Gilbert credit-card fee might save town $230,000 per year

• Gilbert has absorbed the costs of some credit-card transactions for the last two years
• Credit-card processing may cost the town %24230%2C000 during the current fiscal year
• Council members support adding a checkout fee to customers%27 bills to help cover the costs

Since Gilbert began accepting credit-card payments for building permits and other developer fees in 2012, the town has subsidized the associated processing costs — this year to the tune of about $20,000 per month.

That may change soon, however, as the Town Council plans to authorize tacking a "checkout fee" onto credit-card payments to help recover the town's costs.

Council members at an April 17 meeting expressed support for the processing fee, which would likely add about 3 percent to customers' bills when they choose to use plastic.

The move would only affect transactions within Gilbert's Development Services Department, which handles permitting, engineering and plan review.

Common development fees in Gilbert range from about $5,500 for a rezoning request to $300 to install an in-ground swimming pool. When a homebuilder submits a preliminary plat for a new neighborhood, the review fee starts at $6,100 and increases based on acreage.

Processing companies typically charge 2 to 3.5 percent of the total payment, which can get expensive when companies use credit to pay for larger bills. If a customer is paying for a $10,000 permit, for example, the town incurs a processing fee around $300.

"Because of the burden this has placed on the town ... my hope is that we can agree to pass along that charge as a (checkout) fee to the customer," Councilwoman Jenn Daniels said.

Development Services Director Kyle Mieras outlined these five options for the council:

• No credit-card fee: Gilbert could continue to absorb the processing costs as a service to customers. This is the town's current policy, expected to cost about $230,000 in fiscal 2014.

• Outsourcing: Officials could require Development Services customers to use a third-party vendor for credit-card payments, which is the current policy for Gilbert's court system. This system would likely create a delay in permitting as the town awaits payment from the private vendor.

• Convenience fee: The town could charge a flat fee for every credit-card transaction. The fee would be the same for a $20 payment or a $10,000 payment, and the town would continue to absorb processing costs for large transactions.

• Checkout fee: Gilbert could assess a percentage-based fee on payments, which would allow for full cost recovery. This is the preferred option for town staff and council members.

• Discontinue credit-card payments: Officials could stop allowing Development Services customers to pay with credit cards, but the policy would result in a decreased service level.

The council was close to voting on the checkout-fee option at last week's meeting, but the group postponed a decision to allow Town Attorney Michael Hamblin to provide more legal analysis. It was unclear if the credit-card fee required public notification as required by statute, Hamblin said.

Daniels expressed a sense of urgency in bringing the item back to the council for a vote.

"I think there is a rush," Daniels said. "This is essentially costing us $20,000 a month as a community. I think there is a desire to move forward."

If Gilbert adopts the new checkout fee, officials will have to abide by certain rules, such as placing signs at the counter to notify customers of the charge, Mieras said.

The town cannot change the fee rate based on the payment amount, nor can officials waive the fee for purchases under a certain limit. Only federal agencies and higher-education institutions are exempt from that rule, Mieras said.

It remains unclear if the council will set the rate or leave it to staff to find an appropriate percentage.

Councilman Ben Cooper said he prefers to set the policy of cost recovery and let officials decide how to carry that out. Vice Mayor Eddie Cook and Councilman Jordan Ray, on the other hand, said they feared the town could change the fee daily or weekly without specific direction from the council.