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Home My WebLink About0519.000~ ... I, ~-; ( .' ~ '-" :~~ ".1 ij I - . " ~. '-1 -... . . ./ • \ ........... ;:,;. ... --=-_-_,;'_ ' _ ......... -i..~_~ __ '"ti"";!.,~~::A=,. ....... """._ .. ,,'=';.~. (!'t.~ ~~;!;:.:: :;i;4tJ.,s ..... ..tZ.I ... \ o October 4, 1990 HONORABLE CITY COUNCIL Palo Alto, Cali~ornia o rB-HOOSE PROCESSING OF UTZLJ7Y BILL REMITTANCES Xembers of the Council: Report. ill Brief This Is an info-rmatiOl1al repo:rt and no council action is requirecL As staff alerted Council in CKR:51S:0 on September 20, 1990, the vendo~ who was processing utility bill payments will be discon tinuing service as of october 31~ 1990 at the latest. An evalua tion of available alternatives indicates that in-house processing of utilities payments is the best option to ensure quality service to the customers with uninterrupted and accurate depositing of payments. Staff is using utilities funds to establish an office to handle these tasks on an interim basis and will return to Council in November with further information and any necessary permanent fundinq request. Background Since 1975 the City has contracted with outside agencies to provide utility remittance p~ocessing services (lockbox). Processing of utility payments is an essential service to the City, and utilizing outside agencies has previously p~ovided a cost-effective method of rapid processing and deposit of payments. The lockbox service includes the pickup of payments mailed to a post office box, processing and pho-tocopying of those payments, endorsing and depositing tbe cbecks into a City bank account, and transmitt.i.nq a computer· tape of payment information to credit the appropriate individ,ual customer utility accounts. CMR:519:0 "._,' , .... --,-, \ \ . \ \ . .•. • .. I - • , .' ~~_'dt..-=-~""";.'~""Y-~_~':'":~~'!'!:'-~'2.~-.-~ __ <;,-::~,@-i):Q~!!i~J4: __ W ' o o Tha City contracted with National Data Corporation (NOC) for seven years to provide locltbox services. In the summer of 1989 .. NOC gave short notice to the City that the company 'Was discontinuing their bill remittance processing services on t.he West Coast, because proviclill9 the s~rvice vas no longer p't'ofitable. Staff then evaluated otber companies and selected Datalift Corporation in Oakland" 'Who bas been providing Palo Alto 'With lockbox-services since. Auqust 1989 .. Datallft notified the City on september 4 .. 1990 that they viiI be permanently closing: their facil ity on october 31" 1991) and viII provide no services after that time.. The City responded t.hat the agreement requires a SO-day termination notice, and requested that Oatalift contin,ue providing service until November 30,. 1990. However, because Oatalift has already lost many employees,. statf expects that the level of service will be unacceptable end that the City should be prepared immediately to bandle the remittances~ Remittance PrgeeasiD9 Optioas Because the processing of utility payments is ~ssential to city operations. staff must be prepared to continue uninterrupted processing of utility remittances.. Staff has evaluat.ed the options of hirin<)' another outside agency or est.ablishing the proct"ssing in bouse.. Since several companies in this business have failed in recent years. staff has been able to identify only a few Califo:rnia aqencies that appear adequate to meet the City's lockbox require ments. An in-state company is necessary to allow adequate supervision of the process and to avoid inter-state bank tr:E'nsfers. Tbe outside op~ions available to the City include: o Check Processing Incorporat.ed in sacramento. This small company processes payment.s manually. a method which is expensive and ~ay be subject to increased errors. The company would deposit paYlDents into their own bank. account and then reimburse the city in the appropriate amount. Auditing payment. receipts may be difficult. for the City. staff also has concern that the company may become overburdened if several cities switch to this company at the same time. o CMR:519:0 Alpha Beta Data in Los Angeles. This company appears capable of handling the City"s lockbox requirements ... but staff is concerned about t.he Los Angeles location and :higher costs~ Because they are far away, it would be difficult for staff to personally remedy any problems" and customer service may be delayed. utility payments would be mailed to a Los Angeles address, with an electronic transfer of funds to the City's bank account~ 2 ," -- , o " .~ /' o b The company charges a varied tee depen·:iinq on the: complexity of a customer payment .. so accurately estimat ing their QOst of service is difficult. Customer credit Information would experience a delay while computer tapes were 2ailed to Palo Alto. Several banks... including the City"s current bank" security Pacific .. have the ability to process payments but 'Would charge up to three times the present annual cost of $60 .. 00,0 per year .. la-Hous. lroeessing Staff believes that in-house processing is the appropriate solution to allow the smooth continuaJi911 of utility bill processing, and is pursuiIl9 that option. The program will be managed by the Treasury Division of the Finance Department and will initially be staffed by temporary employees.. An office is being established at 425 Bryant in the former Board of Realtors ~ildin9. The City had previously issued a :Reqt.l€st tor Proposals (.R.FP) to lease the building and received no responses. Staff investiqated the possibility of automating the utility billing data entry process by purchasinq the equipment used by Datalift. The equipment encodes and endorses checks .. microfilms recocds ... and transfers payment into-rmation to computer tape. Staff determined that the equipment -would be faster and more accurate than a manual operation.. but it ~as too expensive and could not easily interface with the city's utility billing computer program. staff will begin preparation of an RFP for a permanent automated solution which would be cost-effective for an operation of the City"s size. In the interim .. staff will establish the program for manual processing and data entry .. PUDding The City's ann·ual contract with Dat.alift is approximately $60 .. ()'OO. Funding to establish the program in-bouse will be taken first from the remainder of those funds in the Utilities operating budget allocated to the Datalift contract and secondly from the Utilities contingency. Staff does not expect to realize cost savings by pertorminq the processinq in-house .. and will return to Council "With a funding request for the permanent operation. s·taff estimates annual costs of appro~imately $100 .. 00G to $125$000 .. and one-time costs of $10,0'00 to $20 .. 000. CMR:519:0 J • • \ " r , o copelp.lea , Staff 10 preparir>9 a plan f<>r the in-boUse handlir>9 of City utility r~ittance.. Staff will return to council in November with more infonaatlon on the program and with requests tor penaanent fundlnq. Respectfully submitted, /~~M GORDOK B. FORI> Treasury Manaqer Related staff Reports: CMR:51S:0 ProcessiD9....Qf Utility Bill Pay ~ CHR:519:0 4