SR-11-27-2012-3MCity Council Meeting: November 27, 2012
Agenda Item:
To: Mayor and City Council
From: Gigi Decavalles- Hughes, Director of Finance
Subject: Banking Services Agreement with Wells Fargo Bank
Recommended Action
Staff recommends that the City Council authorize the City Manager to negotiate and
execute a contract for banking services with Wells Fargo Bank, a California -based
company, in an amount not to exceed $375,000 over a five year term.
Executive Summary
The City began using Bank of America for general banking services in 1999. The
current contract with Bank of America has been in place since 2004 and expires March
31, 2013. In preparation for the end of the current contract, staff issued a Request for
Proposal for banking services in August 2012. Seven financial institutions submitted
proposals. A panel of City staff subsequently evaluated each firm's proposal. Based on
this evaluation and review, staff recommends that the City negotiate and execute a five
year contract with Wells Fargo Bank at an amount not -to- exceed $375,000, based on
estimated annual costs and including a 10% contingency to cover any costs associated
with optional services the City may choose in the future as well as any changes in City
business practices that would increase service levels and costs.
Background
The City's current banking relationship with Bank of America Merrill Lynch (BAML)
began in September 1999. In 2004, after a Request for Proposals (RFP) selection
process, Bank of America was again chosen to provide the City's banking services. In
2008, the City exercised an option to extend the contract to September 2012. On
August 14, 2012 Council authorized a modification of the contract extending the term to
March 31, 2013 to allow for completion of the RFP process for banking services.
Discussion
City bank deposits are approximately $600 million annually with a similar amount of
payments issued to vendors. These deposits come from a variety of traditional sources,
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such as direct payment of checks, cash, and credit cards to the City for taxes and
services, as well as other types of deposits such as on -line payments, payments by
mobile device, and deposits from lockbox facilities. Payments to vendors are also made
in several different ways. This high level of financial activity, the complexity of the City's
financial operations, and the need to provide a safe and prudent stewardship of
taxpayer funds require a full service financial institution with experience providing
banking services for large governmental entities. This full suite of services includes
"positive pay" to limit fraudulent check activity; quick processing of City payroll; timely
processing of all types of deposits; a sophisticated on -line banking system providing an
array of reporting, reconciliation, and payment services; a purchasing card system;
cutting edge technology increasing the efficiency of banking transactions such as the
use of remote deposit scanners; and certain investment services. In addition, State
legal guidelines regarding public funds, such as the requirement that all deposits in
excess of FDIC insured amounts be collateralized, limits the pool of banks with
sufficient capitalization to meet this requirement.
The Community Reinvestment Act is intended to encourage depository institutions to
help meet the credit needs of the communities in which they operate, including low- and
moderate - income neighborhoods, consistent with safe and sound operations. Banks
must have a Community Redevelopment Act (CRA) rating of "Satisfactory" or better to
qualify for public funds deposits.
Consultant Selection
A Request for Proposal (RFP) for banking services was posted on the City's online
bidding website in August 2012. The following seven banks submitted proposals:
• Bank of America Merrill Lynch
• Bank of the West
• Comerica Bank
• J.P. Morgan Chase
• Union Bank
• U.S. Bank
• Wells Fargo Bank
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A panel composed of City Finance and Housing Division staff evaluated the proposals
on the basis of the following criteria:
• Ability to meet legal and other qualifications.
• Completeness of proposal.
• Financial strength and capacity of the banking institution.
• Ability to provide required services and availability of optional services and /or
additional services.
• Creative solutions that can reduce the cost of services while improving
operational efficiencies and effectiveness.
• Local community involvement
• Total cost to the City of Santa Monica (through either compensating balances or
direct fee payment).
The panel evaluated the proposals and conducted interviews with the three most
qualified firms (Bank of America Merrill Lynch, Union Bank, and Wells Fargo Bank). As
a result of the interviews, the panel determined that Wells Fargo Bank is best able to
provide the full range of services that meet the City's banking needs. Specific decision
factors were the superiority of Wells Fargo's on -line banking system, a more effective
purchasing card program, and a lower overall cost to the City over the term of the
contract. Also included in this decision was the fact that Wells Fargo Bank currently
maintains a CRA rating of "Outstanding ".
Financial Impacts & Budget Actions
The agreement to be awarded to Wells Fargo Bank is for an amount not to exceed
$375,000 over the term of five years. Funds totaling $133,049 are available in the
FY2012 -13 budget in account object 522180 in various funds where banking fees are
charged. Budget authority for subsequent years will be requested in each budget cycle
for Council approval.
Prepared by: David Carr, Treasury Administrator
Appro ,e
/ I Cf 11 �O
Gigi Dedavalles- 714Lig64
Director of Finance
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Forwarded to Council:
Rod Gould
City Manager
Reference Agreement
No. 9669
(CCS).