Title
Third Amendment to the Master Depository and Banking Services City Agreement
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FileID
File ID: 2025-01415
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Location
Location: Citywide
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Recommendation
Recommendation: Pass a Motion: 1) authorizing the City Treasurer to execute the Third Amendment (Amendment) to the Master Depository and Banking Services City Agreement (Agreement) (2015-2232), and 2) any related documents with J.P. Morgan Chase Bank, N.A, (JPMC) by adding the J.P. Morgan Digital Bill Payment Service to the services being provided to the City.
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Contact
Contact: John Colville, City Treasurer, (916) 808-8297, jcolville@cityofsacramento.org, Kimberlie Gladden, Banking Operations Manager, (916) 808-2675, kgladden@cityofsacramento.org, Office of the City Treasurer
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Presenter
Presenter: None
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Attachments
Attachments:
1-Description/Analysis
2-Third Amendment to the Master Depository and Banking Services Agreement
3-Attachment A - J.P. Morgan Digital Bill Payment Service Terms
4-Attachment B - Digital Bill Payment Fees
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IssueDetail
Description/Analysis
Issue Detail: In 2015, the City entered into the Master Depository and Banking Services Agreement (No. 2015-2232) with J.P. Morgan Chase, N.A; then in 2017 the City entered into the First Amendment to that Agreement (2015-2232-1) adding Custody Services; in 2020, the City entered into a Supplemental Agreement, exercising a two year extension; and then in 2022, the City then entered in to the Second Amendment to the Master Depository and Banking Services Agreement, extending the contract terms for an additional five years through December 22, 2027, with the option for two one-year extensions. This Agreement was originally approved after an extensive Request for Proposal (RFP) process.
The recommended Third Amendment to the Agreement includes adding the J.P. Morgan Digital Bill Payment Service to the services being provided to the City. This service uses the application, Paymentus for the passing of fees to customers through a "service fee" model. This means that when a customer chooses to pay their bill online using a method like a credit card, a separate fee is added to the transaction by JPMC. No extension of terms has been added to this amendment.
This recommendation implements service fees on customers who use credit cards (as well as Debit Cards & Digital Wallets) to make a payment. Service fee programs are available to governments and higher education entities and offer a way to recoup credit card transaction related costs on eligible charges. JPMC offers a program for managing the imposition of service fees by local governments. The City benefits by using a third party for the transactions so that no service fees are paid into the City’s accounts. As a result, the City is not required to account for the fees, distribute the monies, or manage fee surpluses to comply with state laws constraining the collection of fees to actual costs incurred. When a customer pays for services or bills using a credit card, the credit card processor charges a fee. The fees can be (i) interchange (reflects the cost associated with accepting, processing and authorizing the card transaction), (ii) assessment fees (paid directly to the card networks to cover their operational costs, infrastructure, and related expenses), and/or (iii) technology costs.
Moving from an absorbed fee model, on June 11, 2024 (Resolution No. 2024-0193), the City Council (Council) approved the FY2024/25 Approved Budget, which contained department and citywide reduction strategies closing a structural deficit in the City’s General Fund. One of the approved reduction strategies decreased funding for credit card fee subsidies and such costs would be passed onto the customers using credit cards. In order to minimize administrative burdens and the risk of the City collecting charges in excess of actual cost in violation of State law, the recommendation proposes instead to have a 2.45% fee collected by the Bank to offset the charges currently passed on from the Bank to the city.
For example, a $100.00 payment by credit card to the City will result in a total charge of $102.45 with $2.45 going directly towards the fee. Customers will see this as two separate transactions on their credit card statement. The City will continue to provide payment alternatives customers can use that will not incur the 2.45% credit card service fee, which include eChecks, checks, cash, money orders, cashier’s checks, and traveler’s checks.
The City currently does not charge customers any service or surcharge fees to cover bank fees. The Department of Utilities (DOU) is developing a separate credit card fee process from the current citywide consumer funded process. At this time, DOU will be excluded from participating in the citywide consumer funded process and will be considering other options, i.e. a Surcharge or Convenience Fee Program. DOU’s process will be presented to Council at a later date and their budgeted fees will not be removed from their budget.
Similarly, the Youth, Parks & Community Enrichment (YPCE) will not immediately participate in the citywide consumer funded fee process as shifting resources and adding subscriptions to participate would significantly impact programs. YPCE will continue to consider options and will also report back to Council at a later date.
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PolicyConsiderations
Policy Considerations: The proposed Third Amendment is in alignment with the citywide reduction strategy to help close structural deficits in the City’s General/Measure U Fund adopted by the City Council on June 11, 2024 (Resolution No. 2024-0193). By adding Paymentus, the proposed addition of the credit card service fee supports the City's budget sustainability and fiscal responsibility goals.
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EconomicImpacts
Economic Impacts: None.
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EnvironmentalConsiderations
Environmental Considerations: This report is an administrative activity that does not constitute a “project” and is therefore exempt from California Environmental Quality Act (CEQA) according to Section 15601(b)(3) of the CEQA guidelines.
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Sustainability
Sustainability: Not applicable.
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Commission/Committee Action
Commission/Committee Action: Not applicable.
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RationaleforRecommendation
Rationale for Recommendation: The actions recommended in this report enforces the reduction strategy in the Budget.
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FinancialConsiderations
Financial Considerations: Approving the recommended Third Amendment to the Master Depository and Banking Services City Agreement no. 2015-2232 allows the city to continue to provide ongoing banking services while exercising the proposed consumer funded credit card service fee reduction strategy.
Due to increased fees and the significant impact to the budget the City, like many other jurisdictions, has made the decision to pass these fees to the customer. Based on the increasing frequency of high dollar credit card transactions, staff began researching how to implement the passing of the fees to the customers by reaching out to other jurisdictions, surveying the lines of businesses and their third-party vendors as well as reviewing potential internal upgrades and integrations. Given the current scope and assuming the volume is consistent to recent counts, implementing the consumer funded fee process with Paymentus could save the city an estimated $900k annually.
The City will continue to provide payment alternatives that will not incur the service fee. Payment alternatives without fees include eChecks, checks, cash, money orders, cashier’s checks, and traveler’s checks.
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LocalBusinessEnterprise
Local Business Enterprise (LBE): No goods or services are being purchased under this report.
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