Scrapping the City's Utility Convenience Fee

In 2011, Long Beach selected financial firm FIS Global of Jacksonville, Florida to handle on-line payments of utility billings. To pay for this service, between 2011 to 2014, the city charged a so-called “convenience fee” of $3.99, which was the cost of doing business with FIS Global.

In 2015, the per transaction fee reduced to $3.75, at which it remains to this day. No one in Long Beach gets any of this money, it goes directly from the consumer to a Jacksonville financial firm, with the city getting nary a whiff.

Except for one failed 2013 attempt to scrub the fee, not much changed until Long Beach Mayor Robert Garcia sent out his “inconvenient convenience fee” email on April 21, 2017. “One of the issues that has frustrated me most since becoming mayor is the inconvenient “convenience fee” the city charges customers to pay utilities online.

“If we want to be green and encourage residents to pay online, we shouldn’t charge you more. It’s been a complex system to fix due to prior vendor agreements and cost. The good news is we are finally working to eliminate the fee. We are still a few months away from full implementation, but our city staff feels confident we can finally do it.”

This isn’t the first time Garcia lobbied to do away with these fees. Exactly four years previously, in April 2013, as vice mayor, Garcia “implored” city management to eliminate these fees in combination with a new LongBeach.gov website, however that plan was never implemented and the fees persisted.

“It’s an issue of cost recovery,” explained then-Business Operations Bureau Manager Craig Beck in 2012. “The fee was brought forward as the city loses part of the revenue to the credit card company when a credit card is used. If you come in and pay,” or pay by check, “the fee isn’t charged.”

This utility payment convenience fee is ubiquitous, especially in mid-population cities like San Francisco with rates ranging from a sliding scale based on 2.25 percent in San Francisco to Savannah, Georgia which charges $5.95. Long Beach is about in the middle with its $3.75 convenience fee for on-line transactions.

Beck described his operation as “one foot in the utility business; one foot in the government business. Municipalities and private sector have different pricing structures. We’re proud that our gas prices are less.”

According to the city manager’s public affairs officer, Kerry Gerot, the current vendor continues to be FIS. “They were selected in an RFP (request for proposal) process in 2011. In FY 2015, the city paid the vendor $132,274 and in FY 2016 it was $142,263. The financial management department issued a new RFP and are now in the process of evaluating the responses.”

Gerot further disclosed that 11 RFPs were submitted, including one by the current vendor, FIS Global. Perhaps that was the reason that no FIS Global Marketing and Communications spokesperson returned several calls about this issue.

“A recommendation to city council from city staff and selection of a vendor is expected in July. As part of the vendor recommendation, the administration will also be recommending elimination of the convenience fee for utility bills. That recommendation will be incorporated into the vendor selection recommendation,” said Gerot. “There may be third party utility payment vendors on the internet that the city has no control over.”

According to accounting professionals, the cost would be borne by either the vendor or the city, and it’s unlikely a vendor could be found to absorb that expense.

CFO and Director of Financial Management John Gross emailed, “The fee is proposed by the vendor based on its costs, and subsequently approved by city council.”

According to Gross, about 12 percent of utility users pay online. However, this is not the city’s only convenience fee. Among others, a fee of $1.59 is charged by Link2Gov Corporation for online purchase of garage/yard sales permits. According to Gross, Long Beach “has a variety of decentralized payment mechanisms. For many online payments, there is convenience fee. In general most credit/debit card convenience fees are either $1.59, $3.75 or $5.00 and all e-check fees are $0.95,” Gross said.

“If the city paid the vendor’s costs, the fund receiving the revenue would absorb the cost,” said Gross. “In the case of eliminating the utility convenience fees, it would be the water, gas and refuse funds.

“While the administration will recommend elimination of convenience fees for utility bills, (it) has not yet taken a position on other city charges such as garage sale permits.”

In the past month or so, Mayor Garcia offered an update to his earlier press release. “By eliminating the inconvenient convenience fee, the city makes it easier for residents to pay utilities in an efficient and environmentally friendly manner. The City of Long Beach is working to certify its full implementation and ensure a seamless user experience.”

steve@beachcomber.news