SR 07-25-2017 3E
Ci ty Council
Report
City Council Meeting : July 25, 2017
Agenda Item: 3.E
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To: Mayor and City Council
From: Gigi Decavalles -Hughes, Director , Finance Department, Treasury
Subject: Contract for Investment Safekeeping Services
Recommended Action
Staff recommends that the City Council:
1. Award RFP# 109 to The Bank of New York Mello n Trust Company, N.A., a New
York based company, to provide investment portfolio custodial services.
2. Authorize the Director of Finance/City Treasurer to negotiate and execute a
professional services agreement with The Bank of New York Mellon Trust
Company, N.A., for five years in an estimated total amount of $175,000 with
future year funding contingent on Council budget approval.
Executive Summary
In accordance with the City’s investment policy and California Government Code
Section 53601, the City contrac ts with a financial institution to provide investment
portfolio custodial services. The third party custodian acts as the agent to ensure all
investment transactions are settled properly and holds all City investments in
safekeeping. The City currently c ontracts with Wells Fargo Bank to provide investment
portfolio custodial services. At its February 28, 2017 meeting (Attachment A), Council
adopted Resolution No. 11025 (City Council Series) and Resolution No. 34 (Successor
Agency) directing staff to dive st the City’s and the Successor Agency’s funds from Wells
Fargo Bank due to its improper sales practices and financial support of the Dakota
Access Pipeline .
In March 2017, the City issued a Request for Proposals (RFP) for investment portfolio
custodial s ervices. S taff recommends The Bank of New York Mellon Trust Company,
N.A. (BNY Mellon) as the best qualified firm and recommends that the City negotiate a
five -year contract with BNY Mellon for investment portfolio custodial services . The
estimated cost for a five -year term is $175,000.
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The Director of Finance/City Treasurer has the authority to establish and close banking
and investment accounts with financial institutions through City Council Resolution s No.
10934 (City Council Series) and No. 29 , adop ted on Febru ary 23, 2016 .
Background
The City currently contracts with Wells Fargo Bank to provide investment portfolio
custodial services. T he City issued a Request for Proposals (RFP) for investment
portfolio custodial services on July 27, 2015, and st aff selected Wells Fargo Bank as the
best qualified firm. The contract was executed on February 1, 2016, with the agreement
stipulating that the contract may be terminated at any time by either party upon thirty
(30) days’ written notice.
On February 28, 2017, Council approved two resolutions directing the divestment of the
City and the Successor Agency’s funds from Wells Fargo Bank due to the bank’s
improper sales practices and financing of the Dakota Access Pipeline. Included in the
resolutions was the specific direction to issue a Request for Proposals (RFP) for
investment portfolio custodial services.
Discussion
P er the City’s investment policy and in accordance with the California Government
Code Section 53601 and best practices, all securities owne d by the City are held in
safekeeping by a third -party custodian. In a third -party safekeeping agreement, a firm
other than the party that sold the investment, provides transfer and safekeeping
services for the City’s investments. Safekeeping represents the financial firm’s
obligation to act on behalf of the City. Through this arrangement , the City minimize s
safekeeping or custodial risks in an investment transaction, ensure s the safety of public
funds, and control s against fraud. The contracted financi al firm act s solely on
instructions from the Director of Finance or designee and does not exercise any
discretion over the City’s investments or use them for proprietary purposes. The
services provided include the following:
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Maintaining a custody account in the bank’s Trust Department for cash and
securities owned by the City.
Processing and purchasing sales of investments.
Holding and safekeeping assets.
Receiving and remitting to the City the proceeds from investment maturities,
sales, dividends or inter est payments .
Creating, maintaining, and retaining records relating to securities held in custody.
Providing information in regard to any votes or other actions that need to be
taken with respect to security.
Generating financial reports - On -line reportin g of portfolio activity and holdings,
itemized statements showing funds and securities held in the account, etc.
As of May 31, 2017, the City’s portfolio is valued at approximately $675.3 million
(exclusive of funds invested in the State Local Agency Inve stment Fund and cash held
in various bank accounts) and consists of approximately 200 security holdings. The
City pools its cash balances of all funds on deposit and invests for the purpose of
providing safety of principal, liquidity, and a market rate of return after the standards of
safety and liquidity have been met.
Since February 1, 2016, the City’s investment portfolio custodial services have been
provided by Wells Fargo Bank. On February 28, 2017, Council approved Resolution
No. 11025 (City Counci l Series) and Resolution No. 34 (Successor Agency) directing
the divestment of the City’s and the Successor Agency’s funds from Wells Fargo Bank
due to the bank’s improper sales practices and financing of the Dakota Access Pipeline.
These resolutions incl uded specific direction to issue an RFP for investment portfolio
custodial services. The resolutions further disqualified any banking institution that has
been subject to a consent order for improper sales practices placed by the Consumer
Financial Protec tion Bureau (CFPB) from doing business with the City for five years.
Consultant Selection
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On March 15, 2017, the City issued a n RFP for investment portfolio custodial services.
The RFP was posted on the City’s on -line bidding site, and notices were adver tised in
the Santa Monica Daily Press in accordance with City Charter and Municipal Code
provisions. Two hundred forty -seven (247) vendors were notified and seventeen (17)
vendors downloaded the RFP. The following banks submitted r esponses:
U.S. Bank Ins titutional Trust and Custody
The Bank of New York Mellon Trust Company, N.A.
Wilmington Trust, N.A.
Bank of the West
An evaluation panel composed of representatives from the Finance Department
reviewed and ranked the proposals using the criteria set out in the RFP. Staff then
interviewed three shortlisted banks. Based on selection criteria in SMMC 2.24.073, staff
recommends BNY Mellon as the best qualified firm to provide investment portfolio
custodial services for a five -year period at an estimated amoun t of $175,000.
BNY Mellon was selected based on the firm’s financial and organizational stability,
experience and qualifications of staff, security measures to minimize risk, internal
controls to prevent fraud, prudent auditing practices, socially respons ible business
practices, extensive knowledge and expertise in various types of securities, customer
service, experience working with municipalities, and technology solutions for processing
and reporting financial transactions .
BNY Mellon has been providin g custody services since 1968 and currently holds $29.9
trillion under custody and administration and offers complete custody services in more
than 100 markets. BNY Mellon has not been subject to a CFPB consent order within
the last five years.
Resolutio n s No. 10934 (City Council Series) and No. 29 authorize the Director of
Finance/City Treasure r to establish and close banking and investment accounts with
financial institutions.
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Financial Impacts and Budget Actions
Fees for BNY Mellon services are primar ily based on portfolio value and therefore will
vary as this value changes. Based on the projected average size of the portfolio, staff
estimates cos t of services over the five -year life of the contract to be $175,000 ($35,000
per year). Funds are availa ble in the Finance Department’s FY 2017 -19 Biennial
Budget at account 012241.555060 (Professional Services). Future year funding is
conting ent on Council budget approval.
Prepared By: David Carr, Assistant City Treasurer
Approved
Forwarded to Council
Attachments:
A. February 28, 2017 Staff Report (Web link)
B. Oaks Initiative Notice
January 2017
CITY OF SANTA MONICA
OA KS INITIA TI VE NOTICE
NO TICE TO AP PL IC ANTS, BIDDERS, PROPO SE RS
AND OTHE RS SE EKI NG DI S CR ETI ON A RY PE RM IT S, CO NTRACTS,
OR OTHER BE NEFI TS FROM T HE CI TY O F SA NTA MONICA
S an ta M on ica ’s voters adopt ed a Ci t y C ha rt er amendment comm on ly k no wn as the Oaks
Ini tiative. T he Oaks Initiative requires t he Ci ty to provi de this no tice and info rm ati on about t he
Ini tia ti ve ’s requirements. Y ou m ay ob tain a full copy of t he Initiative ’s tex t fro m t he Ci ty Cl erk.
This info rm ati on is requir ed by Ci ty C ha rt er A rt ic le XXII —Tax pa y er Protec tion. It pr oh ibits
a pub li c offic i al fr om receiving, a nd a pe rson or en tit y fr om confe rr ing, specifi ed personal benefits
or cam pa ign adv an tages fr om a pers on or entity a ft er t he offici al votes, or otherwise tak es o ff ic i al
acti on, to aw ard a “pub li c benefit ” to that person or en tity. The prohibiti on app li es within and
ou ts i de of the geographical boundari es of S an ta M on ica.
Al l pe rsons or entiti es a pp lyi ng or receivi ng public benef it s fr om t he Ci t y of Santa M on ica
shall provi de t he nam es of tr us tees, directors, pa rt ners, and officers, and na mes of pe rsons with
more than a 10% equity, pa rt ic i pa ti on or rev enue interest. An excepti on exis ts f or pe rso ns se rvi ng
in tho se capac ities as vol un t ee rs, without com pens ation, for organizations exempt fr om income
taxes under Sec tion 501(c)(3), (4), or (6), of the Inter nal Rev enue Code. However, this
excepti on does not apply if the org an izati on is a po li tic al co mmittee or con tr ols po li tical
c ommi tt ee s. Exampl es of a “pub li c benefit ” i nc l ude pub li c con tr acts to provi de goods or services
wo rt h mor e than $2 5,000 or a l and u se ap proval wo rt h more t han $2 5,000 ov er a 12 -month
pe ri od.
In order to f ac ili tate comp li ance with t he requirements of t he Oaks Initiativ e, t he Ci ty
comp il es and maintai ns certain info rm ati on. T hat info rm ati on i nc ludes t he name of any person or
persons w ho is seeking a “p ub li c benefit.” If t he “pub li c benefit ” is soug ht by an entity, rat her t han
an i nd ivi dual pe rson, t he info rm ati on i nc ludes t he nam e of every person who is: (a) tr ustee, (b)
director, (c) pa rt ner, (d) officer, or has (e) more than a ten percent interest i n t he entity . Therefor e,
i f y ou are seeking a “pub li c ben efit ” co ver ed by t he Oaks Initiativ e, y ou must suppl y that
info rm ati on on t he Oaks Initiative Di sc losure Fo rm . This informati on must be updat ed and
s u pp li ed every 12 m on ths.
January 2017
CITY OF SANTA MONICA
OA KS INITIA TI VE DI SCLOS URE FORM
In order t o f ac ilitate c omp li ance with t he requirem en ts of t he Oaks Initiativ e, t he Ci ty comp il es
and maintai ns certain info rm ati on. T hat info rm ati on i nc ludes t he name of any person or persons
w ho is seeking a “p ub li c benefit.” If t he “pub li c benefit ” is soug ht by an entity, rat her t han an
i nd ivi dual pe rson, t he info rm ation i nc ludes t he nam e of every person who is: (a) tr ustee, (b)
di rector, (c) pa rt ner, (d) officer, or has (e) more than a ten percent interest i n t he entity.
P ub li c benefits i nc lude:
1.Personal services con tr ac ts in excess of $25 ,000 ov er any 12 -month period;
2.Sale of material, equipment or supp li es to t he Cit y in excess of $2 5,000 ov er a 12 -m on th
pe riod;
3.Purchase, sale or lease of real pr op e rt y to o r fr o m t he Ci ty in excess of $25 ,000 ov er a
12 - m on th pe riod;
4.N on -competitive franchise awar ds with gross rev enue of $50,000 or more in any 12 -
month period;
5.Land use variance, special use pe rm it , or other excepti on to an es t ab li shed land use plan ,
w he re t he dec is i on has a val ue in excess of $2 5,0 00;
6.T ax “ab atement, excepti on, or benefit ” of a val ue in excess of $5,000 in any 12 -m on th
pe riod; or
7.Paym ent of “c ash or sp ec i e” of a ne t val ue to t he r ec ipient of $1 0,000 in a ny 12 -m on th
pe riod.
Name(s) of trus t ee s, directors, part ne rs, an d off ic ers:
Name(s) of persons with more than a 10 % equi ty , pa rtici pa ti on , o r rev enu e interest:
Prepared by: ____________________________Title: __________________________
Signature: ______________________________________ Date: ________________
Email: ____________________________________ Phone: ____________________
FOR CITY USE ONLY:
Bid/PO/Contract # ____________________________ Permit # ___________________________
Name(s) of pe rsons or ent ities receiving pub lic be ne fit: The Bank of New York Mellon
1MFBTFTFFBUUBDIFEMJTUJOH
The Bank of New York Mellon Trust Company, N.A. is 100% owned by The Bank of New York Mellon
Corporation. Please see attached listing .
Deborah Scherer Vice President
4/17/2017
deborah.scherer@bnymellon.com (602) 402 2939
The Bank of New York Mellon Trust Company, N.A.
Directors:
Alphonse J. Briand , Jr.
Lisa Y. Brown
Michael Cirar
Robert L. Griffin
William D. Lindelof
Loretta A. Lundberg
Gary N. Nazare
Joseph Panepinto
Antonio Portuondo
Richard P. Stanley
Tammy L. Tice
Tim othy J. Vara
Patrick Vatel
Officers:
Antonio I. Portuondo, President
Donald L. Lancaster, Chief Compliance Officer
Matthew J. McNulty , Chief Financial Officer
William Fahey , Anti -Money Laundering Officer / Bank Secrecy Act Officer
Kurtis R. Kurimsky, Exec utive Vice President / Comptroller
John (Jack) K. McNamara, Auditor
Susan G. Testa , Managing Director
Julie Hoffman -Ramos, Vice President
Jason Smallwood, Vice President
Patricia A. Bicket, Secretary
Audrey M. Edwards, Assistant Secretary
Susan K. Maroni, Assistant Secretary
Cristina M. Rice, Assistant Secretary
Charles C. Doumar , Assistant Treasurer
Claudine Orloski , Assistant Treasurer
REFERENCE:
Agreement No. 10509
(CCS)