenda the meetings that are scheduled for the upcoming budget process.

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 I certainly would encourage you to please, you know, make those notes on your calendars so that you can be here, a lot of good discussion coming your way.

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 And then finally, we did add to the new business action item the one request that we had on the electric commercial rates.

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 We are working on that.

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 My recollection was that that was not germane to today's action, but we will be bringing that back to you at the next meeting and then providing that to you probably in a memorandum.

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 And if you have questions, we can certainly address at that time.

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 With that, happy to answer any questions you may have.

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 >> Seeing no questions, I think we can move on to our work session.

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 We'll have a, let's see, receive a report and discussion on online credit card processing and cost recovery options.

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 >> Chair, members of the PUB, Matt Hamilton, Chief Financial Officer here this morning to present credit card processing and cost recovery options.

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 As you may recall, in the budgeting process last year, the city changed its methodology to a zero-based budgeting approach.

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 And in doing so, we went line by line through each of the departmental budgets and

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 identified areas both on the revenue and expense side where we felt like we could improve or look at additional options.

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 One of those areas in the customer service fund was in regard to credit card fees, which have been increasing year over year.

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 And so on July 14th of last year, we had presented a couple slides in regard to credit card processing fees and recovery options.

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 The board had some feedback, we took it to council.

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 Council also had some feedback and the direction at that time was to continue to look into options and what may be available.

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 So since that time, there has been a new option that has come available.

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 So we just wanted to provide an update for you this morning as we begin the budgeting process for

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 this year so that we can receive any feedback and direction as we start that process.

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 So just a little bit of background, the city of Denton has processed credit card payments for

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 over 25 years and we budget annually to recover those costs.

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 In prior to 2011, we did assess convenience fees to all online transactions,

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 but removed those fees in 2011 across all payment portals.

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 In 2014, due to the identification of rising costs associated with commercial cards which have higher interchange rates,

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 that led to the implementation of a 2.7% convenience fee for commercial utility online payments or by phone.

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 In 2019, the card brand rules changed,

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 restricting convenience fees to only flat amounts, so prior to 2019 we assessed the fee as a percentage.

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 In 2019, the card brand rules changed and they said you can no longer assess that as a percentage.

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 So in 2020, the PUB and City Council directed that convenience fees be removed when the city adopted its new

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 card processing contract with Wells Fargo Merchant Services, since the percentage was no longer allowed.

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 And since that time, card processing costs are absorbed through departmental budgets and funded through city revenues.

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 And so in the case of utilities, it is in the base rate of the utilities,

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 which then make a transfer into the customer service fund to pay that cost.

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 In 2025, October of '25, the card brand rules changed again,

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 this time presenting a new fee option that can be implemented on a percentage basis.

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 So I wanted to provide just an overview of current card processing costs.

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 There's three components that make up card processing costs.

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 The first is called the interchange rate.

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 This is a non-negotiable rate.

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 It's about one and a half percent plus a fixed amount per transaction.

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 The second is the card network assessment, which is also non-negotiable and is about a tenth of a percent to 0.15 percent of your monthly sales.

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 So each of these percentages are set by the card brands and networks.

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 So the city has no control or negotiation with the brands over those percentages.

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 And then the third component is the payment processor fee, which is fixed by contract.

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 And so when we go out and competitively bid our card processor, as we did with Wells Fargo Merchant Services,

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 there is some negotiation there that the city has.

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 What I wanted to illustrate was that the payment processor fees, which are the Wells Fargo Merchant Service costs,

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 are only five percent of the total cost that we pay in card processing fees.

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 So the city has very little, you know, input and influence in terms of card processing costs.

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 So why revisit the fees now?

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 Customer service and the utility billing component of it is 70 percent of the city's annual card processing costs,

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 primarily from online payments, and account for about $1.57 million annually in expense.

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 The costs associated with card processing continue to significantly increase up 20 percent from fiscal year '24 to '25,

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 from $1.3 million to about $1.5 million.

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 So utility payments are governed by MCC 4900.

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 MCC stands for Merchant Category Codes.

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 And these are assigned by the card networks to categorize merchant transactions for processing, fee calculation, and compliance.

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 MCC 4900 specifically identifies transactions as being utility payment related.

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 And MCC 4900 is important because it has a reduced interchange rate compared to retail rates.

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 Previously, only a convenience fee was permissible with MCC 4900,

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 but it provided limited flexibility in how it was applied, specifically only as a flat fee, not as a percentage.

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 Changes in card processing rules in October now allow for what's called a service fee with MCC 4900.

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 So comparing the two options, the convenience fee and service fee are both allowed under MCC 4900 for that discounted interchange rate.

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 The convenience fee, as I had mentioned, is only a flat fee.

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 The service fee can be implemented as a flat or a percentage.

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 Both can be applied to online transactions.

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 The convenience fee cannot include recurring payments.

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 It could only be applied to one-time payments.

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 The service fee could be applied to both recurring and one-time payments.

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 Neither of these two fees can be tiered.

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 So, for example, you know, if your bill is from $0 to $100, you pay one percentage. If it's over $100, you pay a separate percentage.

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 Or, you know, as, you know, one customer type, you pay one percentage and another customer type pays another.

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 So neither fee can be set up in that manner. The fees need to be consistent.

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 However, both fees can be segregated by account type. And what I mean by that is that a fee could be implemented only for residential or only for commercial, or it could be applied to both.

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 The convenience fee must be applied to e-checks, whereas the service fee would not include e-checks.

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 So as a summary, the convenience fee, flat fee only, has to essentially include all payment avenues.

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 The service fee can be applied as a percentage and would not include e-checks.

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 So taking a look at these two options, the convenience fee, again, flat fee only, applies to all payment types, including e-checks, and excludes recurring payments.

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 The estimated rate to recover fees with a convenience fee implemented, the fee would be about $2.90 per transaction.

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 The second option is a service fee, and this is the new fee under the new visa rules.

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 Percentage or flat fee includes the recurring payment, excludes e-checks, and the estimated fee,

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 if it applied to all card payments, would be 1.55% or 2.6% if it only applied to commercial card transactions.

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 So taking a look at online card volumes by utility customer type, what we've provided here at the top is fiscal year 2024 for commercial and residential,

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 including the number of transactions, the amount processed, the average payment amount, and the fees paid by the city for those transactions.

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 And then in the bottom half is fiscal year 25 with the same information, and at the bottom, the year over year increase in each of those categories.

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 So as you can see, the number of transactions between 24 and 25 increased 83,125.

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 The amount processed also increased by about $24 million, and the fees paid by the city increased $264,000, which represents about a 20% increase.

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 So the increase in fees is driven largely by an increase in the volume of transactions that we're handling.

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 But one important component of this is you'll notice that, for example,

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 in 2025, the number of commercial transactions, $32,000, represents a much smaller proportion of the total transactions of $664,000.

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 But the fees paid by the city are over a million, and so it represents about two-thirds of the fees there, excuse me, that are paid.

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 So just talking a little bit about implementation, if direction is provided by PUB and

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 the city council to proceed with implementing one of the two fees,

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 staff will initiate a marketing campaign to educate customers on the fee and payment methods which do not incur fees.

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 So for example, with the service fee, e-checks do not incur any fee.

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 Staff will work with our vendors to implement the fee modules.

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 This is estimated to take about six months as we work through contracts and

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 ensure that everything is up and running, as well as ensuring that

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 customers are well-educated on options that don't incur a fee.

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 And then the fees, if that direction were to be provided relatively soon,

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 March, April, the target would be to implement it at the first of the fiscal year, October 1st.

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 However, that would, of course, be dependent on further discussion and direction.

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 So today we're looking for feedback and direction from the board on the recovery of credit card processing costs.

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 Essentially, there are three options.

215
00:20:51,200 --> 00:20:58,400
 Option one is to leave it status quo and to maintain cost recovery through the utility department budgets.

216
00:20:58,400 --> 00:21:01,200
 The cost would be recovered in the utility base rates.

217
00:21:01,200 --> 00:21:04,840
 Option two is to implement a convenience fee.

218
00:21:04,840 --> 00:21:10,720
 This would be a flat fee assessed for non-recurring online payments, including e-checks.

219
00:21:10,720 --> 00:21:16,000
 And option three would be to implement a service fee, which would either be a flat or

220
00:21:16,000 --> 00:21:21,520
 percentage on all online payments, but exclude e-checks.

221
00:21:21,520 --> 00:21:28,720
 And then additionally determine if the fee, if one is chosen, whether it applies to residential commercial or both.

222
00:21:32,200 --> 00:21:36,720
 And with that I'll stand for any questions.

223
00:21:36,720 --> 00:21:38,120
 >> Mr. Rainer?

224
00:21:38,120 --> 00:21:40,320
 >> Could you go back to slide two, please?

225
00:21:40,320 --> 00:21:47,840
 So we had, I'm just looking at timelines.

226
00:21:47,840 --> 00:21:54,160
 Who controls, you had indicated we have no control, is it MCC did you say, or?

227
00:21:54,160 --> 00:21:58,880
 >> So MCC is just a merchant code that is assigned by the card brands.

228
00:21:58,880 --> 00:22:03,240
 But essentially who is dictating the rates are the card brands.

229
00:22:03,240 --> 00:22:09,520
 So Visa, Discover, MasterCard, Implement, go for it.

230
00:22:09,520 --> 00:22:12,120
 >> I remember that, so if I may.

231
00:22:12,120 --> 00:22:19,600
 So really this is just a history, excuse me, a history of having to deal with requests to the card companies.

232
00:22:19,600 --> 00:22:26,640
 This isn't something that the city has come up with or just kind of plod along to see what needs to be done.

233
00:22:26,640 --> 00:22:33,000
 >> Yeah, I think over the course of time the city has periodically looked at these expenses.

234
00:22:33,000 --> 00:22:38,200
 And as we've seen changes from the card brand,

235
00:22:38,200 --> 00:22:43,960
 either implemented or removed fees to recover those costs.

236
00:22:43,960 --> 00:22:48,040
 >> And I bring it up only that I'm trying to prevent us from being the villain.

237
00:22:48,040 --> 00:22:52,400
 I know Tony appreciates that, so that's what we try to do.

238
00:22:52,400 --> 00:22:53,560
 May I?

239
00:22:53,560 --> 00:22:54,440
 Slide three, please.

240
00:22:57,600 --> 00:23:05,960
 So these are the three changes or the three processes we can go through.

241
00:23:05,960 --> 00:23:06,840
 Is that correct?

242
00:23:06,840 --> 00:23:08,200
 Am I looking at that right?

243
00:23:08,200 --> 00:23:17,560
 >> So these are the three cost components that make up the payment,

244
00:23:17,560 --> 00:23:22,560
 the expense associated with accepting card payments.

245
00:23:22,560 --> 00:23:28,040
 >> And so if I may ask, is this represents commercial and residential or?

246
00:23:28,040 --> 00:23:28,680
 >> This would, yes.

247
00:23:28,680 --> 00:23:29,480
 >> This is everybody.

248
00:23:29,480 --> 00:23:31,000
 >> This would apply to everybody.

249
00:23:31,000 --> 00:23:32,160
 >> Okay, very good.

250
00:23:32,160 --> 00:23:35,440
 And could I go to slide four?

251
00:23:35,440 --> 00:23:46,880
 I was curious, you had mentioned, I think you did, a 5%, but I can't remember what it was associated with.

252
00:23:46,880 --> 00:23:49,080
 Do you remember the conversation?

253
00:23:49,080 --> 00:23:53,120
 >> Slide five percent, I don't, I'm sorry.

254
00:23:53,120 --> 00:23:58,000
 >> Okay, that's all right, no, slide five then.

255
00:23:58,000 --> 00:24:06,720
 So this is, once again, you're looking at either we can go with the convenience or the service, but I guess it leads back to,

256
00:24:06,720 --> 00:24:16,520
 is this something that the card company could have us flip back and forth on, or how consistent is this?

257
00:24:16,520 --> 00:24:26,040
 I know we're planning on doing it on October 1st, and so are we going to have this conversation possibly by September of the next year because of card requirements.

258
00:24:26,040 --> 00:24:27,960
 How flexible does this have to be?

259
00:24:27,960 --> 00:24:32,960
 >> That's a great question, and the answer is that the card brand rules could change at any time.

260
00:24:32,960 --> 00:24:41,880
 So we are subject to those card brand rules as a merchant accepting card payments.

261
00:24:41,880 --> 00:24:50,720
 So the card company's looking at everybody where we may be, we could possibly go with a separation of residential versus commercial.

262
00:24:50,720 --> 00:25:01,280
 >> Yeah, so the card brands essentially establish broad rates based on each of those different MCC categories.

263
00:25:01,280 --> 00:25:06,680
 The MCC 4900 is simply a discounted rate

264
00:25:06,680 --> 00:25:13,960
 that the card brands charge the interchange fees because they're utility payments.

265
00:25:13,960 --> 00:25:21,160
 And they recognize that it is an expense that is necessary in many cases.

266
00:25:21,160 --> 00:25:27,360
 So they set those overarching fees.

267
00:25:27,360 --> 00:25:35,760
 The city's control is simply how to pay for those fees when we accept card payments.

268
00:25:35,760 --> 00:25:44,280
 So as I mentioned, the cost recovery could either be in the base rates as they are now.

269
00:25:44,280 --> 00:25:48,080
 And so that gets plugged into the utility performance, and

270
00:25:48,080 --> 00:25:53,320
 that ultimately gets calculated down to a cost of service rate.

271
00:25:53,320 --> 00:26:01,920
 Or these are two options where individuals who are choosing to use cards for

272
00:26:01,920 --> 00:26:08,640
 online payments would be the ones who specifically pay for

273
00:26:08,640 --> 00:26:15,960
 that fee rather than broadly spreading the cost to all customers.

274
00:26:15,960 --> 00:26:17,800
 >> If I have one more question, Mr. Chairman.

275
00:26:17,800 --> 00:26:21,440
 Slide nine, I think.

276
00:26:21,440 --> 00:26:27,520
 Go back two slides, please, sir.

277
00:26:27,520 --> 00:26:29,200
 I was looking for a chart there.

278
00:26:29,200 --> 00:26:37,320
 You had indicated, if I wrote it down right, is it the thought of the expenses hit at 2025,

279
00:26:37,320 --> 00:26:42,840
 roughly two-thirds of the increase was based on or was the results of residential use?

280
00:26:42,840 --> 00:26:43,840
 Did I hear that right?

281
00:26:43,840 --> 00:26:44,360
 No.

282
00:26:44,360 --> 00:26:51,120
 >> No, sorry, two-thirds of the total fees paid by the city,

283
00:26:51,120 --> 00:26:54,560
 so a million of the one and a half million.

284
00:26:54,560 --> 00:26:55,320
 >> Yes.

285
00:26:55,320 --> 00:26:59,400
 >> Was incurred by commercial business card use.

286
00:26:59,400 --> 00:27:00,320
 >> Wrong horse.

287
00:27:00,320 --> 00:27:01,440
 Okay.

288
00:27:01,440 --> 00:27:12,120
 >> And so as we look at the fees that we pay, each individual card type shows up with a different line,

289
00:27:12,120 --> 00:27:20,320
 a different expense of I have a silver card, and you have a gold card, and someone else has a world elite card.

290
00:27:20,320 --> 00:27:28,760
 Each one of those cards has a different fee that is paid by the merchant at the time that we make a card payment.

291
00:27:28,760 --> 00:27:38,720
 And so the commercial business type cards have higher rewards that are offered and obviously larger payment amounts,

292
00:27:38,720 --> 00:27:43,120
 so the costs associated with accepting those cards are much higher.

293
00:27:43,120 --> 00:27:43,800
 >> Thank you.

294
00:27:43,800 --> 00:27:46,600
 Thank you, Mr. Chairman.

295
00:27:46,600 --> 00:27:50,600
 Any other questions?

296
00:27:50,600 --> 00:27:54,400
 Mr. Rybak?

297
00:27:54,400 --> 00:27:56,400
 >> I don't have a question.

298
00:27:56,400 --> 00:28:05,000
 Since we're being offered to give some direction on three different options, I'm torn about which way to go.

299
00:28:05,000 --> 00:28:10,120
 The flat fee seems more residentially favorable.

300
00:28:10,120 --> 00:28:13,840
 They would know every time they make a payment that there would be this, whatever it is,

301
00:28:13,840 --> 00:28:18,400
 a dollar and a quarter, 273, whatever the number turns out to be.

302
00:28:18,400 --> 00:28:24,000
 On the other hand, if somebody's paying a bill for 80 bucks and somebody's paying a bill for 190 bucks,

303
00:28:24,000 --> 00:28:26,720
 then is that really fair to have the flat fee?

304
00:28:26,720 --> 00:28:32,120
 So I'm a little bit torn on which way to go.

305
00:28:32,120 --> 00:28:36,560
 >> Could you return to the table of costs there?

306
00:28:36,560 --> 00:28:38,960
 So just -- these are all cards.

307
00:28:38,960 --> 00:28:41,000
 This doesn't include e-checks.

308
00:28:41,000 --> 00:28:42,600
 >> That's correct.

309
00:28:42,600 --> 00:28:44,360
 >> Yeah, and just the math here.

310
00:28:44,360 --> 00:28:52,600
 The commercial is a little over 2%, like 2.2%, just a million in fees on 44 million transacted.

311
00:28:52,600 --> 00:28:57,400
 But then the residential is 500,000 in fees on 107 million.

312
00:28:57,400 --> 00:29:01,000
 So that's like point -- that's like less than half a percent.

313
00:29:01,000 --> 00:29:10,520
 Is that -- so there are, I guess, of some rate -- some card types that have even lower than that 1 point whatever percent, 1.7%?

314
00:29:10,520 --> 00:29:14,200
 >> Yeah, it just depends on what that card is.

315
00:29:14,200 --> 00:29:18,840
 And this does encompass all cards.

316
00:29:18,840 --> 00:29:26,440
 And so, you know, if there were to be, you know, a debit card that was processed online as a credit card where, you know,

317
00:29:26,440 --> 00:29:31,120
 they didn't enter a PIN, a point of sale, it would encompass that as well.

318
00:29:31,120 --> 00:29:38,080
 So, yes, the residential costs are significantly lower than the business cards.

319
00:29:38,080 --> 00:29:46,960
 Or I guess I should say retail consumer cards are less expensive than the business cards to accept.

320
00:29:46,960 --> 00:29:50,920
 >> Yeah, I feel like, I mean, customers have the ability to choose.

321
00:29:50,920 --> 00:29:54,800
 Maybe they have some constrained choice, but they have the ability to choose how they pay.

322
00:29:54,800 --> 00:29:59,600
 You know, e-checks, I think we talked about previously last time we had this presentation,

323
00:29:59,600 --> 00:30:05,760
 that they're like 10 or 15 cents a check with no percentage extra.

324
00:30:05,760 --> 00:30:07,000
 >> That's correct.

325
00:30:07,000 --> 00:30:15,360
 >> So, we do, we are assessed a fee for processing e-checks, but it is very minimal.

326
00:30:15,360 --> 00:30:23,960
 And so, all the e-checks that we process, I don't recall the exact dollar amount, but it's, you know,

327
00:30:23,960 --> 00:30:27,680
 in the thousands or tens of thousands, not in the millions.

328
00:30:27,680 --> 00:30:31,280
 >> Yeah, and so, obviously, we would prefer to steer customers to that.

329
00:30:31,280 --> 00:30:37,960
 You know, if everybody did that, we'd save one and a half million dollars a year out of our utility budget.

330
00:30:37,960 --> 00:30:41,040
 You know, and some people can't or won't.

331
00:30:41,040 --> 00:30:45,720
 I have, personally, I don't like the term e-check because, like, that sounds complicated.

332
00:30:45,720 --> 00:30:47,600
 I'm familiar with ACH payments.

333
00:30:47,600 --> 00:30:49,400
 So, to me, it's just an ACH.

334
00:30:49,400 --> 00:30:57,000
 So, I don't know if maybe in communicating that, some people might know one term better than the other, just to.

335
00:30:57,000 --> 00:31:04,360
 But I think that our goal should be to steer our customers,

336
00:31:04,360 --> 00:31:08,520
 our citizens toward the lowest cost option while giving them the options.

337
00:31:08,520 --> 00:31:12,800
 But if they want an option that costs more, they can pay that fee and not put it

338
00:31:12,800 --> 00:31:15,560
 on the backs of all the other rate payers.

339
00:31:15,560 --> 00:31:22,280
 And I don't think, I mean, for fairness, I feel like a split rate between residential

340
00:31:22,280 --> 00:31:24,960
 and commercial would be fair at approximately the recovery rate.

341
00:31:24,960 --> 00:31:29,080
 So, half a percent and 2 point whatever percent.

342
00:31:29,080 --> 00:31:32,080
 The goal being just to recover those fees.

343
00:31:32,080 --> 00:31:39,320
 Yeah, and so here you have kind of either everybody pays one and a half or commercial pays 2.6

344
00:31:39,320 --> 00:31:41,240
 and residential pays nothing.

345
00:31:41,240 --> 00:31:48,240
 You know, I feel like it's fair for a residential user who might have a $500 a month utility bill.

346
00:31:48,240 --> 00:31:52,120
 And if they want to pay with their gold card, they can pay half a percent

347
00:31:52,120 --> 00:31:55,560
 or three quarters, whatever 1%, whatever that rate would be.

348
00:31:55,560 --> 00:32:02,520
 But that doesn't mean necessarily that commercial should be subsidized

349
00:32:02,520 --> 00:32:07,960
 if commercial does have twice the fees on half the transactions.

350
00:32:07,960 --> 00:32:14,200
 So, I would say a split rate targeting just fee recovery based

351
00:32:14,200 --> 00:32:16,560
 on the rate class would be my preference.

352
00:32:16,560 --> 00:32:26,040
 So, just to clarify, when you say a split rate, are you referencing this, the 1.55 for all card transactions?

353
00:32:26,040 --> 00:32:34,280
 Whatever we implement, if it's for residential and commercial, it has to be the same rate.

354
00:32:34,280 --> 00:32:40,360
 So, it would be this 1.55 across all card transactions.

355
00:32:40,360 --> 00:32:48,760
 Or, because there are separate what's called MIDS or merchant IDs between residential and commercial

356
00:32:48,760 --> 00:32:53,800
 that can be set up, we would assess only the commercial accounts,

357
00:32:53,800 --> 00:32:58,520
 the 2.6% residential would not have a fee.

358
00:32:58,520 --> 00:33:06,960
 If we were to implement a fee on the residential side, it would really need to be that 1.55 to be consistent.

359
00:33:06,960 --> 00:33:11,760
 We can't have a residential account rate and a commercial account, we either have to have one rate.

360
00:33:11,760 --> 00:33:15,000
 We have one rate, but we can say these customers are excluded, I guess.

361
00:33:15,000 --> 00:33:17,040
 >> Right.

362
00:33:17,040 --> 00:33:19,280
 >> I don't know which one's better then.

363
00:33:19,280 --> 00:33:26,680
 >> I guess, from my perspective, the residential average card bill uses $169.

364
00:33:26,680 --> 00:33:31,720
 At 1.55%, that's $2.62.

365
00:33:31,720 --> 00:33:37,720
 That's cheaper than $2.90 on the previous slide.

366
00:33:37,720 --> 00:33:44,040
 Furthermore, so we can charge them $2.90 flat fee, including E-checks, or we can charge them $2.62,

367
00:33:44,040 --> 00:33:49,720
 the average bill, and give them a freeway out by using an E-check if we use the service fee route.

368
00:33:49,720 --> 00:33:51,520
 Am I looking at that right?

369
00:33:51,520 --> 00:33:53,840
 >> Well, the $2.60 is a percentage, though.

370
00:33:53,840 --> 00:34:03,040
 >> No, but 1.55% of $169.23 is $2.62.

371
00:34:03,040 --> 00:34:07,320
 So, almost $0.30 cheaper per average card transaction, right?

372
00:34:07,320 --> 00:34:13,240
 And gives them the opportunity to not have to pay a fee at all if they go to the E-check route.

373
00:34:13,240 --> 00:34:15,040
 >> And that would be for all cards?

374
00:34:15,040 --> 00:34:18,440
 >> Yeah, I was just thinking of residential.

375
00:34:18,440 --> 00:34:21,520
 I mean, are the commercial customers going to flinch either way?

376
00:34:21,520 --> 00:34:23,560
 Probably not a whole lot.

377
00:34:23,560 --> 00:34:26,360
 But if we're talking about -- and for now,

378
00:34:26,360 --> 00:34:30,400
 we've just delivered a $2.00 rate decrease to the small customer, right?

379
00:34:30,400 --> 00:34:33,240
 So, in a way, we almost washed the whole thing out.

380
00:34:33,240 --> 00:34:41,080
 We're short a little bit, but to me, the service fee provides a free option.

381
00:34:41,080 --> 00:34:43,600
 It provides an option that's actually cheaper than the community.

382
00:34:43,600 --> 00:34:50,040
 For now, on the average customer, it's kind of the best of all worlds, I think,

383
00:34:50,040 --> 00:34:55,880
 to do 1.55 on all with the free E-checks.

384
00:34:55,880 --> 00:34:59,560
 >> So, your goal would be to try to help drive the customer

385
00:34:59,560 --> 00:35:02,760
 towards the lower cost auction of the E-check?

386
00:35:02,760 --> 00:35:04,200
 >> Yeah, yeah.

387
00:35:04,200 --> 00:35:06,680
 >> And that would be through advertising.

388
00:35:06,680 --> 00:35:07,640
 >> Right.

389
00:35:07,640 --> 00:35:13,440
 >> That'd be up to you for the advertising to give that education for the customer.

390
00:35:13,440 --> 00:35:15,680
 >> Yes, and that would be the city's goal as well.

391
00:35:15,680 --> 00:35:25,080
 I mean, ultimately, at the end of the day, we want to reduce our expenditures to the greatest extent possible.

392
00:35:25,080 --> 00:35:31,440
 And so, if everybody were to move to E-checks, this really wouldn't be a discussion.

393
00:35:31,440 --> 00:35:37,240
 I mean, we wouldn't incur that $1.5 million in credit card fees, everyone would be on E-checks.

394
00:35:37,240 --> 00:35:41,160
 So, yes, that education component would be very important.

395
00:35:41,160 --> 00:35:51,160
 We absolutely make sure that all customers are aware and encouraged to look at the, you know, options that do not incur a fee.

396
00:35:51,160 --> 00:36:00,680
 >> Like everywhere you have pay with credit card underneath its star, save 1.5% with an E-check.

397
00:36:00,680 --> 00:36:04,840
 Any other feedback?

398
00:36:04,840 --> 00:36:15,720
 >> So, if we have an increase, not of our own choosing, could we, I'm thinking that 1.55% versus the $2.90.

399
00:36:15,720 --> 00:36:23,080
 We, in a sense, have about a 30-cent buffer to help absorb depending on how high the percentage is.

400
00:36:23,080 --> 00:36:30,320
 Would that be a fair formula, not one we follow, but would that, does that make sense?

401
00:36:30,320 --> 00:36:42,080
 >> I think, yeah, I think that's a point well taken, that that option would be less expensive based on that average residential payment.

402
00:36:42,080 --> 00:36:47,760
 And so, if expenditures were to increase, that would provide a buffer.

403
00:36:47,760 --> 00:36:59,560
 I think the one note I would make is that the fee increases that we're seeing, and all, sorry, let me return to the table on slide seven.

404
00:36:59,560 --> 00:37:08,680
 The fee increases that we're seeing, that 20% year over year increase is largely driven by the volume of transactions.

405
00:37:08,680 --> 00:37:16,240
 And so, it's not driven by the card brands and the interchange fees increasing.

406
00:37:16,240 --> 00:37:26,840
 It's the, you know, we're seeing more and more and more customers using credit cards to pay the utility bills.

407
00:37:26,840 --> 00:37:36,320
 So, ease of payment and lack of money in the bank, not that we can control any of that, but that's what's, that's what we're looking at.

408
00:37:36,320 --> 00:37:38,720
 The reason for the, I think that's a driving force to you.

409
00:37:38,720 --> 00:37:43,080
 >> I only have one ACH payment a month, which is to my credit card company.

410
00:37:43,080 --> 00:37:51,600
 If I can get as many American airline miles as I possibly can with my American card, I'm going to do that, particularly with business travel, because they can pay for my vacations.

411
00:37:51,600 --> 00:37:58,120
 But yeah, to me, it's convenient and I don't care. I'll pay $3 to not have to put in a routing account number.

412
00:37:58,120 --> 00:38:06,520
 >> I don't mean to be splitting hairs, but I'm just, I'm looking at a way for helping, we're selling this.

413
00:38:06,520 --> 00:38:08,440
 Thank you. You, not me.

414
00:38:08,440 --> 00:38:19,760
 >> Yeah, I think it sounds like we're kind of coming to a consensus on the 1.5% for all customers and whatever, you know, encouraging customers to use the lower cost options.

415
00:38:19,760 --> 00:38:32,920
 We're going to, we're going to charge a 1.5% fee for card users and our utility rates will decline because we will be paying that, that 1.5 million approximately will be covered by that fee.

416
00:38:32,920 --> 00:38:39,160
 So, that's that much less that has to be recovered out of our utility rates.

417
00:38:39,160 --> 00:38:55,760
 >> Yeah, in terms of that trade off, you know, it would certainly relieve pressure in the operating budgets of the solid waste, water, wastewater, and DME budgets.

418
00:38:55,760 --> 00:39:06,960
 You know, is it a one to one, you know, that's all going to get netted out and influenced by, you know, the budget process.

419
00:39:06,960 --> 00:39:14,680
 You know, certainly there's needs to increase, you know, fund balances back to certain targets.

420
00:39:14,680 --> 00:39:20,720
 There are needs for additional services and things that would, you know, be identified in the budget process.

421
00:39:20,720 --> 00:39:34,040
 So, I think at the end of the day, you know, if we were to keep the recovery as it is now, it's just that much more pressure on the operating budget.

422
00:39:34,040 --> 00:39:39,040
 And so, just something to consider.

423
00:39:39,040 --> 00:39:44,760
 >> Well, considering this amount, we're talking about a million and a half dollars, which seems like a lot sitting here talking about it.

424
00:39:44,760 --> 00:39:53,520
 But in the size of the total budgets of the utilities and how many dollars they're taking in, it's a relatively small percentage, is it not?

425
00:39:53,520 --> 00:40:05,520
 >> It is. So, of the 151 million total processed, it is, it's 1.5 million.

426
00:40:05,520 --> 00:40:09,520
 So, yes.

427
00:40:09,520 --> 00:40:21,520
 >> So, whether it's a service fee or a flat fee, we're not talking about an enormous amount of payments versus the total of payments that come in to the utility departments.

428
00:40:21,520 --> 00:40:23,520
 >> Correct.

429
00:40:23,520 --> 00:40:33,520
 >> And then I suppose this will be reviewed every, either in budget process or every year or two to, if that fee needs to be adjusted to match the cost.

430
00:40:33,520 --> 00:40:35,520
 >> That's a great statement.

431
00:40:35,520 --> 00:40:41,520
 I'm curious, you get an email from the credit cards in six months.

432
00:40:41,520 --> 00:40:50,520
 What is the general lead time they give us as to, do we immediately start making those additional payments or is there, how does that work?

433
00:40:50,520 --> 00:41:06,520
 >> So, in terms of card brand rule changes, you know, there is a time frame that we would need to make an adjustment and we would bring whatever change that is back to PUB and back to council in order to adjust.

434
00:41:06,520 --> 00:41:13,520
 As far as the fee changes, I'm not certain offhand, you know, I have not received --

435
00:41:13,520 --> 00:41:15,520
 >> A threatening letter?

436
00:41:15,520 --> 00:41:20,520
 >> Any kind of communication from card brands.

437
00:41:20,520 --> 00:41:34,520
 I think that we would primarily receive that communication through our card processor and we would evaluate, as was noted, in the budget process what fees are looking like.

438
00:41:34,520 --> 00:41:41,520
 As we look at year over year, the number of transactions, the amount processed and see if there's any change needed.

439
00:41:41,520 --> 00:41:52,520
 One item I do want to note is the service fee, that last bullet point, the estimated estimate was provided by Wells Fargo merchant services.

440
00:41:52,520 --> 00:42:07,520
 So Wells Fargo, as our card processor, would provide the calculation to the city by analyzing all of our transactions to say this is the fee that, you know, would be required in order to recover your costs.

441
00:42:07,520 --> 00:42:12,520
 So that communication would be with our card processor.

442
00:42:12,520 --> 00:42:15,520
 >> Thank you.

443
00:42:15,520 --> 00:42:18,520
 Do you need anything further from us?

444
00:42:18,520 --> 00:42:20,520
 >> I don't believe so.

445
00:42:20,520 --> 00:42:34,520
 Just to recap, I think what I heard in terms of feedback was a preference for a service fee at the 1.55% that would apply to both residential and commercial, all card payments.

446
00:42:34,520 --> 00:42:37,520
 I just don't understand.

447
00:42:37,520 --> 00:42:39,520
 >> A motion would be good.

448
00:42:39,520 --> 00:42:42,520
 >> Could you go back to that slide that we're supposed, oh, there it is.

449
00:42:42,520 --> 00:42:45,520
 Go back to the flat fee, one more over.

450
00:42:45,520 --> 00:42:51,520
 What is that, slide nine?

451
00:42:51,520 --> 00:42:55,520
 Mr. Chairman, I'm glad to second your motion.

452
00:42:55,520 --> 00:43:09,520
 >> So I think I move PUB recommend option three, implementing a service fee for all customers of approximately 1.5%, excluding e-checks.

453
00:43:09,520 --> 00:43:11,520
 >> I'll second that.

454
00:43:11,520 --> 00:43:14,520
 >> Okay, we have a motion and a second.

455
00:43:14,520 --> 00:43:15,520
 All in favor say aye.

456
00:43:15,520 --> 00:43:16,520
 >> Aye.

457
00:43:16,520 --> 00:43:19,520
 >> Any opposed?

458
00:43:19,520 --> 00:43:20,520
 >> Very nice.

459
00:43:20,520 --> 00:43:23,520
 >> Thank you.

460
00:43:23,520 --> 00:43:27,520
 I believe that is our last item of business.

461
00:43:27,520 --> 00:43:31,520
 And with that, we are adjourned.