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HomeMy WebLinkAboutFIN 17-23 Report to Council Report Number: FIN 17-23 Date: September 25, 2023 From: Stan Karwowski Director, Finance & Treasurer Subject: Convenience Fee for Online Collection of Building Services Fees - File: F-2000-001 Recommendation: 1. That Council provide authorization for the City to charge a convenience fee for online transactions for Building Services through the Pickering Residential Interface & Service Modernization (PRISM) portal; 2. That Council authorize the Director, Finance & Treasurer to set and adjust the convenience fee as required for optimal cost recovery of online for current term of Council; and 3. That the appropriate officials of the City of Pickering be authorized to take the necessary actions as indicated in this report. Executive Summary: Staff are recommending Council authorize a convenience fee be charged when applicants make an online application and payment for Building permits through the City’s new Pickering Residential Interface & Service Modernization (PRISM) online application portal. This new application portal, currently under deployment, allows for residents and other users to apply, make direct online payments, and receive digital services through upgrades to the AMANDA database software for Building permits. The introduction of this convenience fee is to help recover the merchant fees that will be incurred on these Building permit fees that are processed through the portal. Financial Implications: When a credit card transaction is processed online, the payment processor (merchant), charges the City a merchant fee for each transaction. The City’s implementation of a convenience fee to the customer will allow the City to recuperate this expense. The planned credit card (VISA and MasterCard only) fee, typically known as a “convenience fee” for online transactions, is only intended to allow for cost recovery; the intent is not for the City to make a profit from these fees. FIN 17-23 September 25, 2023 Subject: Convenience Fee for Online Collection of Building Services Fees Page 2 The City is recommending setting the convenience fee at 2.65 percent and the maximum allowable transaction value at $20,000. After the first year of implementation, the City will review the data and will adjust the fee if deemed necessary. In other words, if the merchant fees incurred by the City are significantly greater than the convenience fee received by the City, then the City may increase the fee percentage, and vice versa. Below Table Demonstrates the Logic of this Process Payment in PRISM portal by credit card Customer Transaction: Allocated to: City Permit Fee $ 100.00 City revenue account Convenience Fee (2.65%) 2.65 Misc revenue account Total Collection $ 102.65 Remitted to City Merchant Fee $ (2.65) Financial Service Charges City Net Position $ 100.00 The convenience fee collected from users will be booked to a revenue cost recovery account. The merchant fee is booked to the Financial Service Charges account. These fees will be monitored for the first year of operation to assess whether the service fee charged by the City should be adjusted. The segregation of these fees will allow City staff to review the net position of the cost recovery, and allow City staff to adjust the fee percentage charged to customers, as required, to allow for optimal cost recovery Discussion: It is important to note that the convenience fee is not a revenue generation tool for the City. The charge is to help offset the merchant fees that are charged on those credit card transactions. The City will be capping the online transactions on the portal to a maximum of $20,000 per transaction to mitigate risk of fraud and fluctuating fees. Every credit card transaction processed by the City in curs merchant fees which range from 1.65% to 4.00% of the transaction value depending on the type of card and what cardholder perks may be attached to the card. The City has accepted this as a cost of doing business to a certain level. However, the City currently has in place a maximum dollar limit for credit card payments and has also exempted some City services from being paid by credit card in an effort to minimize the merchant fees incurred by the City. With the introduction of the online portal for processing and payment of Building Services revenue collection, a maximum dollar limit has been set at $20,000 along with the introduction of a convenience fee of 2.65% to help offset some of those costs incurred. Both the convenience fee and the merchant fees for transactions processed through the portal will be charged to the Building Services cost centre. FIN 17-23 September 25, 2023 Subject: Convenience Fee for Online Collection of Building Services Fees Page 3 These fees will be monitored for the first year of operation to assess whether the convenience fee charged by the City should be adjusted. Prepared By: Approved/Endorsed By: Original Signed By: Original Signed By: Kristine Senior Stan Karwowski Manager, Accounting Services Director, Finance & Treasurer Original Signed By: Kyle Bentley Director, City Development & Chief Building Official Recommended for the consideration of Pickering City Council Original Signed By: Marisa Carpino, M.A. Chief Administrative Officer