Despite the city of Fullerton running a projected $5.2 million deficit in the 2022-2023 fiscal year, The Fullerton City Council delayed a vote to have residents pay credit card fees on utility and non-utility bills on Tuesday.
In Fullerton, the utility bill covers water. Everything else is considered non-utility including electricity and sanitation. Chang said utility payments made up about 80% of all credit card transactions in Fullerton last year. The plan to charge credit fees for utility bills is estimated to save the city about $140,000 a year, said Ellis Chang, the director of administrative services in Fullerton.
Fullerton spent $395,000 in the last fiscal year on credit card fees. The city pays between 1% to 5% for every credit card transaction, depending on the type of credit card the person used. Fullerton is projected to run a $5.2 million deficit, according to the city’s 2022-2023 adopted operating budget.
Passing on the cost of the fees to customers would mean that the city has more money to spend on other necessities, said Fullerton Mayor Fred Jung.
“The benefit’s obvious. We are saving by not spending, so that allows us to spend that funds somewhere else where it’s needed,” Jung said.
Although the price of utilities and non-utilities will not change, customers would have to pay the fee on top of that price, said Eric Levitt, the city manager of Fullerton.
Currently, Fullerton absorbs the credit card fees for customers. Jung said this is the first time that the city is considering passing these fees onto customers. Jung said this conversation arose from seeing if the city could generate more revenue by using these fees.
Jung said Fullerton’s history of absorbing credit card fees may be because credit cards were not as common as it is now.
“The times have changed and our structure has to change with the times, right?” Jung said.
Chang presented four options to the city council, one including a blended structure /selection, where the city would pay for utility credit card and eCheck fees. However, it would make customers pay the fee for non-utility payments.
Shana Charles, the city council member representing Fullerton’s District 3, acknowledged that the city council members generally supported the blended model.
“I thought the discussion went really well, in that we all agreed that we want to make sure that people paying utility bills don’t have those fees passed onto them, because utility bills being non-negotiable and non-voluntary, you absolutely have to pay them,” Charles said.
In addition, another option was to have the city of Fullerton continue to absorb both utility and non-utility credit card fees.
The city council could also institute a non-utility credit card and eCheck fee in the future when the Fees and Charges schedule is updated.
If the city council passes credit card fees onto customers, the price of goods and services would increase.
Fullerton councilmember Ahmad Zahra said he was worried about how passing the credit card fees onto customers could impact them.
“I’m a little worried about, for now, some of our residents who are low-income or fixed-income, because sometimes even $20 extra, $30 extra, could impact people,” Zahra said.
Zahra also was concerned residents may be surprised that they are being charged a credit card fee in next month’s payments.
Chang said the city would notify residents about the fee change by mailing information and online notifications.
Charles said she was also concerned about young adults who may not use conventional banking systems and questioned if digital wallet apps would be charged a fee like a credit card.
Jung said that those without bank accounts or using Venmo would not have to pay a credit card fee because they are not part of the structure.
In response, Charles said, “Staff said they were not sure yet, and we are going to bring that back to council at the next meeting and make sure we have that finalized.”
If the city council does vote to pass any credit card fees onto residents, there are alternative forms of payment for people to avoid this fee. People who pay for their bills via cash, check, eCheck or through a digital wallet app would not have to pay a credit card fee for their transactions.
The Fullerton City Council will continue to discuss this topic at the next meeting on March 7.
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