WEBVTT 00:00:00.000 --> 00:00:05.520 Good morning and welcome to the regularly scheduled Public Utilities Board meeting for 00:00:05.520 --> 00:00:08.160 the City of Denton on March 9th. 00:00:08.160 --> 00:00:11.840 It is 9 a.m. and the meeting is called to order. 00:00:11.840 --> 00:00:14.780 Our first item is presentations from the public. 00:00:14.780 --> 00:00:18.400 Do we have any presentations? 00:00:18.400 --> 00:00:24.000 All right moving on to the consent agenda, does anybody have any questions about items 00:00:24.000 --> 00:00:30.760 on the consent agenda? 00:00:30.760 --> 00:00:35.120 Seeing none, the chair would entertain a motion. 00:00:35.120 --> 00:00:38.500 We have a motion and a second. 00:00:38.500 --> 00:00:41.320 All in favor please say aye. 00:00:41.320 --> 00:00:43.260 Opposed sign the same. 00:00:43.260 --> 00:00:45.840 Consent agenda passes unanimously. 00:00:45.840 --> 00:00:49.000 Moving on to items for individual consideration. 00:00:49.000 --> 00:00:57.920 Our first item is consider approval of the February 23rd minutes. 00:00:57.920 --> 00:01:00.000 We have a motion and a second. 00:01:00.000 --> 00:01:01.800 All in favor say aye. 00:01:01.800 --> 00:01:02.800 Any opposed? 00:01:02.800 --> 00:01:07.320 The motion carries unanimously. 00:01:07.320 --> 00:01:15.060 The next item is item B, consider recommending adoption of an ordinance establishing schedule 00:01:15.060 --> 00:01:28.380 of rates for electric service, I believe we have a presentation. 00:01:28.380 --> 00:01:30.240 Hi good morning Chair, PV members. 00:01:30.240 --> 00:01:36.880 My name is Melissa Cuevas with DME and we have our quarterly review of our energy cost 00:01:36.880 --> 00:01:41.460 adjustment and our transmission cost recovery factor today. 00:01:41.460 --> 00:01:44.120 So just a quick overview of what our current rates are. 00:01:44.120 --> 00:01:50.320 So our native load ECA is currently set at 0.0462 cents per KWH and it does provide 00:01:50.320 --> 00:01:54.160 a buffer, a balance buffer of plus or minus 20 million dollars. 00:01:54.160 --> 00:01:57.000 We're not recommending any changes for this one. 00:01:57.000 --> 00:02:04.680 Our large load ECA is currently set at 0.0577 cents per KWH and we are recommending a slight 00:02:04.680 --> 00:02:10.040 increase to 0.0606 per KWH. 00:02:10.040 --> 00:02:15.180 Our transmission cost recovery factor rates are shown below and we are recommending a 00:02:15.180 --> 00:02:18.000 decrease to this as well. 00:02:18.000 --> 00:02:22.720 So for our native load ECA balance, like I mentioned, our balance buffer is plus or minus 00:02:22.720 --> 00:02:26.640 20 million dollars and we look ahead 12 months. 00:02:26.640 --> 00:02:31.520 So we are recommending maintaining that rate, we'll be at a healthy balance of 16 million 00:02:31.520 --> 00:02:34.440 by December of this year. 00:02:34.440 --> 00:02:40.160 On the right is a table where it shows all the changes we've made since October 2023. 00:02:40.160 --> 00:02:47.320 So didn't make any changes in '25 and again, we're not recommending a change for this quarter. 00:02:47.320 --> 00:02:56.800 Our TCRF forecasted account balance, we are recommending a slight decrease to 0.0156 cents. 00:02:56.800 --> 00:03:02.400 That'll leave our balance December of '26 at 2.8 million. 00:03:02.400 --> 00:03:07.520 And then our table to the right just shows what the changes have been from October 23 00:03:07.520 --> 00:03:12.480 and on. 00:03:12.480 --> 00:03:14.760 So this shows a monthly rate impact. 00:03:14.760 --> 00:03:21.800 So as you see, if we decrease the TCRF, there's going to be about a 1.5% decrease to our customers' 00:03:21.800 --> 00:03:29.980 bills that'll show residential through our three commercial rate classes as well. 00:03:29.980 --> 00:03:41.160 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. 00:03:41.160 --> 00:03:45.040 So for our ordinance, we did update the wording. 00:03:45.040 --> 00:03:49.840 The new practice will be following the 12-month lock-in period. 00:03:49.840 --> 00:03:55.440 We'll now be reviewing the accounts retroactively to determine if they should remain in that rate class, 00:03:55.440 --> 00:04:03.800 decrease to GS general service small or increase to general service large. 00:04:03.800 --> 00:04:13.320 So our recommendation is to maintain our native load ECA, increase our large load ECA to 0.0606 per KWH, 00:04:13.320 --> 00:04:24.960 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. 00:04:24.960 --> 00:04:28.720 Any questions? 00:04:28.720 --> 00:04:30.520 >> Mr. Rayner. 00:04:30.520 --> 00:04:42.160 >> Does this correlate to what we had last Monday in discussing going back reviewing bills, whether they were overpaid or underpaid? 00:04:42.160 --> 00:04:43.880 >> Yes, correct. 00:04:43.880 --> 00:04:50.800 And there was a separate item on the consent agenda that you just approved that also addressed some of those items. 00:04:50.800 --> 00:04:51.880 >> I was just curious. 00:04:51.880 --> 00:04:52.720 Thank you very much. 00:04:52.720 --> 00:04:55.600 >> Thank you, Mr. Chairman. 00:04:55.600 --> 00:04:57.160 >> I have a question. 00:04:57.160 --> 00:05:04.040 On the slides you had with the rate projections, it said as of October 23. 00:05:04.040 --> 00:05:06.000 >> Yeah, so that's just what the changes have been. 00:05:06.000 --> 00:05:08.400 >> I was just modestly confused since we're talking about it. 00:05:08.400 --> 00:05:12.400 >> Sorry, no, yeah, that is just showing what changes we've made in the past. 00:05:12.400 --> 00:05:17.800 So you guys can see, obviously, our goal is to keep our rates as consistent as we can. 00:05:17.800 --> 00:05:25.320 But that's just reflecting any changes we've made since October 23 and now effective April 26. 00:05:25.320 --> 00:05:28.280 >> Thank you. 00:05:28.280 --> 00:05:29.360 >> Any further questions? 00:05:29.360 --> 00:05:30.200 Mr. Newquist. 00:05:30.200 --> 00:05:32.480 >> What's the target balance in the TCRF? 00:05:32.480 --> 00:05:34.320 >> The TCRF, we don't have a target balance. 00:05:34.320 --> 00:05:38.440 So essentially, let's say it's our transmission cost of service. 00:05:38.440 --> 00:05:43.080 The total we kind of divided over 12 months and we pay that monthly. 00:05:43.080 --> 00:05:44.640 Our year closes out in September. 00:05:44.640 --> 00:05:50.440 So ideally, we'd like to be closer to a million around there, which is what this is forecasting. 00:05:50.440 --> 00:05:56.160 >> Any further questions? 00:05:56.160 --> 00:06:07.080 >> And Mr. Chair, we also have a close session item, as I mentioned earlier, that is a placeholder. 00:06:07.080 --> 00:06:12.840 But certainly, you know, one of the recommendations here is to increase the EC for large loads. 00:06:12.840 --> 00:06:16.080 So if there are questions regarding that, we would have to go into close session. 00:06:16.080 --> 00:06:20.960 If there's none, then we can certainly proceed with your direction on this item. 00:06:20.960 --> 00:06:27.160 >> I think it's been really beneficial for the PUB to see this quarterly. 00:06:27.160 --> 00:06:28.840 You know, it's given us, I think, a good understanding. 00:06:28.840 --> 00:06:34.200 You know, and every quarter, there's always the rates and balances of the accounts. 00:06:34.200 --> 00:06:36.040 But usually, there's a little bit of education. 00:06:36.040 --> 00:06:42.280 And so I feel like we've gotten pretty good education on, you know, the targets for the ECA accounts. 00:06:42.280 --> 00:06:47.960 You know, and I think it's good to see this just kind of moving along on plan. 00:06:47.960 --> 00:06:51.600 You know, seeing those fund balance projections, having a good idea. 00:06:51.600 --> 00:06:52.880 You know, it feels like they're pretty stable. 00:06:52.880 --> 00:06:57.160 We're changing rates, 0.02 cents. 00:06:57.160 --> 00:07:00.800 You know, that's like, that's a nice, that's not a shock to anybody. 00:07:00.800 --> 00:07:04.880 And honestly, they're moving in the right direction too, which is nice. 00:07:04.880 --> 00:07:08.960 So, I mean, I think this is, this has been a good process. 00:07:08.960 --> 00:07:13.720 I feel like we're getting a good handle on it. 00:07:13.720 --> 00:07:17.800 And with that, I would entertain a motion for approval. 00:07:17.800 --> 00:07:18.960 We have a motion for approval. 00:07:18.960 --> 00:07:19.600 >> Second. 00:07:19.600 --> 00:07:20.600 >> And a second. 00:07:20.600 --> 00:07:21.840 All in favor, say aye. 00:07:21.840 --> 00:07:22.440 >> Aye. 00:07:22.440 --> 00:07:23.480 >> Any opposed? 00:07:23.480 --> 00:07:26.360 Motion carries unanimously. 00:07:26.360 --> 00:07:31.360 Our next item for individual consideration is management reports. 00:07:31.360 --> 00:07:38.880 >> So, Mr. Chair, members of the PUB, so we, staff did provide to you a memo on the Pecan Creek Water Reclamation Plant. 00:07:38.880 --> 00:07:43.280 Certainly, if there are questions on Stephen and Matt are here as well. 00:07:43.280 --> 00:07:45.200 So, if you have any questions on that. 00:07:45.200 --> 00:07:55.760 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. 00:07:55.760 --> 00:08:04.120 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. 00:08:04.120 --> 00:08:05.640 >> Thank you, sir, I did notice that, appreciate it. 00:08:05.640 --> 00:08:06.720 >> Yeah, great. 00:08:06.720 --> 00:08:16.320 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. 00:08:16.320 --> 00:08:26.120 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. 00:08:26.120 --> 00:08:35.120 And then finally, we did add to the new business action item the one request that we had on the electric commercial rates. 00:08:35.120 --> 00:08:36.960 We are working on that. 00:08:36.960 --> 00:08:45.280 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. 00:08:45.280 --> 00:08:48.360 And if you have questions, we can certainly address at that time. 00:08:48.360 --> 00:08:55.080 With that, happy to answer any questions you may have. 00:08:55.080 --> 00:09:02.320 >> Seeing no questions, I think we can move on to our work session. 00:09:02.320 --> 00:09:13.160 We'll have a, let's see, receive a report and discussion on online credit card processing and cost recovery options. 00:09:13.160 --> 00:09:22.880 >> Chair, members of the PUB, Matt Hamilton, Chief Financial Officer here this morning to present credit card processing and cost recovery options. 00:09:22.880 --> 00:09:31.560 As you may recall, in the budgeting process last year, the city changed its methodology to a zero-based budgeting approach. 00:09:31.560 --> 00:09:36.600 And in doing so, we went line by line through each of the departmental budgets and 00:09:36.600 --> 00:09:46.520 identified areas both on the revenue and expense side where we felt like we could improve or look at additional options. 00:09:46.520 --> 00:09:55.840 One of those areas in the customer service fund was in regard to credit card fees, which have been increasing year over year. 00:09:55.840 --> 00:10:05.880 And so on July 14th of last year, we had presented a couple slides in regard to credit card processing fees and recovery options. 00:10:05.880 --> 00:10:09.680 The board had some feedback, we took it to council. 00:10:09.680 --> 00:10:16.560 Council also had some feedback and the direction at that time was to continue to look into options and what may be available. 00:10:16.560 --> 00:10:21.720 So since that time, there has been a new option that has come available. 00:10:21.720 --> 00:10:28.360 So we just wanted to provide an update for you this morning as we begin the budgeting process for 00:10:28.360 --> 00:10:34.720 this year so that we can receive any feedback and direction as we start that process. 00:10:34.720 --> 00:10:41.360 So just a little bit of background, the city of Denton has processed credit card payments for 00:10:41.360 --> 00:10:47.520 over 25 years and we budget annually to recover those costs. 00:10:47.520 --> 00:10:54.120 In prior to 2011, we did assess convenience fees to all online transactions, 00:10:54.120 --> 00:10:59.160 but removed those fees in 2011 across all payment portals. 00:10:59.160 --> 00:11:09.400 In 2014, due to the identification of rising costs associated with commercial cards which have higher interchange rates, 00:11:09.400 --> 00:11:19.680 that led to the implementation of a 2.7% convenience fee for commercial utility online payments or by phone. 00:11:19.680 --> 00:11:23.800 In 2019, the card brand rules changed, 00:11:23.800 --> 00:11:31.400 restricting convenience fees to only flat amounts, so prior to 2019 we assessed the fee as a percentage. 00:11:31.400 --> 00:11:37.560 In 2019, the card brand rules changed and they said you can no longer assess that as a percentage. 00:11:37.560 --> 00:11:44.520 So in 2020, the PUB and City Council directed that convenience fees be removed when the city adopted its new 00:11:44.520 --> 00:11:50.600 card processing contract with Wells Fargo Merchant Services, since the percentage was no longer allowed. 00:11:50.600 --> 00:11:57.200 And since that time, card processing costs are absorbed through departmental budgets and funded through city revenues. 00:11:57.200 --> 00:12:02.480 And so in the case of utilities, it is in the base rate of the utilities, 00:12:02.480 --> 00:12:08.160 which then make a transfer into the customer service fund to pay that cost. 00:12:08.160 --> 00:12:14.680 In 2025, October of '25, the card brand rules changed again, 00:12:14.680 --> 00:12:22.840 this time presenting a new fee option that can be implemented on a percentage basis. 00:12:22.840 --> 00:12:27.520 So I wanted to provide just an overview of current card processing costs. 00:12:27.520 --> 00:12:31.640 There's three components that make up card processing costs. 00:12:31.640 --> 00:12:34.120 The first is called the interchange rate. 00:12:34.120 --> 00:12:35.960 This is a non-negotiable rate. 00:12:35.960 --> 00:12:42.200 It's about one and a half percent plus a fixed amount per transaction. 00:12:42.200 --> 00:12:54.120 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. 00:12:54.120 --> 00:13:00.480 So each of these percentages are set by the card brands and networks. 00:13:00.480 --> 00:13:09.480 So the city has no control or negotiation with the brands over those percentages. 00:13:09.480 --> 00:13:15.520 And then the third component is the payment processor fee, which is fixed by contract. 00:13:15.520 --> 00:13:25.280 And so when we go out and competitively bid our card processor, as we did with Wells Fargo Merchant Services, 00:13:25.280 --> 00:13:28.320 there is some negotiation there that the city has. 00:13:28.320 --> 00:13:34.680 What I wanted to illustrate was that the payment processor fees, which are the Wells Fargo Merchant Service costs, 00:13:34.680 --> 00:13:40.160 are only five percent of the total cost that we pay in card processing fees. 00:13:40.160 --> 00:13:51.720 So the city has very little, you know, input and influence in terms of card processing costs. 00:13:51.720 --> 00:13:53.960 So why revisit the fees now? 00:13:53.960 --> 00:14:02.040 Customer service and the utility billing component of it is 70 percent of the city's annual card processing costs, 00:14:02.040 --> 00:14:09.080 primarily from online payments, and account for about $1.57 million annually in expense. 00:14:09.080 --> 00:14:18.320 The costs associated with card processing continue to significantly increase up 20 percent from fiscal year '24 to '25, 00:14:18.320 --> 00:14:22.720 from $1.3 million to about $1.5 million. 00:14:22.720 --> 00:14:27.040 So utility payments are governed by MCC 4900. 00:14:27.040 --> 00:14:30.760 MCC stands for Merchant Category Codes. 00:14:30.760 --> 00:14:39.560 And these are assigned by the card networks to categorize merchant transactions for processing, fee calculation, and compliance. 00:14:39.560 --> 00:14:47.720 MCC 4900 specifically identifies transactions as being utility payment related. 00:14:47.720 --> 00:14:57.320 And MCC 4900 is important because it has a reduced interchange rate compared to retail rates. 00:14:57.320 --> 00:15:02.320 Previously, only a convenience fee was permissible with MCC 4900, 00:15:02.320 --> 00:15:10.840 but it provided limited flexibility in how it was applied, specifically only as a flat fee, not as a percentage. 00:15:10.840 --> 00:15:21.240 Changes in card processing rules in October now allow for what's called a service fee with MCC 4900. 00:15:21.240 --> 00:15:32.360 So comparing the two options, the convenience fee and service fee are both allowed under MCC 4900 for that discounted interchange rate. 00:15:32.360 --> 00:15:35.520 The convenience fee, as I had mentioned, is only a flat fee. 00:15:35.520 --> 00:15:39.920 The service fee can be implemented as a flat or a percentage. 00:15:39.920 --> 00:15:43.560 Both can be applied to online transactions. 00:15:43.560 --> 00:15:47.440 The convenience fee cannot include recurring payments. 00:15:47.440 --> 00:15:50.920 It could only be applied to one-time payments. 00:15:50.920 --> 00:15:57.000 The service fee could be applied to both recurring and one-time payments. 00:15:57.000 --> 00:16:00.960 Neither of these two fees can be tiered. 00:16:00.960 --> 00:16:11.960 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. 00:16:11.960 --> 00:16:19.840 Or, you know, as, you know, one customer type, you pay one percentage and another customer type pays another. 00:16:19.840 --> 00:16:27.280 So neither fee can be set up in that manner. The fees need to be consistent. 00:16:27.280 --> 00:16:40.760 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. 00:16:40.760 --> 00:16:48.280 The convenience fee must be applied to e-checks, whereas the service fee would not include e-checks. 00:16:48.280 --> 00:16:57.320 So as a summary, the convenience fee, flat fee only, has to essentially include all payment avenues. 00:16:57.320 --> 00:17:07.440 The service fee can be applied as a percentage and would not include e-checks. 00:17:07.440 --> 00:17:18.000 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. 00:17:18.000 --> 00:17:27.800 The estimated rate to recover fees with a convenience fee implemented, the fee would be about $2.90 per transaction. 00:17:27.800 --> 00:17:33.760 The second option is a service fee, and this is the new fee under the new visa rules. 00:17:33.760 --> 00:17:42.800 Percentage or flat fee includes the recurring payment, excludes e-checks, and the estimated fee, 00:17:42.800 --> 00:17:58.520 if it applied to all card payments, would be 1.55% or 2.6% if it only applied to commercial card transactions. 00:17:58.520 --> 00:18:09.840 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, 00:18:09.840 --> 00:18:19.380 including the number of transactions, the amount processed, the average payment amount, and the fees paid by the city for those transactions. 00:18:19.380 --> 00:18:30.000 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. 00:18:30.000 --> 00:18:39.880 So as you can see, the number of transactions between 24 and 25 increased 83,125. 00:18:39.880 --> 00:18:52.560 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. 00:18:52.560 --> 00:19:02.240 So the increase in fees is driven largely by an increase in the volume of transactions that we're handling. 00:19:02.240 --> 00:19:10.200 But one important component of this is you'll notice that, for example, 00:19:10.200 --> 00:19:21.160 in 2025, the number of commercial transactions, $32,000, represents a much smaller proportion of the total transactions of $664,000. 00:19:21.160 --> 00:19:30.060 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. 00:19:30.060 --> 00:19:39.760 So just talking a little bit about implementation, if direction is provided by PUB and 00:19:39.760 --> 00:19:44.760 the city council to proceed with implementing one of the two fees, 00:19:44.760 --> 00:19:52.160 staff will initiate a marketing campaign to educate customers on the fee and payment methods which do not incur fees. 00:19:52.160 --> 00:19:57.240 So for example, with the service fee, e-checks do not incur any fee. 00:19:57.240 --> 00:20:01.080 Staff will work with our vendors to implement the fee modules. 00:20:01.080 --> 00:20:05.760 This is estimated to take about six months as we work through contracts and 00:20:05.760 --> 00:20:10.920 ensure that everything is up and running, as well as ensuring that 00:20:10.920 --> 00:20:18.360 customers are well-educated on options that don't incur a fee. 00:20:18.360 --> 00:20:25.080 And then the fees, if that direction were to be provided relatively soon, 00:20:25.080 --> 00:20:31.560 March, April, the target would be to implement it at the first of the fiscal year, October 1st. 00:20:31.560 --> 00:20:36.900 However, that would, of course, be dependent on further discussion and direction. 00:20:40.740 --> 00:20:48.160 So today we're looking for feedback and direction from the board on the recovery of credit card processing costs. 00:20:48.160 --> 00:20:51.200 Essentially, there are three options. 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. 00:20:58.400 --> 00:21:01.200 The cost would be recovered in the utility base rates. 00:21:01.200 --> 00:21:04.840 Option two is to implement a convenience fee. 00:21:04.840 --> 00:21:10.720 This would be a flat fee assessed for non-recurring online payments, including e-checks. 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 00:21:16.000 --> 00:21:21.520 percentage on all online payments, but exclude e-checks. 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. 00:21:32.200 --> 00:21:36.720 And with that I'll stand for any questions. 00:21:36.720 --> 00:21:38.120 >> Mr. Rainer? 00:21:38.120 --> 00:21:40.320 >> Could you go back to slide two, please? 00:21:40.320 --> 00:21:47.840 So we had, I'm just looking at timelines. 00:21:47.840 --> 00:21:54.160 Who controls, you had indicated we have no control, is it MCC did you say, or? 00:21:54.160 --> 00:21:58.880 >> So MCC is just a merchant code that is assigned by the card brands. 00:21:58.880 --> 00:22:03.240 But essentially who is dictating the rates are the card brands. 00:22:03.240 --> 00:22:09.520 So Visa, Discover, MasterCard, Implement, go for it. 00:22:09.520 --> 00:22:12.120 >> I remember that, so if I may. 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. 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. 00:22:26.640 --> 00:22:33.000 >> Yeah, I think over the course of time the city has periodically looked at these expenses. 00:22:33.000 --> 00:22:38.200 And as we've seen changes from the card brand, 00:22:38.200 --> 00:22:43.960 either implemented or removed fees to recover those costs. 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. 00:22:48.040 --> 00:22:52.400 I know Tony appreciates that, so that's what we try to do. 00:22:52.400 --> 00:22:53.560 May I? 00:22:53.560 --> 00:22:54.440 Slide three, please. 00:22:57.600 --> 00:23:05.960 So these are the three changes or the three processes we can go through. 00:23:05.960 --> 00:23:06.840 Is that correct? 00:23:06.840 --> 00:23:08.200 Am I looking at that right? 00:23:08.200 --> 00:23:17.560 >> So these are the three cost components that make up the payment, 00:23:17.560 --> 00:23:22.560 the expense associated with accepting card payments. 00:23:22.560 --> 00:23:28.040 >> And so if I may ask, is this represents commercial and residential or? 00:23:28.040 --> 00:23:28.680 >> This would, yes. 00:23:28.680 --> 00:23:29.480 >> This is everybody. 00:23:29.480 --> 00:23:31.000 >> This would apply to everybody. 00:23:31.000 --> 00:23:32.160 >> Okay, very good. 00:23:32.160 --> 00:23:35.440 And could I go to slide four? 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. 00:23:46.880 --> 00:23:49.080 Do you remember the conversation? 00:23:49.080 --> 00:23:53.120 >> Slide five percent, I don't, I'm sorry. 00:23:53.120 --> 00:23:58.000 >> Okay, that's all right, no, slide five then. 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, 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? 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. 00:24:26.040 --> 00:24:27.960 How flexible does this have to be? 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. 00:24:32.960 --> 00:24:41.880 So we are subject to those card brand rules as a merchant accepting card payments. 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. 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. 00:25:01.280 --> 00:25:06.680 The MCC 4900 is simply a discounted rate 00:25:06.680 --> 00:25:13.960 that the card brands charge the interchange fees because they're utility payments. 00:25:13.960 --> 00:25:21.160 And they recognize that it is an expense that is necessary in many cases. 00:25:21.160 --> 00:25:27.360 So they set those overarching fees. 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. 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. 00:25:44.280 --> 00:25:48.080 And so that gets plugged into the utility performance, and 00:25:48.080 --> 00:25:53.320 that ultimately gets calculated down to a cost of service rate. 00:25:53.320 --> 00:26:01.920 Or these are two options where individuals who are choosing to use cards for 00:26:01.920 --> 00:26:08.640 online payments would be the ones who specifically pay for 00:26:08.640 --> 00:26:15.960 that fee rather than broadly spreading the cost to all customers. 00:26:15.960 --> 00:26:17.800 >> If I have one more question, Mr. Chairman. 00:26:17.800 --> 00:26:21.440 Slide nine, I think. 00:26:21.440 --> 00:26:27.520 Go back two slides, please, sir. 00:26:27.520 --> 00:26:29.200 I was looking for a chart there. 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, 00:26:37.320 --> 00:26:42.840 roughly two-thirds of the increase was based on or was the results of residential use? 00:26:42.840 --> 00:26:43.840 Did I hear that right? 00:26:43.840 --> 00:26:44.360 No. 00:26:44.360 --> 00:26:51.120 >> No, sorry, two-thirds of the total fees paid by the city, 00:26:51.120 --> 00:26:54.560 so a million of the one and a half million. 00:26:54.560 --> 00:26:55.320 >> Yes. 00:26:55.320 --> 00:26:59.400 >> Was incurred by commercial business card use. 00:26:59.400 --> 00:27:00.320 >> Wrong horse. 00:27:00.320 --> 00:27:01.440 Okay. 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, 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. 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. 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, 00:27:38.720 --> 00:27:43.120 so the costs associated with accepting those cards are much higher. 00:27:43.120 --> 00:27:43.800 >> Thank you. 00:27:43.800 --> 00:27:46.600 Thank you, Mr. Chairman. 00:27:46.600 --> 00:27:50.600 Any other questions? 00:27:50.600 --> 00:27:54.400 Mr. Rybak? 00:27:54.400 --> 00:27:56.400 >> I don't have a question. 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. 00:28:05.000 --> 00:28:10.120 The flat fee seems more residentially favorable. 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, 00:28:13.840 --> 00:28:18.400 a dollar and a quarter, 273, whatever the number turns out to be. 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, 00:28:24.000 --> 00:28:26.720 then is that really fair to have the flat fee? 00:28:26.720 --> 00:28:32.120 So I'm a little bit torn on which way to go. 00:28:32.120 --> 00:28:36.560 >> Could you return to the table of costs there? 00:28:36.560 --> 00:28:38.960 So just -- these are all cards. 00:28:38.960 --> 00:28:41.000 This doesn't include e-checks. 00:28:41.000 --> 00:28:42.600 >> That's correct. 00:28:42.600 --> 00:28:44.360 >> Yeah, and just the math here. 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. 00:28:52.600 --> 00:28:57.400 But then the residential is 500,000 in fees on 107 million. 00:28:57.400 --> 00:29:01.000 So that's like point -- that's like less than half a percent. 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%? 00:29:10.520 --> 00:29:14.200 >> Yeah, it just depends on what that card is. 00:29:14.200 --> 00:29:18.840 And this does encompass all cards. 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, 00:29:26.440 --> 00:29:31.120 they didn't enter a PIN, a point of sale, it would encompass that as well. 00:29:31.120 --> 00:29:38.080 So, yes, the residential costs are significantly lower than the business cards. 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. 00:29:46.960 --> 00:29:50.920 >> Yeah, I feel like, I mean, customers have the ability to choose. 00:29:50.920 --> 00:29:54.800 Maybe they have some constrained choice, but they have the ability to choose how they pay. 00:29:54.800 --> 00:29:59.600 You know, e-checks, I think we talked about previously last time we had this presentation, 00:29:59.600 --> 00:30:05.760 that they're like 10 or 15 cents a check with no percentage extra. 00:30:05.760 --> 00:30:07.000 >> That's correct. 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. 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, 00:30:23.960 --> 00:30:27.680 in the thousands or tens of thousands, not in the millions. 00:30:27.680 --> 00:30:31.280 >> Yeah, and so, obviously, we would prefer to steer customers to that. 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. 00:30:37.960 --> 00:30:41.040 You know, and some people can't or won't. 00:30:41.040 --> 00:30:45.720 I have, personally, I don't like the term e-check because, like, that sounds complicated. 00:30:45.720 --> 00:30:47.600 I'm familiar with ACH payments. 00:30:47.600 --> 00:30:49.400 So, to me, it's just an ACH. 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. 00:30:57.000 --> 00:31:04.360 But I think that our goal should be to steer our customers, 00:31:04.360 --> 00:31:08.520 our citizens toward the lowest cost option while giving them the options. 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 00:31:12.800 --> 00:31:15.560 on the backs of all the other rate payers. 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 00:31:22.280 --> 00:31:24.960 and commercial would be fair at approximately the recovery rate. 00:31:24.960 --> 00:31:29.080 So, half a percent and 2 point whatever percent. 00:31:29.080 --> 00:31:32.080 The goal being just to recover those fees. 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 00:31:39.320 --> 00:31:41.240 and residential pays nothing. 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. 00:31:48.240 --> 00:31:52.120 And if they want to pay with their gold card, they can pay half a percent 00:31:52.120 --> 00:31:55.560 or three quarters, whatever 1%, whatever that rate would be. 00:31:55.560 --> 00:32:02.520 But that doesn't mean necessarily that commercial should be subsidized 00:32:02.520 --> 00:32:07.960 if commercial does have twice the fees on half the transactions. 00:32:07.960 --> 00:32:14.200 So, I would say a split rate targeting just fee recovery based 00:32:14.200 --> 00:32:16.560 on the rate class would be my preference. 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? 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. 00:32:34.280 --> 00:32:40.360 So, it would be this 1.55 across all card transactions. 00:32:40.360 --> 00:32:48.760 Or, because there are separate what's called MIDS or merchant IDs between residential and commercial 00:32:48.760 --> 00:32:53.800 that can be set up, we would assess only the commercial accounts, 00:32:53.800 --> 00:32:58.520 the 2.6% residential would not have a fee. 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. 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. 00:33:11.760 --> 00:33:15.000 We have one rate, but we can say these customers are excluded, I guess. 00:33:15.000 --> 00:33:17.040 >> Right. 00:33:17.040 --> 00:33:19.280 >> I don't know which one's better then. 00:33:19.280 --> 00:33:26.680 >> I guess, from my perspective, the residential average card bill uses $169. 00:33:26.680 --> 00:33:31.720 At 1.55%, that's $2.62. 00:33:31.720 --> 00:33:37.720 That's cheaper than $2.90 on the previous slide. 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, 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. 00:33:49.720 --> 00:33:51.520 Am I looking at that right? 00:33:51.520 --> 00:33:53.840 >> Well, the $2.60 is a percentage, though. 00:33:53.840 --> 00:34:03.040 >> No, but 1.55% of $169.23 is $2.62. 00:34:03.040 --> 00:34:07.320 So, almost $0.30 cheaper per average card transaction, right? 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. 00:34:13.240 --> 00:34:15.040 >> And that would be for all cards? 00:34:15.040 --> 00:34:18.440 >> Yeah, I was just thinking of residential. 00:34:18.440 --> 00:34:21.520 I mean, are the commercial customers going to flinch either way? 00:34:21.520 --> 00:34:23.560 Probably not a whole lot. 00:34:23.560 --> 00:34:26.360 But if we're talking about -- and for now, 00:34:26.360 --> 00:34:30.400 we've just delivered a $2.00 rate decrease to the small customer, right? 00:34:30.400 --> 00:34:33.240 So, in a way, we almost washed the whole thing out. 00:34:33.240 --> 00:34:41.080 We're short a little bit, but to me, the service fee provides a free option. 00:34:41.080 --> 00:34:43.600 It provides an option that's actually cheaper than the community. 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, 00:34:50.040 --> 00:34:55.880 to do 1.55 on all with the free E-checks. 00:34:55.880 --> 00:34:59.560 >> So, your goal would be to try to help drive the customer 00:34:59.560 --> 00:35:02.760 towards the lower cost auction of the E-check? 00:35:02.760 --> 00:35:04.200 >> Yeah, yeah. 00:35:04.200 --> 00:35:06.680 >> And that would be through advertising. 00:35:06.680 --> 00:35:07.640 >> Right. 00:35:07.640 --> 00:35:13.440 >> That'd be up to you for the advertising to give that education for the customer. 00:35:13.440 --> 00:35:15.680 >> Yes, and that would be the city's goal as well. 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. 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. 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. 00:35:37.240 --> 00:35:41.160 So, yes, that education component would be very important. 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. 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. 00:36:00.680 --> 00:36:04.840 Any other feedback? 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. 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. 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? 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. 00:36:42.080 --> 00:36:47.760 And so, if expenditures were to increase, that would provide a buffer. 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. 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. 00:37:08.680 --> 00:37:16.240 And so, it's not driven by the card brands and the interchange fees increasing. 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. 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. 00:37:36.320 --> 00:37:38.720 The reason for the, I think that's a driving force to you. 00:37:38.720 --> 00:37:43.080 >> I only have one ACH payment a month, which is to my credit card company. 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. 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. 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. 00:38:06.520 --> 00:38:08.440 Thank you. You, not me. 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. 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. 00:38:32.920 --> 00:38:39.160 So, that's that much less that has to be recovered out of our utility rates. 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. 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. 00:39:06.960 --> 00:39:14.680 You know, certainly there's needs to increase, you know, fund balances back to certain targets. 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. 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. 00:39:34.040 --> 00:39:39.040 And so, just something to consider. 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. 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? 00:39:53.520 --> 00:40:05.520 >> It is. So, of the 151 million total processed, it is, it's 1.5 million. 00:40:05.520 --> 00:40:09.520 So, yes. 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. 00:40:21.520 --> 00:40:23.520 >> Correct. 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. 00:40:33.520 --> 00:40:35.520 >> That's a great statement. 00:40:35.520 --> 00:40:41.520 I'm curious, you get an email from the credit cards in six months. 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? 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. 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 -- 00:41:13.520 --> 00:41:15.520 >> A threatening letter? 00:41:15.520 --> 00:41:20.520 >> Any kind of communication from card brands. 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. 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. 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. 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. 00:42:07.520 --> 00:42:12.520 So that communication would be with our card processor. 00:42:12.520 --> 00:42:15.520 >> Thank you. 00:42:15.520 --> 00:42:18.520 Do you need anything further from us? 00:42:18.520 --> 00:42:20.520 >> I don't believe so. 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. 00:42:34.520 --> 00:42:37.520 I just don't understand. 00:42:37.520 --> 00:42:39.520 >> A motion would be good. 00:42:39.520 --> 00:42:42.520 >> Could you go back to that slide that we're supposed, oh, there it is. 00:42:42.520 --> 00:42:45.520 Go back to the flat fee, one more over. 00:42:45.520 --> 00:42:51.520 What is that, slide nine? 00:42:51.520 --> 00:42:55.520 Mr. Chairman, I'm glad to second your motion. 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. 00:43:09.520 --> 00:43:11.520 >> I'll second that. 00:43:11.520 --> 00:43:14.520 >> Okay, we have a motion and a second. 00:43:14.520 --> 00:43:15.520 All in favor say aye. 00:43:15.520 --> 00:43:16.520 >> Aye. 00:43:16.520 --> 00:43:19.520 >> Any opposed? 00:43:19.520 --> 00:43:20.520 >> Very nice. 00:43:20.520 --> 00:43:23.520 >> Thank you. 00:43:23.520 --> 00:43:27.520 I believe that is our last item of business. 00:43:27.520 --> 00:43:31.520 And with that, we are adjourned.