Modesto backs away from fees on utility, parking charges paid by debit, credit cards

Modesto officials are backing away from a proposal to charge customers a fee for using debit and credit cards to pay their city utility bills or for parking in one of the city’s three downtown garages.

The City Council approved in June charging a 2.4 percent service fee for customers who use plastic to pay for all city transactions except parking and utility bills. Staff asked for more time to look into charging fees for those transactions.

The council also in June exempted charging a fee for the purchase of monthly passes and ticket books for Modesto Area Express buses and Dial-A-Ride because it believed the fee would be a burden.

City officials have said the fees recoup what companies charge the city for processing credit and debit card payments. But staff is expected to recommend at Monday’s City Council Finance Committee meeting that the council not impose fees on parking and utility bills. The final decision rests with the full council.

A city report states imposing a 2.4 percent service fee on parking would increase the time it takes to leave the garages and cause frustration and delays. Cars now can back up as motorists pay as they exit.

And the report states there would be substantial additional costs for Modesto if it were to charge what it calls a fixed-amount convenience fee on utility payments. City officials have considered charging a $3 convenience fee.

Modesto pays a discounted rate of 0.85 percent for the processing of debit and credit card payments of utility bills. But the report states the discount goes away and the rate would be about 2.4 percent if Modesto charges customers a convenience fee.

The report states Visa would only let Modesto charge a convenience fee for payments made by phone or online and it could not charge a fee for payments made in person at City Hall. Visa would require that the fee cover the city’s cost of maintaining its online and phone payment systems and not what it is be charged for processing those payments.

The report states MasterCard allows for more flexibility, but city officials don’t recommend charging differing fees based on the type of payment card.

City officials have said Modesto expected to pay about $525,000 in fees for processing credit and debit card payments during its budget year that ended June 30. The city was trying to pass the cost onto its customers. The fees for utility payments make up about two-thirds of what Modesto pays.

The Finance Committee meets at 3 p.m. in room 2005 on the second floor of Tenth Street Place, 1010 10th St. The meeting is open to the public.

This story was originally published October 22, 2017 at 5:21 PM with the headline "Modesto backs away from fees on utility, parking charges paid by debit, credit cards."