Travis County Commssioners Court
June 10, 2003
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Item 24
Number 24 is to discuss and take appropriate action on the e government's oversight committee recommendation. Approve the attached service level agreement (sla) with Texas online and its associated epay attachment (revised by Texas online authority).
>> we thought we had an agreement the last time the decision came before us, but apparently that was not the case. Right? So we are back to reconsidering.
>> yes.
>> I'm alicia perez. Back in March, we brought you a service level agreement that was between Travis County and the Texas online authority and working also with bearing point that used to be kpmg. The way the process works is that that agreement would come to the court, get approved and then presented to the Texas online authority. That is their process that they request. When -- when joe harlow the director of i.t. Went before the authority they had a couple of changes. The first change was in the revenue sharing by bearingpoint, that -- that, that used to read that the county around bearingpoint will -- anticipates entering into a revenue sharing agreement. They changed that to will consider. The second change was I think a very positive change, they went from a transaction fee of 5% to 3% with a minimum fee per transaction of $5 to $3. I think, judge, you possibly had questions on the -- you probably had questions on the change in the words and the first part of that under the revenue sharing by bearing point, I'm going to have joe address that.
>> the reason the authority wanted to change that, they -- that group or that body didn't feel like that they could obligate the authority to -- for a future transaction and let this come up at such time as the $500,000 trans action are reached and the authority has gained back all of the investment they put into this project. At this point in time is when we would begin to do a revenue share. So the authority said, well, we will consider to do it at that time, but they didn't want to obligate that future authority to that clause. That was the reason they changed it.
>> then why wouldn't you [indiscernible] exactly what you just said? That at the point that they recover their costs, we would start sharing revenue?
>>
>> I understand half a million, 100,000, I can live with that. I guess if that's the standard, why wouldn't the contract say it?
>> well, there's no other county or local government that they are doing any kind of a revenue sharing with. So we were one of the early counties in the program, so that's -- that's kind of an exception thing.
>> sure.
>> and the -- in fact that -- the group that's on the board, they didn't feel like that since this was not going to happen in their range, so to speak, they didn't feel like they could obligate that future board to do this. In their reign.
>> I get the point is that let's say that you have 500,000 transaction that's involve simply the minimum convenience fee of three bucks, I can understand they are trying to get to a certain number. But if a good portion of those transactions might be related to paying your taxes, in which case it's a 3% of a very big number, that they are paying to the county, then you are going to be collecting a whole lot more depending on what the blend is there. So really if you do it the way the judge was talking about in terms of the idea of you're trying to recapture a certain investment, it may get their sooner if we had more of a blending of folks paying their property taxes as opposed to I need to get my license plate renewed, that's a three buck transaction.
>> there's probably more profit, so to speak, in three bucks than there is in the percentage because most of the percentage goes to the credit card.
>> the problem is when you came last time I remember our discussion about the language because we were hearing one thing said and saw another thing in print. And I thought we kind of came together on that.
>> uh-huh.
>> I guess we did and they took that to the Texas online authority. But the explanation that they are giving makes sense, it's just that why wouldn't we make the contract language consistent with the explanation? We don't know whether they would recover costs at 300,000 transactions or 700,000 transactions.
>> that's true.
>> so 500,000 really is arbitrary. But it's not arbitrary if the language says when you recover costs, we will start sharing revenue. They keep the revenue. We don't know -- if they come and say after 425,000 transactions, we have covered our costs and it's time to share revenue, we're happy. If they don't come until 625,000 answer attractions, we're not quite as happy but that's better than zero.
>> we worked out a formula, judge, to where we can tell what their investment -- when their investments will be recovered.
>> that's even better. Why wouldn't simple straightforward language like that, that's fair, work? I mean we will consider doesn't say thinking.
>> that's right.
>> right now we are kind of -- the agreement here is this like a month to month?
>> each one of the applications will go for like a three-year period. And then we will renew it at the end of that period or do it yourself or quit doing it or whatever we decide to do.
>> it's three years from the implementation of the last application, so that e pay is one application, e filing would be another application, kind of goes --
>> the last application a year and a half from now, it effectively becomes [indiscernible]
>> yes.
>> and right now, online authority is the monopoly, basically.
>> for e pay, no. You know the tax office is using another system. But in order to lay the groundwork for e filing absolutely. Only the Texas online will be able to take e filing and that's kind of our long-term goal. The other point to make is that they also authorize a 50-cent per transaction convenience fee for us.
>> okay.
>> well, consistent with our last conversation, why wouldn't we counter the counter with language that says basically we understand exactly what you mean, and so our attorney general has drafted lapping that says basically -- language that says basically we will receive zero until you recover your costs and then at that point we will cost share.
>> I think the point with the authority was they didn't want to commit to cost share.
>> judge --
>> I think [multiple voices]
>> that was the point is that basically says hi, we will cost share with you, maybe, kind of, sort of, perhaps, and it doesn't really say anything about the -- they promised to do it, now it says like they are unpromising to do it or they have --
>> well, I think that bearing point was willing to do it. When they took it to the authority, the authority didn't agree.
>> does the authority then consider that they are going to get the money?
>> well, the -- the way that the financial transactions work out, as I understand it, is that it -- anything that they share with us, that the authority shares with us, on any other entity with a revenue sharing clause in it, then that would come out of state's share. So that's why they are taking that position, I believe.
>> I see where this is headed right now, that is if there is cost sharing while it was okay to do it when times are great, all of a sudden they are going, well, now, we want the money and not the county that's been working to be one of the first to put all of this stuff in place and to try to make it, if it works in Travis County, we will tell everybody. That's just the way it is. If it doesn't work here, we are also tell everybody. It's very important for this pilot to happen here, there's no reason why that cost sharing can't occur with the county that is taking a lot of risk and a lot of involvement that we're not charging them for in terms of the volume of your department and everything to make this thing happen. I don't know, it just seems they are reneging on what they promised.
>> uh-huh.
>> in a way I think they are, the authority is. Barbara, you may want to add something, you have been in these discussions as well, you may want to add some comment.
>> well --
>> I just --
>> the authority cerms kp -- I'm sorry, bearing cls point -- still back in the other loop -- can do and I can understand, just like this Commissioners court might not want to agree that another Commissioners court three years down the road would enter into an agreement, that related to cost sharing, the commission would be in a similar position to you all in that. To the extent that bearingpoint did not advocate zealously on our behalf indicating that any cost sharing between us and bearingpoint should not have any bearing whatsoever on the state and the proceeds of the commission, you could say that they reneged on the agreement. But if the commission was soundly of the mind, no matter what was said, that they weren't willing to make that -- allow that kind of a commitment to be made in the agreement, then it really isn't a question of what bearing point wanted to do, whether they wanted to renew, it's a question of what they were allowed to do.
>> really don't think that it's a reneging on bearing point's part --
>> was this said to us that we would have the potential of revenue sharing and that was the path that we were going down or is there a contractual document that memorialized that we would cost share and it was simply a matter of us getting it down into a final service level agreement? All agreements -- other agreements are still binding but not as binding if they put it on paper that they would do this, now they are saying no we're not?
>> that's sort of a yes and no. In relation to the system that is being use understand the tax office, there is a written agreement that says that they will cost share. That agreement, however, only relates to that one application.
>> we should say revenue share.
>> sorry. Revenue share. That was totally like the head wasn't controlling the mouth. In relation to the second situation, which is the current agreement, bearingpoint and Travis County negotiated and negotiated at length for almost two years and between the two of us, we agreed that there would be revenue sharing. However, bearingpoint always told us from the very beginning that whatever we agreed to would be subject to the additional agreement of the authority because they didn't have sole authority in this matter and they would take whatever we agreed to to the authority and attempt to get that approved by the authority.
>> and -- go ahead.
>> so, yes, we had a written agreement with bearingpoint to the extent that they had the authority to enter into any agreement at all. But they told us up front, we knew up front, according to the way that the law was written and things were set up, that the authority would have to approve it because of the first agreement being approved by the authority with revenue sharing potential in there, there was no reason for bearingpoint or us to believe that the commission wouldn't approve it again. It just turns out that apparently either the commission looked at it more closely this time or felt it was more likely because of the terms of it this way or different people and so they just reviewed it from a different perspective. Because every time memberip of the Commissioners court changes, the view of the Commissioners court changes to reflect the new person's knowledge and experience.
>> I have one more question. So if they are not willing to let Travis County revenue share with bearingpoint, is there precision in some kind of document as to who is going to get revenues beyond the cost of service? Does bearingpoint get to keep them all? Or is this deferring back to the commission state folk to be able to grab that money? I mean, is it staying with the private vendor or is it going to another governmental entity that has budget challenges like the rest of us?
>> I believe that the agreement still reflects the agreement that was made initially. And that agreement I have read and can speak on. If there has been an amendment that changes this, then I may be giving you bad information. But the agreement initially between kpmg around the state, bearingpoint now, said that I can't remember the precise terms, but something on the order of once they have -- net revenues in excess of -- in excess of expenditures, 50% of the profitings to the state. I may be wrong on that and it may be that they get 50% of gross after operating expenses. I would have to go back and look at the details, but it's my recollection is that -- on some formula, I will be glad to go reread it and get it down to you by lunch time, so you have it in an e-mail in your office so you will know the exact terms of it, but that they would --
>> there is a formula?
>> yeah, there is a formula.
>> it gives the state half of -- half of -- of the revenue at the point at which it starts getting it. I remember recalling, as I read it, wow, they negotiated well for themselves on this one because bearingpoint is in the cheer before they start having to pay the state money.
>> where it would affect us in a revenue sharing deal, any revenue they shared with us would be a cost to that formula.
>> but what does Travis County have to do to facilitate implementation?
>> what I think we are -- if we can, you know ...
>> the contract has got to be implemented, what should we do?
>> we will work with bearingpoint and the user departments that want to use the credit card and set up the system for them to do that and working with the auditor to make sure that we've got good financial controls on it.
>> we eat that cost?
>> that's an internal cost, yes.
>> and the public justification, if there is one, is that for residents who want to -- to use the easier processing method, it's available.
>> that's correct.
>> but they have to pay a fee.
>> that's right.
>> and that fee goes to private vendors plus --
>> and 50 cents for Travis County. They did approve a 50-cent transaction fee for Travis County.
>> so every transaction, we get at least 50 cents.
>> that's right.
>> okay.
>> so there's a transaction fee that the county gets, which is the 50 cents.
>> right.
>> and then on top of that, there is a what we will call the convenience fee that is really intended to recoup the costs of this service being provided by Texas online.
>> and the majority of that goes to the credit card company.
>> right, okay.
>> the state is saying if you do --
>> don't they have to approve that --
>> they have to approve e filing in order for counties to do it. Right now we have approved e filing with [indiscernible]
>> that's correct.
>> so it's either with bearingpoint on the state jurisdiction or not at all.
>> that is correct.
>> because of the supreme court rules. That they're set for all state.
>> this e pay application we will have to use it whenever we get an e filing, because it will be tied into the Texas online approach.
>> so what language, what right do we have to terminate the contract assuming that we approve it? Let's say we start looking at the numbers, if we want to get out of it.
>> there's a termination clause in it, but I can't remember what it is.
>> pardon me?
>> it is -- I don't know that there needs to be a -- [multiple voices] a cause. You have a copy of this.
>> [multiple voices] [inaudible - no mic]
>> I want to say it's 90 days.
>> I think the reality is whether we like it or not, if we and the to do e filing, these are the folks that we are going to have to go see to do e filing which is a bigger deal here in terms of having more effective and efficient operations over at the courthouse related to the filing of documents, which cost us an arm and a leg when it's real people having to shuffle papers.
>> I have a couple of questions which [indiscernible]
>> [inaudible - no mic]
>> pardon me?
>> if there's a breach in the services provided, if they don't do what they say they are going to do, you can terminate on 30 days notice. If you just feel like terminating because you are not happy or it's more convenient to do something else, it's 90 days notice.
>> Commissioner Davis.
>> yes, this particular formula that you had mentioned joe, I expect when we come to looking at repturing that cost, how long would that probably take for the [indiscernible] to reach their cost with the problems that -- with the forms that we have in place now?
>> well, it's hard to answer that question because the costs are different for each application, depending on whatever is involved to do it. This particular one, there's virtually no cost because it's a -- it's a service that they are providing, so they are not putting any extra development work into it. Other applications develop or work into it, so that cost will be varied in each one, it would depend on the volume of transactions, that we get, we don't know that until we get into it.
>> but I guess the question still looms heavily in my mind, that is the -- the revenue sharing aspect, still tied into cost.
>> that's correct.
>> if that's not true, then somebody ought to tell me that. But what I'm hearing, that is in fact what it is. And not be -- not defined in how we are be able to revenue share if we don't know what the cost is.
>> we do know what the cost is. For example the application that you have before you on e pay, we ask them to define a cost. We created a model that told us approximately how many transactions you have to have. Or have that information -- in front of me, we also used the $5 or the 5%, so we would have to go back and see what the $3 or 3% would come to in terms of the number of transactions. But that was one of the issues that was indeed vague. I asked them to -- to in fact to give us that -- that information and then we plugged it into the model, we e-mailed them that back, said this is the model that we are using in terms of -- to determine your cost and that we are amenable to.
>> the other thing that I would say is the part of that that we were able to tie down very specifically for most of it is what the cost would be. The cost is composed of five elements. The first element is the cost of developing the application and that number for each application will be stated in the attachment so that we know when we enter into the agreement how much is going to have to be recouped there. The second number is the cost of configuring the application for the county, which means like if you -- if you had -- if you had a copy of word and you needed it to do some special things, you had to do a little special program to make it fit on your computer, that's what the configuring is, that cost is also stated in the attachment. The next thing is the cost of operating the application for the county, including the cost of any additional programs they would have to buy from somebody else and that amount is stated in the application attachment. Any revenue -- sorry, that's -- and then the cost of converting the application to the county, if the -- if the agreement is terminated, so that it doesn't have to use their software and we can use it on our own is a third cost that is set out in the application. That we will only need if we decide that we are going to terminate and need to pay the license fee. So the first three will be the parts that relate to revenue sharing. The last one will relate to if we decide we want to go on our own with what we've got from them and continue to use it. Now, on e pay over the counter we are not going to be able to do that because that service agreement is with -- with the credit card companies. But on all of the other things we would be able to.
>> okay. I guess my final question is what role does the authority has, what does it do here, what role -- can they basically look at this and say, well, we don't -- we will not allow the county, bearingpoint to get into such a type of situation because it may be not in the best interests of the state, can anyone define that role?
>> the -- as I understand the Texas online authority is the -- is the oversight board for the Texas websites and for the Texas online systems that are under contract to bearingpoint. So they are the governing body for that entity.
>> [indiscernible]
>> go ahead.
>> I think that you kind of have to think about what's going on here and the legislature created the authority to set up a -- an internet system for the state.
>> exactly.
>> the state said and the legislature said that we think that it would be more valuable if it involves the counties being able to do all of the things that the state wants to do in terms of doing the business over the internet. So we will let all of those people use our infrastructure is the word that they used, but basically it's piggybacking on their system. So basically in order to maintain the integrity of their system, as long as we are using their system, they have control over the agreements that are involved. And the benefit we get from letting them have that control is that we don't end up going out and buying whatever the infrastructure would cost and joe may have some idea of what our own personal infrastructure would cost. It may be well worth our while to do that in the future. If he wants to speculate on that cost he can. I haven't even talked to him about it because I can't repeat what he said.
>> I know the deal with kpmg, also with the past whereby they give the counties the opportunity to actually receive the benefits that we are receiving now as far as revenue is concerned, it was some time ago, but I guess my question still as far as the role is concerned, I know that infrastructure does exist, but it appears to me that if the agreement is not in the best interests of what the authority has -- has in place, as far as infrastructure and everything else, then it may not appear that we may not get of best bang out of what we're doing. But of course that remains to be seen. I guess we will have to wait now and see how we develop what we are doing before we go forward and see what the results of that will be. Right now I'm not really sure if they want to keep something back in, that they have the luxury of doing it, the authority itself. That's what I'm kind of concerned about. If so that should not preclude [indiscernible] from pursuing it, possibly another way. That's a different story, also.
>> I wanted to clarify the cost that I said a while ago that there was no cost, there was no cost for the development of the e pay system itself, which is the credit card system. But there is some development cost which is defined in this agreement here. 54,460 for bearingpoint's initial project management work to get it established in the county. And then there's an annual cost of -- of around 12,000 for the operating costs. So all of those costs every time we do an application is going to be defined in the attachment.
>> [indiscernible]
>> bearingpoint.
>> I don't -- I mean, judge, I don't have a real problem with this. I think what happened is that if bearingpoint would have thought that the language was going to get passed to begin with, I mean, we wouldn't be back.
>> yeah, right.
>> and we have a no lose situation here especially the fact that we can get out in 30 or 90 days. Any time a vendor offers you something where you have no exposure, we have very little of it with the opportunity to -- to generate some funds, I would write this language not having have to come back as well, because it always makes you think, okay, well, are we getting tricked here, I don't think that's the case, I think that bearingpoint really found out that the authority wasn't --, you know, they wanted different language I think that's where we are.
>> the authority members, spent basically a whole day down there, I think there were two people there that I had seen before. Out of 20 or so that are on the authority. So they are all new people.
>> what language is in the contract to capture the will consider amendment?
>> they changed one word from anticipates entering into the revenue sharing agreement to will consider entering into the revenue sharing agreement. That's the word that they changed.
>> move approval of the proposed contract.
>> second? Any more discussion? All in favor? That passes by unanimous vote.
Last Modified: Tuesday, July 10, 2003 7:52 PM