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HomeMy WebLinkAbout14 GENERAL BANKING SERVICESDocuSign Envelope ID: F5AAB750-D243-4FB0-A521-EE7F836FBF11 Agenda Item 14 ,:. Reviewed. DS AGENDA REPORT City Manager 5W Finance Director MEETING DATE: MAY 17, 2022 TO: MATTHEW S. WEST, CITY MANAGER FROM: JASON AL -IMAM, FINANCE DIRECTOR/CITY TREASURER SUBJECT: GENERAL BANKING SERVICES SUMMARY: For the past 45 years, the City has contracted with Bank of America for general banking services. GFOA recommends that governments review their financial services contracts every five years to obtain market competitive rates and to take advantage of service enhancements. In connection with a competitive procurement process and based on the advisement of the Audit Commission, it is recommended that the City enter into an agreement with Citizens Business Bank to provide general banking services, which is expected to yield approximately $45,700 in annual savings. RECOMMENDATION: It is recommended, based on the advisement of the Audit Commission, that the City Council authorize the City Manager, or designee, to execute a banking services agreement with Citizens Business Bank for an initial term of five years, with an option to extend on the same terms and conditions for an additional period of two years. FISCAL IMPACT: General banking services provided by Bank of America currently cost approximately $45,700 per year, which is net of applicable earnings credits (interest earnings). The proposed general banking services agreement with Citizens Business Bank is estimated to result in no cost to the City net of the applicable earnings credit, which will yield annual cost savings of $45,700. 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. DocuSign Envelope ID: F5AAB750-D243-4FB0-A521-EE7F836FBF11 General Banking Services Page 2 of 3 DISCUSSION: For the past 45 years, Bank of America has provided a comprehensive package of banking services, including depository, disbursements, cash management tools and online reporting. The current banking services contract with Bank of America has not been competitively priced or negotiated for years as modern banking services, fees and technologies have changed substantially over the years. In April 2019, the Finance Department hired the consulting firm, PFM Asset Management LLC (PFM), to perform the following tasks: • Review the City's existing banking relationships • Evaluate and propose recommendations on existing banking services • Develop RFP for banking services • Evaluate proposals and recommend qualified firms In August 2019, the City issued an RFP for Comprehensive Banking Services seeking proposals from qualified financial institutions to provide six groups of services: general banking; merchant card processing; electronic bill payment; purchase card; checking printing; and institutional custody services. The objective of the RFP was to procure cost- effective banking services and to take advantage of service enhancements while safely managing public funds, reducing risks and improving productivity and customer experience. The proposers had the option to choose one or more of the services. A total of nine firms submitted proposals for general banking services. PFM reviewed and scored the proposals based on an extensive list of service criteria. An Evaluation Committee consisting of City staff and PFM consultants was formed to review the results. Three firms with the highest scores were invited to make finalist presentations to the Evaluation Committee. In December 2019, the Committee recommended JP Morgan for general banking services, which is estimated to cost approximately $13,500 per year, net of an earnings credit of 0.15% In January 2020, staff began the process of contract negotiation with JP Morgan. However, staff and JP Morgan were not able to come to an agreement on certain provisions in the bank's services contract. The negotiation process came to a halt in early 2020 with the onset of the pandemic as staff shifted focus and redirected all efforts to mitigate the health crisis and related financial impacts to the local community. Therefore, the banking services contract negotiation was temporarily put on hold. In 2021, the Comprehensive Banking Services project was resurrected. Staff initially focused efforts on institutional custody services with US Bank, which was implemented in early 2021. Thereafter, City staff revisited the proposals submitted for general banking services. As previously mentioned, City staff had not been able to reach an agreement with JP Morgan regarding certain aspects of its general banking service contract. The other two general banking finalists, Bank of America and U.S. Bank, have fees that are DocuSign Envelope ID: F5AAB750-D243-4FB0-A521-EE7F836FBF11 General Banking Services Page 3 of 3 50% higher than JP Morgan. Staff also expressed concerns for some limitations in Bank of America and U.S. Bank's services. As an alternative, staff issued a Request for Information (RFI) to Citizens Business Bank (CBB), another local banking institution that has long-standing relationships with many governmental agencies. Staff evaluated the proposal submitted by CBB and invited CBB for an interview and a demonstration of its online platform. Staff found that CBB is able to provide all services outlined by the City in a manner that is comparable to JP Morgan's offerings; its online platform is robust, flexible and easy to navigate; and its service team demonstrated a good understanding of the City's operational needs and strong desire to win the City's business. In addition, since CBB offers an earnings credit of 0.55% the projected interest earned on daily cash balances is expected to fully offset all banking fees resulting in no cost to the City. Therefore, the estimated costs proposed by CBB net of the earnings credit is significantly lower than the amounts proposed by JP Morgan and is expected to yield $45,700 in annual savings compared to current costs associated with services provided by Bank of America. A portion of these costs savings could be used for other enhanced functionalities, such as utility payment lock box and check printing services. Based on the proposals submitted and subsequent negotiations, staff believes that Citizens Business Bank can provide services that will provide operational efficiencies and an enhanced customer experience at a competitive market rate. On April 28, 2022, the Audit Commission reviewed staff's analysis and recommended that the City Council consider Citizens Business Bank as the service provider for the City's general banking services. 902 Jason AI -Imam Finance Director/City Treasurer Jennifer King Deputy Director—Financial Services