Meeting_Body
FINANCE, BUDGET AND AUDIT COMMITTEE
SEPTEMBER 20, 2017
Subject
SUBJECT: METRO FARE MEDIA VENDOR COMMISSION
Action
ACTION: RECEIVE AND FILE
Heading
RECOMMENDATION
Title
RECEIVE AND FILE status report on the increase of sales commissions for Metro third-party vendors from the current 1.75% to 3.50% in 2017, to 3.75% in 2018 and to 4.00% in 2020.
Issue
ISSUE
TAP retail vendors are reporting that the benefit of selling TAP products for a commission of 1.75% is not covering their costs. The California minimum wage increased to $10.50 per hour on January 1, 2017 for businesses with 26 or more employees, and then will increase each year until reaching $15 per hour in 2022. Vendors have raised issues regarding increases in: 1) staffing costs to administer the program due to the minimum wage increase; 2) time needed to process transactions and; 3) administrative work. Many potential TAP vendors report that the current sales commission of 1.75% is not competitive with other higher paying commission programs such as the California Lottery, which pays a minimum of 4%.
Discussion
DISCUSSION
History
Over the years, the vendor commission rates have fluctuated. Third party vendors have experienced rates as high as 5.9% in 1982, and as low as 1.46% in 2014.
In May of 1999, the vendor commission was lowered. Customers had shifted from purchasing monthly passes once a month to purchasing four weekly passes. This meant that the flat rate being paid to vendors at the time was quadrupling. In 1999 the vendor network included 750 locations that provided passes and tokens and there was no recognized need for expansion.
Table 1 offers brief historical context of vendor commission rate activity.
Table 1
Year
Commission Rate
1982
5.8%
1997
5.9%
1999
1.46%
2014
1.75%
2015
1.75%
2016
1.75%
2017
1.75%
In the past 18 months, the TAP Vendor Support team canvassed more than 1,000 businesses in LA County. As a result, the retail vendor network increased by 1...
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