Council debates proposed $5 online convenience fee as staff weighs legality and vendor options

Council on Aug. 11 discussed Resolution 2025‑R‑27, which would authorize a flat convenience fee for online credit- and debit-card payments to offset transaction costs. Administration said the city’s current cloud permit/payment vendor offers card acceptance but the vendor charges a processing fee and a flat convenience fee of $5 was proposed so the city would not lose money on transactions. Council members raised several legal and practical concerns: whether the proposed fee would be a permissible convenience fee or an unlawful surcharge, the statutory differences between credit and debit transactions, and whether the city should instead adjust service fees broadly to account for card processing costs. The law director and other council members noted that surcharges are legally constrained to the card cost and that debit-card surcharges are federally limited. Administration said the city currently uses a vendor (Square or equivalent) and that processing rates vary; staff said they would research alternative vendors, whether pooled municipal contracting is feasible and how similarly sized cities handle card payments. Members suggested exploring options other than tacking a $5 flat fee onto every online transaction, including periodic review of fee schedules or municipal cooperative contracts to reduce merchant fees. Next steps: Council referred the resolution to a future reading and asked staff to return with legal guidance on the distinction between a convenience fee and a surcharge, vendor options and a comparative survey of peer municipalities’ practices.