HomeMy WebLinkAbout07 AUTHORIZE A PROFESSIONAL SERVICES CONTRACT FOR TREASURY CONSULTINGMEETING DATE
TO:
FROM:
SUBJECT:
SUMMARY:
AGENDA REPORT
APRIL 2, 2019
MATTHEW S. WEST, ACTING CITY MANAGER
Agenda Item
7
Reviewed:
City Manager
Finafce Director
JOHN A. BUCHANAN, FINANCE DIRECTOR
JENNY LEISZ, DEPUTY DIRECTOR - FINANCIAL SERVICES
AUTHORIZE A PROFESSIONAL SERVICES CONTRACT FOR TREASURY
CONSULTING SERVICES INCLUDING ASSESSMENT OF BANKING SERVICES
Staff is recommending that the City Council authorize a professional services contract with PFM
Asset Management LLC for treasury consulting services, including an assessment of banking
services and preparation of a Request for Proposal (RFP) for banking services.
RECOMMENDATION:
It is recommended that the City Council:
1. Authorize a professional services contract with PFM Asset Management LLC for treasury
consulting services, including assessment of banking services and preparation of an RFP for
banking services; and
2. Appropriate $50,000 from Land Sale Proceeds Fund (Fund 189) reserves for the project.
FISCAL IMPACT:
The contract amount with PFM Asset Management LLC, if authorized, is not -to -exceed $70,000.
Funds for this project in the amount of $20,000 were budgeted in the FY 2018-2019 budget as part
of the professional services budget in the Finance department. Therefore, staff is requesting an
additional appropriation of $50,000 from Fund 189.
CORRELATION TO THE STRATEGIC PLAN:
Correlates with the City's Strategic Plan Goal C: Financial Strength, Item 3.c. Conduct an
assessment for banking services to determine the best value for the services the City needs.
AUTHORIZE A CONSULTANT AGREEMENT WITH PFM ASSET MANAGEMENT LLC FOR ASSESSMENT OF
BANKING SERVICES
Page 2 of 3
DISCUSSION:
Bank of America has provided services for the City of Tustin for many years, with millions of dollars
in transactions flowing through our accounts each year. The City has a fiduciary responsibility to its
citizens to evaluate City services and identify ways to achieve cost neutrality. To accomplish this,
the City's strategic plan includes conducting a thorough assessment of banking services to determine
the best value for the services the City needs. As perspective, our banking fees from Bank of
America totaled approximately $137,000 in fiscal year 2018, plus merchant services fees for online
water activity of approximately $72,000 last fiscal year. A preliminary assessment by two outside
experts indicates that our fees are "above average" for a City of our size and complexity.
Four potential consultants were identified to help with the assessment process and the development
of a banking services RFP. Proposals were received from three of the four proposing consultants.
The consultants were evaluated based upon the following criteria: (a) knowledge, (b) experience with
similar projects, (c) their approach and understanding of the scope of services, (d) availability, (e)
proposed cost of services, and (f) references. After review and discussion with the consulting firms,
staff recommends PFM Asset Management LLC.
PFM offers comprehensive services, providing a complete and thorough evaluation of the City's
treasury -related services and providing recommendations regarding efficiency and cost
effectiveness. PFM has performed similar assessments with strong references for seven (7)
California municipalities / utilities (listed in the attached proposal). PFM has a nationwide database
of fees charged by most banks and has an extensive list of clients for comparative purposes. As
detailed in the attached proposal, the scope of work includes: 1) a comprehensive and detailed
assessment of current banking arrangements; 2) evaluating our organization's needs; 3) analyzing
existing banking relationships; 4) reviewing how bank services fit into the cash management and
investment systems; and 5) providing specific recommendations to improve our system. This
analysis will help the City to improve efficiency, take advantage of new technology, strengthen
controls, and reduce banking costs.
AUTHORIZE A CONSULTANT AGREEMENT WITH PFM ASSET MANAGEMENT LLC FOR ASSESSMENT OF
BANKING SERVICES
Page 3 of 3
Staff recommends partnering with PFM Asset Management LLC to act as a consultant for these
services, with the goal of conducting an assessment for banking services to determine the best value
for the services the City needs.
s
ny Leisz
Deputy Director - Financia Services
elf",
Joh Buchanan
Finance Director
Attachment: PFM Asset Management LLC proposal
PfM
City of Tustin
Proposal to Provide
Treasury Consulting Services
February 26, 2019
PFM Asset 213 Market Street 717.232.2723
Management LLC Harrisburg, PA 17101 Pfm.com
Expertise + Insight = Ingenuity
We are avid problem -solvers, using our collective expertise
to deliver the best solutions. We mine the experience of our
colleagues, combining wisdom and agile thinking to develop
answers and execute strategies for our clients.
February 26, 2019
City of Tustin
Treasury Consulting Services
Table of Contents
Cover Letter
I. Firm Profile......................................................................................................1
Il. Personnel.........................................................................................................2
III. Treasury Consulting Services..........................................................................5
IV. Bank Pricing Database..................................................................................12
V. Preliminary Pricing Analysis..........................................................................13
VI. Success Stories.............................................................................................16
VII. Benefits of PFM's Banking Services Review & Rebidding Services.............21
VIII. Fee Proposal.................................................................................................22
PFM Asset 213 Market Street 717.232.2723
Management LLC Harrisburg, PA www.pfm.com
17101
U01
Pfm
213 Market Street
Harrisburg PA 17101
pfm.com
February 26, 2019
Jenny Leisz
Deputy Director — Financial Services
Finance Department
City of Tustin
300 Centennial Way
Tustin, CA 92780
Dear Jenny,
PFM Asset Management, LLC ("PFM") is pleased to submit this proposal to provide treasury
consulting services to the City of Tustin ("the City"). PFM has broad experience working with
governmental entities across the country and can bring a unique perspective to this project. We have
the technical resources and experience to help you to assess the City's current banking needs and to
competitively procure those services at the most advantageous price.
We can provide a unique local, as well as national, perspective of trends in the banking industry that
will benefit the City through this engagement. PFM's treasury consulting team has worked on many
engagements of similar size and complexity; a full list of clients we have worked with over the last five
years, as well as several case studies, is included in the attached proposal.
We are enthusiastic about this opportunity to work with the City and look forward to discussing this
proposal with you in greater detail. If you have any questions, please feel free to call me at (717) 232-
2723 or email me at calvertd@pfm.com.
Sincerely,
PFFMAsset Management LLC
J4.e,
David J. Calvert, CFA
Director
I. Firm Profile
PFM is a leading provider of independent investment advisory services to public and other not-for-profit
organizations. The firm's original practice was founded in 1975 to provide independent financial
advisory services to the public sector and began providing investment advisory services in 1980. PFM
employs over 600 individuals located in 36 offices across the country.
In addition to our asset management services, PFM is the nation's leading independent financial
advisor in public finance, according to Thomson Reuters.
We are indirect wholly-owned subsidiaries of a holding company known as PFM I, LLC. This holding
company is 100% owned by the firm's Managing Directors, who set the firm's strategic direction.
The PFM Group
Holding Company
(PFM I, LLC)
Public Financial PFM Financial Advisors FinancialSenkes PFM Swap Advisors LLC PFM Group Consulting PFM Ventures LLC
Management• tnc. LLC Management LLCLLC LLC
Subsidlades:
• PPM Fund distributors. Inc.
• BondResource Partners, LP
• Bond Resource Partners, LLC
Treasury Management Consulting
Treasury management consulting services are provided as part of PFM's comprehensive investment
services. We have provided these consulting services since 1989. PFM is not affiliated with any bank
or trust company; we are independent and give independent advice.
The City of Tustin I Treasury Consulting Services
II. Personnel
PFM is committed to assigning a team of top professionals to work on this engagement with the City of
Tustin.
The relationship will be managed by David Walters, CFA, CTP, a Senior Managing Consultant with over
11 years of cash management and investment experience. David Calvert, CFA, Director, will provide
oversight for the engagement. Analysts, Danton Ponzol, CTP, Ashley Loper, and Lauren Donley, will
provide analytical and technical support for this engagement including summarizing information from
account analysis statements and preparing pro -forma costs of proposal responses.
David Calvert, CFA; Director
David Calvert is a Director at PFM Asset Management LLC specializing in the delivery of treasury
consulting services.
He helps clients identify their banking needs and assists in the time consuming process of competitively
procuring banking services. These engagements typically result in our clients receiving significant cost
savings, new and improved services, and greater customer service from their banking partner. He has
worked on treasury consulting projects with clients across the country in 28 different states. He has been
a guest speaker at multiple conferences and training sessions for the Virginia Government Finance
Officers' Association ("VGFOA"), Treasurers' Association of Virginia, North Carolina Local Government
Investment Association, Texas Association of Counties, Texas Association of Community College
Business Officers, and the Western Association of College and University Business Officers.
He also provides a broad range of investment advisory and consulting services for clients located from
Maine to South Carolina. These services include developing portfolio strategies, modeling cash flows,
developing initial portfolio strategies, reviewing portfolio performance, and updating investment policies.
After graduating from Boston College with a Master of Science degree in Finance, he joined PFM in
2000. He completed his Bachelor of Science degree in Business Administration with a dual
concentration in Finance and Accounting from Bloomsburg University graduating Magna Cum Laude.
Mr. Calvert holds the Chartered Financial Analyst (CFA) designation and is a member of the CFA
Institute. Additionally, Mr. Calvert holds Financial Industry Regulatory Authority (FINRA) Series 6 and 63
licenses.
The City of Tustin I Treasury Consulting Services
David Walters, CFA, CTP; Senior Managing Consultant
David Walters joined PFM's asset management practice in 2007 and is a Senior Managing Consultant in
the Milwaukee, Wisconsin office. He is a project manager in PFM's treasury consulting practice, working
with clients nationwide to review and enhance their cash management program. He provides clients with
an independent analysis of their banking relationships, recommendations for process improvements, and
assistance with the competitive procurement of banking services.
Prior to joining the treasury consulting practice, Mr. Walters was a member of PFM's arbitrage rebate
practice, specializing in providing post -issuance tax compliance services to issuers of tax -advantaged
debt. He worked with issuers to help them understand complex arbitrage requirements and ease the
burden of compliance. As part of his efforts to educate issuers, he has spoken on arbitrage rebate and
post -issuance compliance topics at industry conferences and educational events across the country.
Mr. Walters graduated Magna Cum Laude from the Pennsylvania State University with a Bachelor of
Science degree in Finance with a minor in Business Law. He holds the Chartered Financial Analyst (CFA)
and Certified Treasury Professional (CTP) designations and is a member of the CFA Institute and the
CFA Society of Milwaukee.
Danton Ponzol, CTP, Senior Analyst
Danton Ponzol is a Senior Analyst in PFM's Harrisburg office. Mr. Ponzol started at PFM in July 2014.
As part of PFM's treasury consulting practice, he is responsible for analyzing individual client's bank fees
and services, conducting banking industry research, drafting RFPs for banking services, and evaluating
proposal responses. In addition, he supports clients with all aspects of their investment programs,
including investment policy development, cash flow modeling, portfolio structuring and analysis,
investment performance analysis, and economic research and reporting.
Mr. Ponzol graduated from Lafayette College with a Bachelor of Arts degree in Economics and Policy
Studies. He holds the Certified Treasury Professional designation (CTP), as well as Financial Industry
Regulatory Authority (FINRA) Series 6 and 63 licenses.
Ashley Loper, Senior Analyst
Ashley Loper is a Senior Analyst in PFM's Harrisburg office. Ashley began working at PFM in 2015,
where she was involved with asset management for fixed income portfolios and local government
investment pools (LGIPs). More recently, she has begun to work in the Treasury Consulting Group,
where she is responsible for analyzing bank services and fees, as well as conduct banking industry
research. Ashley also is involved with drafting RFPs for banking services and evaluating proposal
The City of Tustin I Treasury Consulting Services
responses on behalf of our clients. Additionally, she still supports clients with all facets of their
investment programs, including cash management, investment policy development, portfolio structures,
investment performance analysis and economic research and reporting.
Ashley started out in personal finance, where she obtained her Series 7 license from the Financial
Industry Regulatory Authority (FINRA) and provided advice to individuals on their investments. She also
holds her Series 63 license with FINRA and earned the CFA Institute Investment Foundations certificate.
Ashley graduated from Shippensburg University with a dual degree in Finance and Marketing, as well as
a minor in Spanish. Ashley is currently enrolled with West Texas A&M University pursuing her MBA with
an expected graduation date of May 2019.
Lauren Donley, Analyst
Lauren Donley is an Analyst in PFM Asset Management LLC's Harrisburg office. Lauren's primary job
functionalities reside in PFM's Treasury Consulting practice. She is responsible for investment
management reporting, cash flow modeling, economic research, and the development and analysis of
portfolio strategies. In addition, she is also responsible for analyzing individual client's bank fees and
services, conducting banking industry research, drafting RFPs for banking services, and performing
detailed analysis on clients' account analysis statements to understand what services are currently being
used and where opportunities may exist for greater efficiency.
Lauren graduated Magna Cum Laude from Saint Vincent College. She holds a Bachelor of Science
degree in Finance and Mathematics. Additionally, Ms. Donley holds Financial Industry Regulatory
Authority (FINRA) Series 6 and 63 licenses.
The City of Tustin I Treasury Consulting Services
III. Treasury Consulting Services
PFM has helped numerous clients design banking services to meet their needs, evaluate the services
offered by competing banks, and re -bid banking services. For each client, we undergo a
comprehensive and detailed assessment of current banking arrangements; we evaluate the
organization's needs, analyze existing banking relationships, review how bank services fit into the
cash management and investment systems, and make specific recommendations to improve the
entire system. This thorough analysis has consistently allowed us to help our clients improve
efficiency, take advantage of new technology, strengthen controls and reduce banking costs.
The analysis process varies for each client based on the scope of the banking relationship, number of
stakeholders involved, problems identified, and the client's timeframe. The general steps involved are
described below.
TASK 1: PRELIMINARY REVIEW OF BANKING RELATIONSHIPS
At the onset of the engagement, PFM will request written policies, procedures, incumbent bank
contracts, and agreements from the City, including:
An organization chart of the treasury department
Schematics defining treasury flows, if available
Copies of current bank agreements and contracts
Bank analysis statements for all accounts to be covered by the project (prior 12 months)
Merchant card statements (prior 12 months)
Purchasing card/ePayables rebate schedule
PFM will review these documents to gain an understanding of the City's operations. We will perform
this background review prior to our initial discussions so we can make the best use of your time.
TASK 2: DISCOVERY MEETING WITH OFFICIALS AND KEY STAFF
At the Discovery Meeting, we will review the City's banking arrangements with key staff members,
including management, personnel handling the day-to-day banking responsibilities, information
technology services and the procurement department. Interviews will focus on the following key
areas:
The City of Tustin I Treasury Consulting Services
Account structure
Collection procedures
Cash concentration
Accounts payable process
Payroll processing
Cash flow and liquidity requirements
Disbursement methods
Reporting requirements
Credit facilities
Service levels
Collateralization of deposits
Bank fees
As part of the meeting, we will actively discuss alternative approaches or new services that can
enhance productivity. This discussion will be interactive, so we can address any concerns or
questions with staff and/or management. We view our role as finding viable, workable solutions for
the City and not simply providing a laundry -list of services that may or may not work.
TASK 3: EVALUATE AND PROVIDE RECOMMENDATIONS REGARDING THE CITY'S
CURRENT USE OF BANKING SERVICES
PFM will make recommendations for any changes to the existing use of banking services. This
analysis will identify areas in which additional services could be beneficial, unnecessary services can
be eliminated, physical processing of checks can be minimized, earnings on cash or sweep balances
can be improved, the overall cost of banking services can be reduced, and/or operations can be
streamlined.
TASK 4: DEVELOP RFP FOR BANKING SERVICES
After working with the City to define the level of required banking services, we will assist in preparing
a Request for Proposal that incorporates the needed services and desired objectives. The RFP will
be designed to obtain sufficient information while still providing bidders the flexibility to suggest new
ideas and creative solutions.
We will include questions in the RFP to address key issues raised by City decision makers, individual
departments, IT, and/or accounting. The RFP will address these requirements and confirm that the
bank will not only be able to comply, but have relevant experience complying with these requirements
for other clients.
Before proposals are received, we generally recommend a question -and -answer period. PFM will
incorporate specific information into the initial RFP document to address the most frequently asked
questions from the vendors. However, there are always a fairly large number of questions submitted.
The City of Tustin I Treasury Consulting Services 6
We will consolidate all of the questions received and will prepare an initial draft of the responses. We
will then forward the document to the City for review and assistance with questions we weren't able to
answer.
TASK 5: EVALUATION OF PROPOSALS/SELECT QUALIFIED FIRMS
PFM will read and thoroughly evaluate the proposals received so we have a complete understanding
of the proposing firms' capabilities and cost structure.
Our assessment criteria include the proposer's financial condition, technical capabilities, staff
experience, internal controls, reporting capabilities, level of automation, accounting system
capabilities, disaster recovery plans and proposed fees.
As part of our proposal review, we will compile detailed evaluation materials for the City. These
materials will include:
1) Service Levels Matrix: The Service Levels Matrix extracts responses from key questions from
the RFP and lists the banks' answers side-by-side. The Matrix is an important resource that will
allow the City to easily compare answers provided by the banks. We highlight answers that stand
out as positive or negative and identify gaps in the banks' proposals. In the past, our clients have
used the Matrix as an aid while they read the proposals on their own. A portion of a sample
Service Levels Matrix is shown below:
Question Bank 1 Bank 2 Bank 3 Bank 4
Deposit Processing
1.a
Number of bank
3
15
4
2
5
branches within 10 miles
Yes/No: Direct or
1.b
indirect discounted
Unresponsive
No
Yes
Yes
Yes
armored car services
Cash Only -
Imaged -
7:30pm
1.d
Ledger cutoff time for
6 pm PST
Spm PST
Spm
Unresponsive
Check Only -
deposits
Check -Only -
6:30pm
7:30pm
Mixed - 6pm
Yes/No: Deposit bags
1.e
provided by bank; Fee
No; Yes
No; Yes
Yes; Yes
Yes; Yes
Yes; Yes
for deposit bags?
1.f
Yes/No: Accept loose or
Yes
Yes
Yes
Yes
Yes
rolled coin
Willingness to cash any
Yes, up to
Yes, if payee is
1'g
check from another bank
Unresponsive
Yes
$100
No
a Bank
customer
Remote Deposit Capture
The City of Tustin I Treasury Consulting Services
7
3.c
Yes/No: Use Intelligent
Character Recognition
Yes
Yes
Yes
Yes
Yes
ACCOUNT MAINTENANCE
b
up to 999
$ 210 -CO
$ 20.00
$ 120.07
$ 10.CC
Limit on number of
up to 500
items;
up 200
up to
Yes;cks
more than
ns
3.d
checks contained in a
items at one
recommen
checks
300 checks k
1,items
$ 20.00
single deposit
time
ds 30-50
DEBITS POSTED
32
,000
$ 12.80
$ 0.40
$ 12.80
checks
$ 4.80
CREDITS POSTED
128
$ 0.40
$ 51.20
$ 0.40
$ 51.20
$ 0.15
$ 19.27
No, but will
6
Yes/No: Provide RDC
$ 120.00
Yes; limit
$ -
$ -
cover 50% of
3.e
machines to the City at
Yes; limit 2
1
Yes; limit 2
Yes; limit 4
cost of one
$
no cost?
1
$ 20.00
$ 20.00
$ 20.00
$ 20.00
$
$
GCS TRANSACTION HISTORY
1
$ 5.00
$ 5.00
scanner
2) Quantitative Analysis: PFM will also prepare a detailed quantitative analysis of each firm's cost
proposal on an "apples to apples" basis. The analysis will include both direct and indirect costs.
This can be one of the most challenging parts of the proposal evaluation process. Pricing schedules
from different banks can look quite different because banks take very different approaches to pricing.
For instance, some banks bundle services together while others have a long list of charges. PFM's
process compiles line item pricing in a pricing matrix. A portion of a sample pricing matrix is shown
below:
CURRENT COST .
Volume Levelsl Unit Cost I Monthly Price Unit Cos[I Wrnhly Price I Unit Cost I Monthly Price
GENERAL ACCOUNT SERVICES
ACCOUNT MAINTENANCE
b
$ 35DO
$ 210 -CO
$ 20.00
$ 120.07
$ 10.CC
$ 60.07
2BA MASTER ACCOUNT
1
$ 50.00
$ 50.00
$ 30.00
$ 30.00
$ 35.00
$ 35.00
ZBA SUBSI DI ARY ACCOUNT
1
$ 25.00
$ 25.00
$ 20.00
$ 20.00
$ 25.00
$ 25.00
DEBITS POSTED
32
$ 0.40
$ 12.80
$ 0.40
$ 12.80
$ 0.15
$ 4.80
CREDITS POSTED
128
$ 0.40
$ 51.20
$ 0.40
$ 51.20
$ 0.15
$ 19.27
DIRECT DDA STATEMENT PER ACCOUNT
6
$ 20.00
$ 120.00
$ -
$ -
$ -
$ -
CHECKS PAID - REPORT
3
$ 10.00
$ 30.00
$ 10.00
$ 30.00
$
$
FACSI MILE TRANSMI SSI ON
1
$ 20.00
$ 20.00
$ 20.00
$ 20.00
$
$
GCS TRANSACTION HISTORY
1
$ 5.00
$ 5.00
$ 5.07
$ 5.00
$
$
PHOTOCOPIES
2
$ 10.00
$ 20.00
$ 10.00
$ 20.00
$ 20.00
$ 40.00
PFM's quantitative analysis will compare the direct fees on specific services as well as indirect costs
such as the impact of below market earnings credit rates or investment rates and availability
schedules.
The table below is an example of the "indirect" cost associated with maintaining balances in bank
deposit accounts. For this client, the quoted earnings credit rate was 0.280%, but after accounting for
the bank's 10% "reserve requirement" and deducting FDIC fees, the net rate on the collected balance
was only 0.101%.
The City of Tustin I Treasury Consulting Services
Ledger Balance $26,796,405
Less Float $540,352
Total Collected Balance $26,256,053
Less Reserve Requirement 10% $2,625,605
Available Balance $23,630,448
Earnings Credit 0.28%
$5,524
$23,630,448 " 0.28% " 30/365
0.15%
Less FDIC Assessment $3,350
$3,350 / ($26,796,405 " (30/365))
Net Earnings Credit 0.099% on Ledger Balance $2,175
0.101 % on Collected Balance
3) Score Sheets: After reading and analyzing each proposal, PFM will score the banks on
qualitative and quantitative criteria, assessing which institution we believe will best meet the
City's operational, service, and technology needs.
We will present our evaluation to the City and will help identify those firms that best meet the
selection criteria and represent the best candidates to be invited in for the next phase of the RFP
process — the finalist interviews.
TASK 6: INTERVIEW SELECTED PROPOSING INSTITUTIONS
The finalist presentation is one of the most important parts of the selection process. Although the
proposing firm may have a lot to offer, much of the success or failure of a banking relationship is the
result of the experience and commitment of the selected firm(s)' assigned account officer(s).
The objective of the interview will be to evaluate the technical competence of bank personnel and
obtain answers or clarification on questions from the RFP. The interview also provides an opportunity
to discuss and/or negotiate fees, if permitted by local procurement rules. Vendor visits and product
demonstrations may also be included in this phase of the selection process.
During the interview phase, as an independent consultant, PFM can provide the City with information
on the advantages and disadvantages of various services and the feedback of similar clients. Since
The City of Tustin I Treasury Consulting Services
we are actively reviewing and interviewing banks and bank representatives from across the country,
we are knowledgeable about changes in the industry and product offerings.
TASK 7: RECOMMENDATIONS
After the finalist interviews, we will discuss the presentations with the City, provide recommendations
and determine if additional information is needed before awarding the contract. If additional
information is needed, PFM will work with the banks to get clarification on outstanding items. We will
also update our quantitative analysis to reflect any financial changes made as part of the finalist
interviews.
TASK 8: CONTRACT/AGREEMENT NEGOTIATIONS
Once the City has selected the bank with which it would like to work, we will assist in negotiating any
revisions to the proposed fee schedule or other aspects of the bank's proposal. Our experience has
shown that it is often possible to obtain fee concessions from the banks on certain aspects of the
work. The quantitative analysis performed in Task 5 and PFM's database of bank pricing are valuable
tools in this process.
PFM's database of bank pricing contains a wealth of information about bank pricing, including both
actual and proposed fees, from public and not-for-profit organizations across the country. The
database is invaluable in assessing potential fee savings and in negotiating pricing.
With the database, we are able to compare individual line item pricing to the pricing paid by other
similarly sized organizations for banking services. As an example, here is the analysis for Checks
Paid for one of our clients before the issuance of an RFP. The organization was paying $0.18 per
item for each check paid. In the current highly competitive banking environment — where technology
has driven down the cost of "commodity" services - we are seeing proposed pricing for this service at
significantly lower levels.
The chart shows per unit pricing for Checks Paid based on the overall size of the general banking
relationship (annual fees). The symbols are color coded to show the source of the pricing as follows:
The client's current pricing is shown with a square;
Pricing before competitive procurements are designated by squares — green squares for the
client's current bank and red squares for other banks;
Pricing proposed by banks during competitive procurements are designated by diamonds — green
diamonds for the client's current bank and blue diamonds for other banks.
The City of Tustin I Treasury Consulting Services
10
Price Comparison Scatterplot
Checks Paid
$0..35
50.30
■■
a PA banks Exisfing
u $0.25
— ••[ ■ ■�
Al Banks Pm ..rued
■
■
H[
$0'20 �
■Client Bank Existing
��— !
�
O
■ N ■
rt■
rt
�. $57.75
• ■ • N •♦ it ♦ �e :
■ • ■ �[ :
. punt bank
`m
■
■ _i a
•
■ Prc urement
a
■ ■ ■ • ■
♦ ■
• ■
■
m 59.10
♦ a r [ a■�,a♦■»■a ,�
- �■ i ■
- [Current Rela8cn9hip
♦
J
■ ♦ s
■
50.00 -
– • s
`
.
$0
$25,000 $50.000
575,000
$100.000
Size of Banking Relationship
TASK 9: CONTRACT REVIEW
Although many banks would like their customers to think that the contract for banking services is
"standard", this is rarely the case. Bank contracts are often written by bank attorneys for the benefit of
the bank. PFM will serve as a technical resource to the City's lawyers in making those changes to the
"standard" contract needed to assure that the terms and pricing are fully documented.
The City of Tustin I Treasury Consulting Services
11
IV. Bank Pricing Database
One of the tools we will use to ensure that the City receives the most competitive pricing available is
PFM's database of bank pricing. This database contains a wealth of information about bank pricing,
including both actual and proposed fees, from public and not-for-profit organizations across the
country. The database is invaluable in assessing potential fee savings and in negotiating pricing.
Over the last decade, we have seen technology drive the costs for "commodity" banking services
lower.
With the database, we are able to compare individual line item pricing to the pricing paid by other
similarly sized organizations for banking services. As an example, here is the analysis for Checks
Paid for one of our clients before the issuance of an RFP. The organization was paying $0.18 per
item for each check paid. In the current highly competitive banking environment, we are seeing
proposed pricing for this service at significantly lower levels.
The chart shows per unit pricing for Checks Paid based on the overall size of the general banking
relationship (annual fees). The symbols are color coded to show the source of the pricing as follows:
• The client's current pricing is shown with a square;
• Pricing before competitive procurements are designated by squares — squares for the
client's current bank and red squares for other banks;
• Pricing proposed by banks during competitive procurements are designated by diamonds —
green diamonds for the client's current bank and blue diamonds for other banks.
Price Comparison Scatterplot
Checks Paid
$0.35
$0.30
v $0.25
m
$0.20
8
a
$0.05
$0.00
$0
All Banks Existing
• All Banks Procurement
r -Client Bank Existing
$25,000 $50,000 $75,000 $100,000
Size of Banking Relationship
Client Bank
Procurement
Current Relationship
The City of Tustin I Treasury Consulting Services 12
■
■
N ■
■
M
_
♦
N♦ ♦ ■
♦
♦ ■ ■ ■■
■ ■
■■N ♦
#41
♦ ■♦
■
■ �
♦
-
♦ .■04
.
■
0 No
$0.00
$0
All Banks Existing
• All Banks Procurement
r -Client Bank Existing
$25,000 $50,000 $75,000 $100,000
Size of Banking Relationship
Client Bank
Procurement
Current Relationship
The City of Tustin I Treasury Consulting Services 12
V. Preliminary Pricing Analysis
PFM has reviewed the City's January 2019 account analysis statement for Bank of America to assess
current fee levels.
While this is not a comprehensive assessment of the fee savings the City may achieve through a
competitive RFP process, it does provide a sample of the type of analysis PFM can perform.
Hopefully, it also demonstrates the power of our pricing database.
Based on the information we reviewed, it appears that the City is paying about $53,523 per year
(excluding FDIC fees). Compared to the fees charged to other similarly sized institutions, we believe
the City is incurring above average charges for most services.
PFM'S DATABASE OF BANK PRICING
We used the database of bank pricing to compare line item pricing on the City's account to the fees
paid by other organizations; those currently paying less than $75,000 per year. We also compared
pricing to the fees we have seen Bank of America charge other customers. As shown in the table
below, the majority of services analyzed are above average when compared to database pricing.
Account Maintenance
$
23.0000
4
Above Average
Above Average
Above Average
ZBA Master Account
$
37.0000
1
Above Average
Above Average
Above Average
ZBA Sub Account
$
22.0000
3
Above Average
Above Average
Above Average
Debit Posting
$
0.4000
16
Maximum
Above Average
Above Average
Credit Posting
$
0.4000
264
Above Average
Above Average
Above Average
Deposit (Vault)
$
1.2000
20
Above Average
Above Average
Above Average
Deposit (Vault) Mixed Coin & Currency (per $100)
$
0.1200
282
Above Average
Above Average
Above Average
Image Clearings (ICL) - Transit
$
0.0600
4,699
Above Average
Above Average
Above Average
Return Item
$
1
4.0000
2
1
Below Average
Below Average
Above Average
Return Item Redeposit
$
1.1500
5
Below Average
Below Average
Below Average
Positive Pay Maintenance
$
55.0000
1
Above Average
Above Average
Above Average
Checks Paid
$
0.1500
445
Above Average
Above Average
Above Average
Stop Payment (Automated)
$
10.0000
1
Above Average
Average
Average
Stop Payment (Automated)
$
20.0000
6
Above Average
Above Average
Maximum
Positive Pay Checks Paid
$
0.0300
158
Below Average
Below Average
Below Average
Check Image Maintenance
$
-
1
Minimum
Minimum
Minimum
Check Image Item Retrieval
$
0.2500
2
Below Average
Below Average
Maximum
CD-ROM
$
10.0000
1
Below Average
Below Averaqe
Above Average
The City of Tustin I Treasury Consulting Services 13
A snapshot showing the pricing on one service is provided below. The scatterplot shows the City's
current pricing for ACH Maintenance compared to the fees paid by other organizations for the same
service.
$120.00
$100.00
0
U
$80.00
a�
N
r $60.00
c
nom. $40.00
m
v
a $20.00
$0.00 4-
$0
PFM Database -All Banks
ACH Maintenance
■
■ ■ ♦ IN ■♦■
■ ■ IMM ♦ ■■ ■ i ■ ■ ♦ r■
$15,000 $30,000 $45,000 $60,000
Size of Banking Relationship
All Banks Existing
•All Banks Procurement
:;Client Bank Existing
Client Bank
Procurement
■ ♦ Current Relationship
M
$75,000
If the City were able to reduce the fee on this single line item to the average price for this item in our
database for organizations paying less than $75,000 per year ($106.25), it would realize annual
savings of between $3,285 and $3,465 per year.
The City of Tustin I Treasury Consulting Services
14
r err
CD-ROM
$
10.0000
1
Below Average
Below Average
Above Average
CD Rom Per Image
$
0.0450
445
Above Average
Above Average
Above Average
Partial Reconciliation Maintenance
$
84.0000
2
Above Average
Above Average
Above Average
Partial Reconciliation Item
$
0.0800
445
Above Average
Above Average
Maximum
Account Recon Output Per Transmission
$
35.0000
1
Above Average
Above Average
Maximum
ACH Maintenance
$
106.2500
3
Above Average
Above Average
Above Average
ACH Item Originated - Debit via Transmission
$
0.0500
187
Below Average
Below Average
Below Average
ACH Item Originated - Debit via Transmission
$
0.1000
876
Above Average
Above Average
Above Average
ACH Item Originated - Credit vwa Transmission
$
0.0500
237
Below Average
Below Average
Below Average
ACH Item Originated - Credit via Transmission
$
0.1000
1,428
Above Average
Above Average
Above Average
ACH Item Originated - Same Day On -Us
$
0.0500
2
Below Average
Below Average
Below Average
ACH Item Originated - Same Day Transit
$
0.5000
2
Maximum
Below Average
Maximum
ACH Item Received - Debit
$
0.1200
39
Above Average
Average
Above Average
ACH Item Received - Credit
$
0.1200
132
Above Average
Average
Above Average
ACH Return Item
$
3.5933
6
Above Average
Above Average
Above Average
ACH File Processing or Transmission
$
25.0000
19
Maximum
Above Average
Maximum
ACH Debit Block Maintenance
$
14.0000
3
Above Average
Above Average
Below Average
Wire Transfer Monthly Maintenance
$
30.0000
1
Above Average
Above Average
Maximum
Automated Non -Repetitive Wire (Domestic)
$
11.0000
2
Above Average
Above Average
Above Average
Incoming Wire (Domestic)
$
10.0000
2
Above Average
Above Average
Above Average
Previous Day Reporting Transaction
$
0.1100
1,162
Above Average
Above Average
Above Average
Bank Internet Portal Access
$
50.0000
1
Below Average
Below Average
Average
Bank Internet Portal Access
$
48.0000
1
Below Average
Below Average
Below Average
A snapshot showing the pricing on one service is provided below. The scatterplot shows the City's
current pricing for ACH Maintenance compared to the fees paid by other organizations for the same
service.
$120.00
$100.00
0
U
$80.00
a�
N
r $60.00
c
nom. $40.00
m
v
a $20.00
$0.00 4-
$0
PFM Database -All Banks
ACH Maintenance
■
■ ■ ♦ IN ■♦■
■ ■ IMM ♦ ■■ ■ i ■ ■ ♦ r■
$15,000 $30,000 $45,000 $60,000
Size of Banking Relationship
All Banks Existing
•All Banks Procurement
:;Client Bank Existing
Client Bank
Procurement
■ ♦ Current Relationship
M
$75,000
If the City were able to reduce the fee on this single line item to the average price for this item in our
database for organizations paying less than $75,000 per year ($106.25), it would realize annual
savings of between $3,285 and $3,465 per year.
The City of Tustin I Treasury Consulting Services
14
On the City's entire banking relationship, we are projecting annual savings of 39% - 46% ($20,925 -
$24,784) when the City rebids their services.
EARNINGS CREDIT ANALYSIS
We have computed the effective ECR at Bank of America by adjusting the stated ECR for a balance
assessment (aka FDIC assessment) being charged. The table below shows the impact of this charge
on the City's stated ECR of 0.25%.
Ledger Balance
$8,341,897
Less Float
$169,574
Total Collected Balance
$8,172,324
Less Reserve Requirement
0%
$0
Available Balance
$8,172,324
Earnings Credit
0.25%
$1,735
$8,172,324 " 0.25%' 31/365
0.17%
Less FDIC Assessment
$1,219
$1,219/($8,341,897.(31/365))
Net Earnings Credit
0.07% on Ledger Balance
$516
0.07% on Collected Balance
The effective ECR on the City's account is much lower than what we are seeing at other banks, and
much lower than what the City could likely earn in a liquid investment vehicle.
During the RFP process, PFM will evaluate each of the proposers' ECRs, balance assessment fees,
reserve requirements and potential sweep options to determine the optimal investment options for the
City's balances.
The City of Tustin I Treasury Consulting Services 15
VI. Success Stories
In addition to improving internal operations, PFM's bank RFP process has consistently allowed our
clients to achieve fee savings. The organizations listed below represent clients PFM has worked with
during the past 5 years to re -bid banking services through a competitive RFP process.' These clients
have achieved direct fee savings on general banking of 17% to 93% with average savings of 43%.
Half have maintained banking relationships with their incumbent bank and half selected a different
banking services provider.
CLIENT
STATE
Municipalities / Utilities
Alameda County Water District
California
Arlington County Treasurer's Office
Virginia
Chicago Public Schools
Illinois
City of Carlsbad
California
City of Charlottesville
Virginia
City of Glendale
Arizona
City of Mesa
Arizona
City of Napa
California
City of Newport Beach
California
City of Norfolk
Virginia
City of Norfolk Employee Retirement System
Virginia
City of Philadelphia
Pennsylvania
City of Santa Rosa
California
City of Scottsdale
Arizona
City of St. Louis
Missouri
City of Surprise
Arizona
City of Tucson
Arizona
Colorado Intergovernmental Risk Sharing Agency
Colorado
CPS Energy
Texas
This list was compiled as of December 31, 2018 and includes all complete treasury consulting engagements led by Barbara
Fava or David Calvert over the last five years. Savings are based on general banking and cash management services and do
not include other services such as merchant card processing or enhanced rebated schedules for purchasing cards. Savings
represent past experiences and competitive conditions at the time of the engagements. Similar results may not be duplicated
for all clients. Inclusion on this list does not necessarily represent endorsement of PFM services.
The City of Tustin I Treasury Consulting Services 16
DC Water and Sewer Authority
District of Columbia
Hampton Roads Sanitation District
Virginia
Henrico County
Virginia
Huntsville Utilities
Alabama
Lexington -Fayette Urban County Government
Kentucky
Lincoln Electric System
Nebraska
Metropolitan Nashville Airport Authority
Tennessee
Prince William County
Virginia
San Bernardino County
California
Santa Clara Valley Transportation Authority
California
Santee Cooper
South Carolina
School Board of Broward County
Florida
State of Delaware
Delaware
State of Hawaii
Hawaii
State of Oregon
Oregon
Virginia State Non -Arbitrage Program
Virginia
Healthcare and Higher Education
Baptist Healthcare System
Kentucky
Barnard College
New York
Brandman University
California
College of William & Mary
Virginia
Eastern Maine Healthcare Systems
Maine
Grand Valley State University
Michigan
Hackensack Meridian Health, Inc.
New Jersey
Harrington Healthcare System
Massachusetts
Independence Blue Cross
Pennsylvania
Michigan State University
Michigan
New Jersey Institute of Technology
New Jersey
Redlands Community Hospital
California
Rhode Island School of Design
Rhode Island
Roger Williams University
Rhode Island
Rush University Medical Center
Illinois
Rutgers University (Including the New Jersey Medical School)
New Jersey
Trinity University
Texas
University of Arizona
Arizona
University of Arkansas
Arkansas
University of Maine System
Maine
University of Redlands
California
University of Virginia
Virginia
University System of New Hampshire
New Hampshire
Virginia Polytechnic Institute & State University
Virginia
The City of Tustin I Treasury Consulting Services
17
Wellesley College Massachusetts
Wentworth Institute of Technology Massachusetts
These results are achieved by:
1) Structuring the RFP in a way to retain flexibility to pick and choose the most competitive
proposal for each service.
2) Recognition by the banks that an independent third -party consultant is involved in the
process.
3) Our ability to negotiate on the client's behalf to improve the pricing.
The following case studies demonstrate how PFM's process can add real value:
CITY OF LONG BEACH, CALIFORNIA
r
PFM worked with the City of Long Beach to rebid the City's banking relationships. The
ti RFP was structured in a way that allowed banks to bid on one or more of the
requested services, including: (1) General Banking Services, (2) Bill Printing and
Mailing Services, (3) Investment Custody, (4) Payroll Card Program, and (5) Operation of onsite
ATMs.
The City received a total of eight proposals from this solicitation, and PFM conducted an extensive
qualitative and quantitative review of each proposal. As a result of the procurement process, the City
is expected to save $110,500 or 38% per annum for General Banking services. Investment Custody
fees were cut by nearly 60% or $51,000 per year.
ALAMEDA COUNTY WATER DISTRICT, CALIFORNIA
��CI� Alameda County Water District (ACWD) sought to streamline its
9L9,11f9911MA VWffFf90/S/9//.'7 banking operations to achieve greater efficiencies, while enhancing the
payment experience for their customers. The RFP focused on General Banking, Retail Lockbox, and
Electronic Bill Payment & Presentment (EBPP) services.
PFM assisted the District in evaluating 15 different proposals and invited six firms to make finalist
presentations. Since the scope of the RFP included many new or enhanced services, it was
challenging to estimate the potential volume levels of particular services. Through our discussions,
we emphasized the District was seeking a long-term partnership with these firms and encouraged the
The City of Tustin I Treasury Consulting Services
18
firms to submit pricing that was reflective of the potential growth of the program in the future. This
emphasis helped all parties reach a fair compromise on pricing.
Once the selection process was completed, the District consolidated general banking and retail
lockbox services with a single provider and received a generous transition credit of $77,000 to help
offset banking costs during the first year. ACWD also partnered with a leading provider in EBPP
services to offer a robust and comprehensive platform that allows its utility customers to have access
to a powerful interactive website, electronic invoicing, and enhanced payment functionality such as
text -to -pay services.
SAN BERNARDINO COUNTY, CALIFORNIA
The increased capital requirements imposed by Basel III caused San
C&6�ar.a�oix 7 Bernardino County's (California) banking partner to fundamentally change the
NTY
nature of their banking relationship with the County. The bank imposed severe
limitations on the amount of money they were willing to allow the County to
hold on deposit. After multiple attempts to negotiate with the bank, the County hired PFM to review its
current banking relationship and assist in the solicitation of a Request for Proposal.
We customized the RFP to address the specific needs of the County's operations and processes. As
the largest county in the United States by area, there were some unique challenges related to
meeting the deposit needs of remote County offices.
Through the competitive solicitation process, the County received proposals from five different
vendors. The County selected a new banking provider that did not impose a limitation on the amount
of collateralized bank deposits, and reduced its banking fees by 64% compared to the incumbent
bank's pricing.
CITY OF SURPRISE, ARIZONA
The City of Surprise, Arizona hired PFM in 2015 to evaluate its current
-/Ef&9h-- service providers, identify "best practices", and explore new bank services.
S U R F R I S E During the discovery phase of the engagement, PFM determined that the
AR""" A City's fees were high relative to other municipal entities we've worked with.
PFM also identified several bank services that could improve efficiency and reduce the potential for
fraud.
The City of Tustin I Treasury Consulting Services
19
The RFP was structured to seek vendors for General Banking, Institutional Custody, Purchasing
Card, Retail Lockbox, Bill Printing / Mailing and Online Collection, Merchant Card Processing, Payroll
Card, Onsite ATMs, Armored Car, and Wholesale Lockbox.
In total, the City received proposals from nine vendors. PFM prepared a detailed quantitative and
qualitative evaluation of each proposal. The City selected four firms to provide the comprehensive
suite of services included in the RFP. The City received aggressive pricing and a generous transition
bonus, which resulted in savings of 52.7% for general banking services. The City also determined
outsourcing the printing and collection of its utility bills was a more efficient and cost effective
alternative, and it improved the customer experience.
CITY OF TUCSON, ARIZONA
The City hired PFM to procure comprehensive banking services, including general
i
banking services, institutional custody, corporate trustee services, lockbox
services, and pre -paid cards. A second RFP was issued simultaneously for a
purchasing card program/virtual card payments. This allowed the City to have a
16..-7
different Selection Committee to evaluate the responses for the purchasing
card/virtual card payments from the general banking services.
Through the RFP process, PFM was able to save or generate revenues of over $300,000 per year for
the City.
The City of Tustin I Treasury Consulting Services
0
VII. Benefits of PFM's Banking Services Review
& Rebidding Services
Organizations that have engaged PFM to provide treasury consulting services have realized a variety
of benefits. The value added often differs from client to client because of their objectives and the
situation of the treasury operation at the start of the project. However, regardless of the starting point,
clients have consistently found that PFM's comprehensive process of reviewing and rebidding
banking services has helped them to take their treasury operation to a new level. The following is a
list of improvements that clients have found to be the most beneficial:
Substantial fee savings;
Improved earnings on cash balances;
Identification of inefficiencies, costly processes and possible control problems in the treasury
operation;
Documentation of current processes (especially valuable when there has been recent staff
turnover);
Implementation of collection, cash handling and disbursement best practices;
Evaluation of new banking technologies with the help of an independent (non-bank) advisor;
Faster deposit of funds to reduce deposit float and increase earnings;
Implementation of an integrated payables platform with expense reporting capabilities; value
added from higher rebate, better controls, enhanced reporting, accounting system integration
and faster reconciliation;
Improved terms and rates on lines and letters of credit;
Improved reporting and integration with General Ledger systems;
Conversion of paper checks to electronic payments; value added from lower costs, better
controls, elimination of escheating requirements and simplified account reconciliation;
Better control and management of cash with the use of a treasury workstation;
Improved efficiencies, which allow Treasury to do more and provide a higher degree of
service to the organization and its constituents (students, patients, taxpayers, customers)
without the need to add staff; and
Faster implementation of new bank services and technologies.
The City of Tustin I Treasury Consulting Services 21
VIII. Fee Proposal
PFM is available to assist the City of Tustin with all of the Tasks outlined in Section III of this
proposal. The table below outlines the engagement fee.
Management Consulting Services
EngagementTreasury
Task 1: Preliminary Review of Banking Relationships
Task 2: Discovery Meetings with Officials and Key Staff
Task 3: Evaluate and Provide Recommendations Regarding the City's
Current Use of Banking Services
Task 4: Develop RFP for Banking Services
Task 5: Evaluation of Proposals/Select Qualified Firms
$60,000
Task 6: Interview Selected Proposing Institutions
Task 7: Make Final Recommendations
Task 8: Contract/Agreement Negotiations
Task 9: Contract Review
Additional On -Site Meetings
$3,000 per
Three on-site meetings are included in the engagement fee above.
additional meeting
Review of Additional Proposals
$2,500 per
If the City receives more than 6 proposals, an additional fee per proposal
additional proposal
reviewed would apply.
We would also ask to be reimbursed for expenses related to travel, meals and lodging. Appropriate
documentation and third -party receipts will be provided with each invoice.
The City of Tustin I Treasury Consulting Services 22
PfM
213 Market Street
Harrisburg, PA 17101
717.232.2723
pfm.com
City of Tustin
Treasury Consulting Project - Timeline
Sign Contract
April 2019
Project Kick Off Call
April 2019
Data Request (Request Provided)
April 2019
Preliminary Review of Material
Late April 2019
On-site Meetings with City Staff
Week of April 22nd OR
May 22nd & 23rd OR
Week of June 3rd
Follow up Discussions and Data Requests
June 2019
Prepare Recommendations Report
June 2019 /early July 2019
Review and Discuss Recommendations with
the City
July 2019
Draft RFP
Early August 2019
City Review of Draft RFP
August 2019
Finalize RFP
Early September 2019
Issue RFP
Early September 2019
Receive Written Questions from Prospective
Vendors
Late September 2019
Respond to Written Questions
Late September 2019
Receipt of Proposals
Mid October 2019
Evaluate Proposals
Late October -November 2019
Finalist Interviews and Demos
Early December 2019
Negotiate Pricing with Preferred Vendors
December 2019 / January 2020
Selection
January 2020
Contract Review and Negotiations
February 2020
Begin Implementation
March 2020