DATE: January 8, 2025
TO: Honorable Mayor and City Councilmembers
FROM: Financial Services Department
TITLE: PROFESSIONAL SERVICES AGREEMENT WITH U.S. BANK, N.A. OF CALIFORNIA, TO PROVIDE BANKING SERVICES
RECOMMENDATION
title
Staff recommends that the City Council approve a five-year Professional Services Agreement with U.S. Bank, N.A. of California, to provide banking services in an amount not to exceed $660,000 ($132,000 per year), and authorize the City Manager to execute the agreement.
body
BACKGROUND AND ANALYSIS
On September 3, 2024, the Financial Services Department issued a request for proposals (RFP) to provide banking services to the City. Five responses were received.
The RFP requested submittals from qualified banking institutions to provide banking services to the City for its banking and cash management needs. The primary objective of the proposal was to obtain the most efficient, high-quality services at the most reasonable cost.
The minimum qualifications for the financial institutions to meet were:
1. Be a Federal or State of California chartered financial institution.
2. Be a member of the Federal Reserve System and have access to all services.
3. Be a qualified depository for public funds pursuant to the applicable State of California codes. All balances must be fully collateralized through the pool collateral system required under the State of California Financial Code Section 53630 et. seq. The bank must also be FDIC insured.
4. Be a full-service bank in good standing among other comparable banks.
5. Be capable of providing the services sought by the City, to include a wide range of electronic payment and deposit services.
6. Agree to assign experienced and dedicated staff committed and capable of servicing the City’s accounts.
7. Be in compliance and good standing with the Community Reinvestment Act.
8. Be sufficiently capitalized to accommodate the City’s cash management needs.
9. Execute a HUD-approved general depository agreement.
10. At least one account for the Housing Authority must be an interest bearing account to comply with HUD regulations.
The RFP asked banks to provide information and pricing for existing banking, as well as propose any potential service enhancements that may improve the City’s treasury management operations.
The RFP resulted in responses from JP Morgan Chase, BMO, PNC Bank, U.S. Bank and Wells Fargo Bank. The banks were evaluated by the City Treasurer, the Finance Director and Treasury Supervising Accountant using the following criteria:
1. Financial strength of the bank and ability to protect and collateralize City deposits
2. Quality of references and overall experience with public agencies
3. Overall cost and ability to guarantee pricing for contract period of five years
4. Ability to meet minimum required service levels and offer required bank products
5. Ability to offer product and service enhancements
6. Qualifications and strength of the relationship management team
7. Earning Credit Rate (ECR)
8. Sweep Options
9. Completeness of proposal
10. Scope of implementation plan
11. Quality of presentation
On October 30, 2024, the selection panel held second interviews with the top two banks. Of the two banks, U.S. Bank was ranked number one by all three evaluators and was recommended to provide Banking services for the City.
The agreement with U.S. Bank provides for guaranteed pricing for five years with an optional two-year extension. Banking costs are based on monthly transaction volumes and fixed administrative fees which vary from month to month. Due to this pricing methodology, a fixed contract price is not available. Staff estimates that banking costs should remain stable over the next five years; however, staff is requesting a not-to-exceed amount of $132,000 per year ($660,000 over five years) in the event new services are added or transaction volumes increase.
FISCAL IMPACT
The five-year banking contract is for a not-to-exceed amount of $660,000 ($132,000 per year). Prices are based on monthly transaction volumes as well as fixed administrative fees, therefore fees vary from month to month and a fixed contract price is not available. The not-to-exceed level is set at $132,000 to provide for flexibility due to fluctuating transaction volumes.
Banking fees are budgeted in Allocation of Interest account 200010102.5405 which has a current available balance of $594,752; therefore, sufficient funds are available. Interest earnings from the City’s investment portfolio serve as the revenue source for the fees. Estimated FY 25-26 interest earnings will be approximately $2.5 million, providing sufficient revenue to cover the annual cost of the banking fees.
COMMISSION OR COMMITTEE REPORT
Does not apply.
CITY ATTORNEY’S ANALYSIS
The referenced documents have been reviewed by the City Attorney and approved as to form.
end
Prepared by: Silvia Twardy, Supervising Accountant
Reviewed by: Jill Moya, Financial Services Director
Submitted by: Jonathan Borrego, City Manager
ATTACHMENTS:
1. Staff Report
2. Professional Services Agreement