The City of Morgan Hill spends more than $200,000 per year in fees for processing credit card payments for various city services—including utilities, business licenses and recreation.
These costs came up during a discussion of new and updated fees for city services at the April 5 Morgan Hill City Council meeting. The council ultimately approved an increase in the credit card service fee for payments for development services and transient occupancy taxes from 2% to 2.7%; and a new business license renewal fee of $14 per renewal.
Both fees were recommended by city staff in an effort to recover more of the city’s costs in processing these payments and services.
The business license renewal fee will save the city about $49,000 per year in third-party contractor’s costs, according to Morgan Hill Finance Director Dat Nguyen. Prior to the April 5 meeting, the city had been paying its contractor, HdL Companies, a fee of $14 per account for the processing of business licenses and renewals.
The increased credit card processing fee for development services and TOT payments to city offices will increase revenue to the city’s general fund and development services fund by about $14,000 annually, according to Nguyen.
The city’s cost for credit card processing is currently 2.71% per transaction.
The city council approved both recommended items unanimously.
But council members also want city staff to look into recovering more of the money that City Hall currently pays to banks and credit card companies in transaction processing fees. For now, the city is not charging customers with credit card processing fees for smaller-ticket payments for utility bills, business licenses, recreation services and other small fees.
Nguyen said the credit card processing fees paid by the city for these services add up to about $202,000. Of this amount, about $148,000 is for the processing of utility payments; $46,000 is for recreation services; and about $8,000 is for business licenses.
City Council member Rene Spring noted that the sum of $202,000 is equivalent to the city’s cost for a full-time employee such as a police officer.
“I would like us to consider charging the credit card fee on other transactions moving forward,” Spring said.
City staff indicated they could return to the council at a future meeting with a proposal to recover the processing fees from customers who pay for services with credit cards.
