RPU proposes $3 card convenience fee and escalated water-availability fee for 2026 budget

Tim McCullough, general manager for Rochester Public Utilities, briefed the council on two fee proposals RPU intends to include in its 2026 budget package: a flat convenience fee for card-based payments and an updated water-availability fee intended to fund future above‑ground water storage.

Nut graf: McCullough said rising credit-card processing costs and construction inflation have created pressure on utility finances. He told the council that card processing fees are “in excess of $650,000 a year” and that a proposed $3 convenience fee would align those costs to the customers electing card payments; RPU also proposed escalating the per-acre water-availability fee to match a recent general rate increase.

Credit-card payments: McCullough said the share of payments made by card has grown and now represents about 25% of payment revenue while accounting for a disproportionate share of processing costs. “We are entering a phase where the credit card processing fees, are in excess of $650,000 a year,” he said, noting that card processing can be roughly “6 and a half times” more expensive than ACH/bank draft or cash/check for the same revenue.

To move toward a cost‑based approach, RPU recommended a convenience fee of $3 per card transaction rather than a percentage‑based surcharge. McCullough explained legal and practical constraints: state and federal rules limit how surcharges may be applied (for example, surcharges are governed by state statute and cannot be applied to debit-card transactions under federal rules), and the flat convenience-fee model is common in the utility sector and recommended by payment vendors.

McCullough described customer‑notification plans should the council concur: targeted communications through RPU’s publications, signage at payment counters, notices on the customer portal and direct outreach to customers on autopay so they can adjust payment methods if they prefer to avoid the fee. McCullough said the utility is replacing its customer-portal software before year‑end — an implementation window he said made mid‑budget timing appropriate.

Council members asked practical questions about consumer impacts and logistics. Council member Miller asked whether customers with credit cards on autopay would have to re‑enroll under the new portal; McCullough said the utility intends not to interrupt existing autopay arrangements and will conduct direct outreach to affected customers. Council member King asked whether the policy’s main goal is revenue or behavior change; McCullough said the principal purpose is to be cost‑based so that customers who choose higher‑cost payment methods bear those costs, though the fee may also incentivize some customers to switch to lower‑cost payment methods.

Water-availability fee: McCullough also presented a recommendation to escalate the water-availability fee, a per‑acre charge designed by city code to recover the cost of above‑ground water storage needed as development expands. He said construction and material costs for storage facilities have escalated rapidly and recommended aligning the fee to the same general rate increase he referenced earlier (the presentation text states the fee escalation would follow a “99%” general rate increase; the transcript records that figure as presented by the speaker).

Council member Palmer asked whether the fee applies only to land within RPU service territory; McCullough said the fee applies to land that has not yet paid the water-availability fee and is typically assessed at annexation for land that will be served by RPU. Staff noted there are cases where service provision and annexation interact differently (for example, some areas outside city limits are served by RPU under council policy); McCullough deferred to targeted follow-up on specific parcels.

What happened next: McCullough said the RPU board has generally supported both proposals and that they would appear in the RPU proposed budget and tariff package later in the year, subject to council review and concurrence. The council expressed general consensus to include the convenience fee in the RPU budget submission; no formal vote was taken at the study session.

Clarifying details: RPU estimated card payments constitute about 25% of payment revenue and that processing fees are a significant share of annual costs (>$650,000). The proposed convenience fee is $3 per transaction; McCullough said average residential utility transaction totals about $300 when all services are combined. The water-availability fee is applied per acre for undeveloped land and is intended to cover above‑ground storage tank costs; McCullough said the recommendation is to escalate that fee with the general rate increase presented earlier in the packet.

Discussion vs. decisions: Discussion — the council and RPU staff discussed legal constraints on surcharges, the mechanics of customer notification and autopay continuity, and the water-availability fee’s application to annexations and undeveloped parcels. Directions — staff to include the convenience fee and the water-availability fee changes in the RPU recommended budget for council review; implement customer notification plans if council concurs. Formal action — none taken at the study session.

Speakers: Tim McCullough, General Manager, Rochester Public Utilities (government); Administrator Zelms, City Administrator (government); Council member Miller (government); Council member Keane (government); Council member Palmer (government); Council member King (government).

Authorities: {"type":"statute","name":"state statutes governing payment surcharges","referenced_by":["RPU presentation"]},{"type":"policy","name":"RPU charter (cost‑based rate policy)","referenced_by":["RPU presentation"]},{"type":"code","name":"City code: water availability fee provisions","referenced_by":["RPU presentation"]}

Provenance: topicintro — {"block_id":"block_2510","local_start":0,"local_end":176,"evidence_excerpt":"In contrast to the prior item, we try and keep sparks and explosions to a bare minimum at RPU. Good afternoon. My name is Tim McCullough, general manager for Rochester Public Utilities. Have 2 items for the council's consideration."} topicfinish — {"block_id":"block_3506","local_start":0,"local_end":64,"evidence_excerpt":"Okay. Hearing general consensus to move forward, you would see that as a part of the overall proposed budget from RPU."}