HomeMy WebLinkAbout2004-11-22 City Council (3)TO:
FROM:
DATE:
SUBJECT:
C ty
City of Palo Alto
Manager’s Report
HONORABLE CITY COUNCIL 4
CITY MANAGER DEPARTMENT: ADMINISTRATIVE
SERVICES
NOVEMBER 22, 2004 CMR:476:04
AWARD OF CONTRACTS TO: WELLS FARGO BANK FOR
BANKING SERVICES AND UNION BANK OF CALIFORNIA FOR
CUSTODIAL SERVICES;. AND APPROVAL OF RESOLUTION
DELEGATING AUTHORITY TO THE DIRECTOR OF
ADMINISTRATIVE SERVICES TO EXECUTE AGREEMENTS AND
SIGN DOCUMENTS ON BEHALF OF THE CITY.
REPORT IN BRIEF
The City currently has contracts with Bank of America for banking services and Union Bank of
California for custodial services. Staff recently requested proposals for these services since the last
request was conducted in 1998. Seeking cost-effective services of a high caliber with the
teclmological capacity to meet current and future needs, staff reviewed proposals from six banks
providing banking and custodial services. After thoroughly analyzing and discussing each proposal,
it is staff’s recommendation to enter into an agreement with Wells Fargo Bank for banking services
and to renew the City’s contract with Union Bank of California for custodial services.
CMR: 476:04 Page 1 ot’5
RECOMMENDATION
Staff recommends that Council:
Approve the attached resolution delegating authority to the Director of Administrative
Services to execute agreements and sign documents, forms, and negotiable instruments with
Wells Fargo Bank for banking services and with Union Bank of California for custodial or
safekeeping services on behalf of the City of Palo Alto for a term of four years, through
December 31, 2008.
°Delegate authority to the Director of Administrative Services to exercise the option to renew
the contract for thefifth and sixth year, through December 31, 2010, provided costs for
banking, excluding merchant services, and custodial services do not increase, the vendors are
responsive to the City’s needs, and the quality of the vendor’s work is acceptable during the
four years of the original contract. In addition, the Wells Fargo’s processing fees for
merchant services may not exceed three ba_sis points.
BACKGROUND
The City currently has contracts with Bank of America for banking services and Union Bank of
California for custodial services. Banking services include, for example: maintaining the City’s
various checking accounts, wiring funds for purchases of goods and overnight deposits, processing
cash, providing a variety of reports to enhance cash management, and merchant services (processing
of debt and credit card payanents). Custodial or safekeeping services include: taking custody of
investment securities purchased by the City; paying interest and principal due from securities; and
providing monthly statements which show the book, par and market values of securities in the City’s
portfolio.
The last Request for Proposal (RFP) for banldng and custodial services was conducted in August
1998. That process resulted in four proposals for banking services and three proposals for custodial
or security safekeeping services. After analyzing and comparing the proposals, Bank of America
was awarded a three-year contract with an option to renew for an additional three years, or through
December 31, 2004.
DISCUSSION
In anticipation of the banking and custodial contracts expiring, staff issued an RFP for these services
in August 2004. The City received six banking and custodial services proposals from: Union Bank
of California, Wells Fargo, Bank of America, US Bank, Comerica, and Bank of the West. The City
was seeking cost-effective, comprehensive, high quality services along with the proven technological
capacity to meet current and future needs.
CMR: 476:04 Page 2 of 5
Summar7. of Solicitation Process
Proposal Descriptiol~Number
Proposed Length of Project
Number of Proposals Mailed
Total Days to Respond to Proposal
Pre-proposal Meeting Date
Number of Company Attendees at Pre-
proposal Meeting
Number of Proposals Received
Company Name:
1. Union Bank of California
2 Wells Fargo
3, Bank of America
4. US Bank
5. Comerica
6. Bank of the West
Range of Proposal Amounts Submitted:
Banking Services
Custodial or Safekeeping Services
6
6
Location (City, State):
Wahmt Creek, CA
San Francisco, CA
Sacrmnento, CA
Wahmt Creek, CA
Los Angeles, CA
Walnut Creek, CA
$192,000 - $214,000
$4,200 - $34,000
Banldng and/or Safekeeping Sercices, RFP No. 109043
4 years with the option to renew to 2 additional years
8
35 Days
September 14, 2004
~elected for oral interview?
Yes
No
No
No
Banking Services
Based on the above criteria, a committee consisting of staff from the Administrativ~ Services
(Treasury and Accounting divisions) and Utilities departments evaluated the six proposals.
After analyzing the proposals, staff eliminated those from Bank of the West and Comerica. These
financial institutions were rejected based on the finding that their technological services were not as
comprehensive as the competitors and on the relatively high cost of their services.
The four remaining banking proposals were comprehensive both in services and products and met
the City’s technological requirements. There were, however, noteworthy price differences among the
proposals with the lowest Cost submitted by Wells Fargo Bank. On an armual basis, Wells Fargo’s
proposal was lower than the current provider of bankang services by approximately $18,600 or 10
percent. With their "cutting edge" technological services, comprehensive products and services, and
lower prices as the chief factors, staff’s unanimous decision was to select Wells Fargo for banking
services.
Additional factors included:
Wells Fargo’s banking charges, except merchant services, to the City of Palo Alto are to
remain fixed for a total of six years (consisting of a four-year contract with an option to
renew for an additional two years). The bank’s processing fees for merchant services are
fixed for four years with increases in the fifth and sixth year not to exceed three basis points.
CMR: 476:04 Page 3 of 5
Wells Fargo has a Master Service Agreement with the State of California for merchant or
electronic (e.g., credit and debt cards, etc.) payment processing. Wells Fargo will extend the
State’ s favorable pricing, terms and conditions to the City As the City, and particularly the
Utility Furids, move toward increased usage of electronic payments, lower fees are important.
Wells Fargo is an Aaa rated (Moody’s) financial institution, the highest credit rating
possible.
A one-time, maximum $3,000 reimbursement for bank conversion programming costs. The
City has contracts with two vendors who process worker’s compensation and derital
payments and will charge the City for processing costs associated with using a new bank. In
addition, Wells Fargo will waive all one-time implementation fees and provide three months
of supplies (e.g. endorsement stamps, check stock, cash vault deposit supplies, etc.) free of
charge.
Staffwas impressed with the credentials and services of all the RFP respondents. Significant time
was spent by banking and City staff, respectively, in preparing and in evaluating the proposals.
Moreover, significant time will be devoted to the conversion fi’om Bank of America services to those
of Wells Fargo. Staff expects to receive outstanding service at competitive prices from the new
relationship.
Custodial Services
Staff recommends Union Bank of California to provide safekeeping services. Compared to other
bank proposals, the lowest cost service was cited by Union Bank. The City has been receiving
excellent service from Union Bank at a very competitive price. The highest proposal was
approximately eight times that of Union Bank’s and the remaining proposals were all higher. Given
the City’s strict buy-and-hold philosophy, which results in a minimum of trading activity, and the
relative homogeneity of its investment instruments (Federal Agency Securities and U. S. Treasury
Notes), the City does not require a complex or costly custodial system. Renewal of the contract with
Union Bank, therefore, is recommended.
Approval of Attached Resolution
In order to enter into a new four-year agreement with an option to renew for an additional two years,
with Wells Fargo and Union Bank of California, staff requests Council approval of the attached
resolution. It delegates authority to the Director of Administrative Services to execute agreements
and sign all required documents to enter into the banldng relationships.
RESOURCE IMPACT
The City’s annual banking fees with Wells Fargo are estimated at $192,000 at the current activity
level (merchant services portion is $144,000 and the remainder of the banking fees is approximately
$48,000). Banking fees include, for example, banking maintenance activity for checking accounts,
supplies, federal deposit insurance, special deposit processing, wiring of funds, reports, other
miscellaneous fees, and merchant services, which include the bank’s and interchange fees for the
processing of debt and credit card payments. Palo Alto pays the banking portion of fees through
CMR: 476:04 Page 4 of 5
interest.earned on its checking balance and through budgeted expense when checking interest isn’t
sufficient to pay the fees. Merchant services are paid through budgeted expense.
The annual custodial fees are estimated to be approximately $4,200, which is paid via budgeted
expense. A fixed fee is charged for each investment purchased and sold and costs are dependent on
the level of investment activity.
In summary, the estimated first year annual cost for baaking and custodial services is estimated at
$196,200.
POLICY IMPLICATIONS
There are no policy implications related to this request.
ENVIRONMENTAL ASSESSMENT
This does not constitute a project under the California Envirom~’lental Quality Act.
environmental assessment is needed.
Therefore, no
ATTACHMENTS
Attachment A: Resolution of the Council of the City of Palo Alto Delegating Authority to the
Director of Administrative Services to Execute Agreements and Sign Documents
Relating to All Banking Services of the City of Palo Alto; and Rescinding Resolution
No. 7821
TARUN~~AN
Senior Financial Analyst
DEPARTMENT HEAD APPROVAL:
CITY MANAGER APPROVAL:
CARL YEATS
Director,;trative Services
HARRISON
Assistant City Manager
CMR: 476:04 Page 5 of 5
NOT YET APPROVED
RESOLUTION NO.
RESOLUTION OF THE COUNCIL OF THE CITY OF PALO ALTO
DELEGATING AUTHORITY TO .THE DIRECTOR OF
ADMINISTRATIVE SERVICES TO EXECUTE AGREEMENTS AND
SIGN DOCUMENTS RELATING TO ALL BANKING SERVICES OF
THE CITY OF PALO ALTO;AND RESCINDING
RESOLUTION NO. 7821
WHEREAS, the City of Palo Alto is a chartered municipal
corporation of the State~ of California and as such has the legal
authority to enter into agreements for banking services;
NOW THEREFORE, the Council of the Cityof Palo Alto does
hereby RESOLVE as follows:
SECTION i. Each of the Banks or financial institutions
designated below (hereinafter referred to as "Bank" or "Banks"} is
hereby selected and designated as a depository of funds of the City
of Palo Alto and such deposit account or accounts may be
established and maintained by and in the name of the City of Palo
Alto at such office or offices of each Bank and upon and subject to
such terms and conditions as the City of Palo Alto and the Bank may
agree upon:
Wells Fargo
Union Bank of California
SECTION 2. The Director of Administrative Services (also
referred to as the City Treasurer), or any other person he may from
time to time designate by written certification, is hereby
authorized to act on behalf of the City of Palo Alto and to sign
any and all agreements or documents relating to the bank accounts
and banking services of the City of Palo Alto.
SECTION 3. All checks, drafts, orders, receipts, and other
instruments drawn, accepted or given by the City of Palo Alto for
payment from any such account or at any such office shall be signed
on behalf of the City of Palo Alto by the Director of
Administrative Services, or his designee.
SECTION 4. The City Clerk, or any Assistant City Clerk of
the City of Palo Alto is hereby authorized and directed to certify
to the Banks that this resolution has been duly adopted and is in
conformity with the charter and by-laws or other governing
instrument of the City of Palo Alto and further to certify to each
Bank a copy of this resolution, and the name and specimen signature
of the present Director of Administrative Services, and the fact of
any change of said Director of Administrative Services, together
with the name and specimen signature of the successor.
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NOT YET APPROVED
SECTION 5. This resolution and each such certification
shall remain in full force and effect, and each Bank is authorized
and requested to rely and act thereon until it shall receive at its
office, or offices if more than one, to which a certified copy of
this resolution is delivered, a certified copy of a further
resolution of the City Council amending or rescinding this
resolution; and the Banks are authorized to honor any instrument
and agreement signed by any new person in respect of whom it has
received any new certification as successor with the same force and
effect as if said new person were named in this resolution.
SECTION 6. Resolution No. 7821 is hereby rescinded.
SECTION 7. The City Counci! finds that this action does
not constitute a project under the California Environmental Quality
Act.
INTRODUCED AND PASSED:
AYES:
NOES:
ABSENT:
ABSTENTIONS:
ATTEST:APPROVED:
City Clerk Mayor
APPROVED AS TO FORM:City Manager
Senior Asst. City Attorney Director of Administrative
Services
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