1. Why are you going to include an electronic payment processing fee for the online and IVR utility payments?
These services were implemented to provide alternate, convenient, 24/7 methods for utility payments. There are six ways a customer can pay a bill: 1) by mail; 2) at a substation; 3) by bank draft; 4) in person; 5) online through Internet; and 6) through an automated phone system (IVR). Usage of the online and automated phone systems has grown significantly, increasing 376 percent from FY 2003-04 to FY 2006-07. Costs associated with these services also have increased. Currently, all taxpayers are paying for the services, which are only used by 8.6 percent of residential utility customers.
The proposed electronic payment processing fee is only for customers making credit card payments for utility bills through the City’s online and IVR payment systems (non-face-to-face payments). It will not be assessed for payment by bank draft or other payment methods listed above.
2. What are the costs incurred by the City in providing the online and IVR utility payment services?
There are a number of costs to the City for electronic payment processing. All online payment processors must have a merchant account and payment gateway service. Associated costs include assessment fees; authorization/transaction fees; interchange rate fees, chargeback/ACH fees, and monthly support fees. Other direct costs include an annual fee for the online software that is interfaced with the utility billing system; the annual fee for the IVR software that is interfaced with the utility billing system; the annual fee for the SSL security certificate; monthly transaction fees for the IVR phone; monthly SBC charges for phone ports; annual payment for quarterly security audits required by the credit card companies; server leases and maintenance to run the systems; and staff support to assist online and IVR customers.
3. Why don’t you just use an online payment service like PayPal instead of the systems you use and save money?
Options such as the PayPal service only provide the collection of payments. They do not provide an interfaced system for utility payments, so City staff would need to receive the payment list from PayPal and then enter the information into the HTE system to credit payments to customer accounts, resulting in delayed posting of payments to accounts. In addition, customers would not have access to account information such as current and past bills, usage, due dates, balance forward, etc. The interfaced system currently used by the City enables real time posting, even though the transfer of funds may take one to three days. If a customer makes an online or IVR payment to avoid shut-off status (which often happens), the information is immediately posted into the utility system. As stated above, the proposed electronic payment processing fee of $2.50 per transaction is lower than the cost of most options and provides expanded services and account information to the utility customer using the online and IVR systems.
4. Why do you need to do quarterly security audits?
In 2006, Visa, MasterCard, American Express, Discover and JCB formed the Payment Card International (PCI) Security Standards Council. Payment processors of these credit cards must conduct an annual assessment and audits based upon the number of transactions they process. If the assessment and audit are not completed, the payment processor can be liable for up to $500,000 per incident of credit card fraud. The City has had several cases of credit card fraud that involved someone using another person’s credit card to make online and IVR utility payments. These cases were referred to the Police Department. This is also the reason the City includes authentication for online and IVR payments. In addition, authentication service helps to reduce the number of chargebacks, for which the City pays $15 per incident.
5. What is the total number of utility customers?
There are 77,787 residential customers and 7,780 commercial customers for a total number of billed customers of 85,567.
6. Are commercial customers able to pay through these applications?
No. The online and IVR applications were only set up for residential customers. The reason is that commercial utility bills fluctuate and can range from $1,000 to over $10,000 per month, so associated costs would be significant.
7. How many utility payments are made online and through the IVR?
Although only 8.6 percent of all residential utility customers use the electronic payment services, the number and amount of payments has grown significantly.
Fiscal Year |
Total Number of Transactions |
Payments Collected |
| 2002-03 |
5,486 |
$545,378 |
| 2003-04 |
14,833 |
$1,991,058 |
| 2004-05 |
24,422 |
$2,504,406 |
| 2005-06 |
53,596 |
$6,348,907 |
| 2006-07 |
80,832 |
$9,492,669 |
8. Do other cities charge an electronic payment processing fee?
In a 2005 study published by Northern Illinois University of 45 local governments in the United States with online payment applications (parking violations, utilities, property taxes and water-related payments), 76 percent of the local governments charged a fee.
9. What if usage goes down due to the electronic payment processing fee or what if costs increase?
Staff recommendations are based on several years of data. Online and IVR electronic payments will be monitored closely, as well as associated costs. The processing fee may be decreased if usage or costs decline. Staff also will monitor recent legislative discussion about putting limits on the bank transaction fees that banks can charge for processing payments.