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Home My WebLink About0530.094'.-. City of Palo Alto C}ty ~~nag~~_I~~~por_t TO: HONORABLE CITY COUNCIL FROM: CITY MANAGER DEPARTMENT: FINANCE AGENDA DATE: DECEMBER S, 1994 CMR:530:94 SUBJECT: EXTENSION OF BANKING SERVICES CONTRACTS WITH BANK OF AMERICA AND BANK OF CALIFORNIA BEQT~SJ: The purpo~,e of this report is to re'l'JCst COtlncil's appHJ\';)l (lfor-:(;--~'C'lr ('On1r<-,c! (':\t~n~!On5 'Nith Ba.nk of America for gcnl'ral banUng ,"er .. i,'e~ <lnd Vt!th 8all~, oj' California for safekeeping services, respc(:tivcJy. :\ budgd amendmmt is n0t n.:ccssary since g~Tl~r8.1 banking sCivic(:s hlC paid by compensating b~lanct;;5:,.and sat~ke~ping 5en~(:es are hudgr:ted, RECOMMENDATIONS Stair recommends that Council: 1) Authorize staff to enter in~o a contrnct extension with Bank tIl' Amerka from january 1, 1995 through December 31, 1995 for genefal ballking sorvices; and 2) Authorize staff to enter into a contract ex1ension \vith Ban!..: of California from January I, 1995 through December 31,1995 for safekeeping ser.,.;ces. POLlCY IMPLlCATION~ This report does not propose any changes to existing City policies EXECUTIVE SUMMARY The last request for proposal (Rl'P) for banking _,"niccs was issued in 1989. The Cit) selected Security Pacltlc and entereD into Ii three-yc(ll' COM tract, expiring December 31. 1992. Early in J 992, Bank of America and Security Pacitlc merged, ;mel Bank of America toot... over the City of Palo Allo account. Thl! Cit)' extended the contract with Bank of America through December 31, 1994 (CMR:5JJ:92 and CMR.:616:9J). The extension allowed Staff Page I or 3 i , I i , i ; I ./ i ' .. -. • > ._. ~ •. ,..... "II'!!I\3I(e II' to complete u'1e transition fi'orn Security Pacitic to Bank of America and to evaluate Bank of America's services. Staff spent considerable time and effort to accomplish a smooth coDvmion from Security Pacit1c to Bank of America. The conversion from one bank sysh:m to another is complkated. and involves numerous process changes, including new deposit slips, new checks, a modified account reconcitiation process, changes to pa)Toll records, computer information s)·stems modifications, re\vrlting cash llandling procedures, armored carrier instructiOns and legal contracts. In addition, D .... (.'f twenty City f<!cilities are lnvoi',!ed in cha."1ging fonns and I:ndorscment stamps, and training staff in n~w procedures. The Fm.ancc Department Trem;ury and Accounting Divisions are respoJ111.iblc for leading lhe Clm'lr'eT"SIOn effcns. The rreasuf)' Division MaIli:,ger departed (luring the I.1S[ quarter of fiscal year 1993-94 and, as a result of de(:islom. m8de during the orgmizational rc"ic'.'.', the position is not being filled. The ioss of the Treasury Division MaJ1Cl.£,t!f limits. tll~ abiJit:" of tht' Finance D~pfl.rtm{'nt to undertake multi})!:: major projects, such as. th~ conversion to a new bmkiog s),s!em, and other projo:-cts staff is now working UiI, In addition, all a\'~il3ble Finan~e Department reSOiJfc,es are ded~ca.ted lo the implementation of a MlS5,ioll Driven Budget (MDB), Therefore, stalrre~lJTIl.mcnds e}..1ending the contract for nne year through De<:ember 31. 1995 111L" will allow Treasury staff an opportunity to adjust to the Joss of r.he Treasu.·"y Division Manager position and aJlow the Department to continue to fo..:us all resources towards tht successful imptementatiol1 of hi DB. Staff \vi\l issue an RFP for gcneia) banking and safekeeping services in the! fir:~t quartl'r ofFY t995-96 and submjt recommendations to COUll,i/ by mid-year FY 1995-96. Bank: of America Banking Services Bank of America's general banking service fees arc based on the number oftransactiorlS and have averaged S6,250per month for the first nille months of 1994. Most of the fees are paid through compensating balances, which is a tann of payment that requires the City to maintain sufficient balances that eam credit to onset fee,'i. On rare occasiDns, the City needs to make minimal direct payment$ to the bank; this is due to adjustments caused by unusually high levels of aClivity. These fees are covered within the Treasury Division budget. Bank of A.lTlerica has made a \\TItten commitment to extend the corltract for another year at the same pri<:ing levels fUld with L.~e same temH; and conditions. The ]evel of service provided by Bank of Anierica has continued t" be. g.ood. The. b3.nk has also provided the City with alternate methods ofprocc:ising dcposi(s, discrepancy not\fL(:ations, fund transfers and other services to improve cftlciency. L t' f ,..I;. ~.' <t " ~ , , f ,~ Bank of California Safekeeping Scrvi;_~i The Bank of Califomi21 contract for $.afekeeping services ",'as approved in conjunction \vith Bank: of America's confract. Staff t.clie\'es that kecp[ng the t\\'o contra~ts togcLl)(..'T provides t1x: City \!lith the best c:ompetit:ve bidding (,pportunity and the most etT.cient process. The lC'Vel of servlce needed f~7f s.atckeeping services is not a.o:. complex as those Ibr general bank~&. The ~l1k of Califomja fees are also hased on the number of transactions, but the tn"el of a.,. .. -thity is lower and highly m~urab1e. 'Ille Bank of California has commined in \\nting to 2 one-year cootract c-xtensiofl. Trle terms and conditions would remain the same, as well as th-:=: co::.l v..hich is approx;matel): $5.000 pCI' year. StatT h.1S ~ e.\1remC'ly ~a~i5ncJ \,,:th the !evel of seT\.'ice provided by Ban." of California. T"'ne ban.k rommitted 10 :a high 1-:\'(;1 nf sen'ic;: at the I1qsinning of the contra''::! and has con!.Ln ..... td to pcrf('mi 0;': it'> .:(1lTdllitnwrll. Ihe h;:!.nk providt:·, the Cit:, wiL1 the nece$sary 'S\JPr't;:I1c imrr'.~d)~l:t r::5r,or,~e-tt, i:;,~',Je ... prDlllj11 reporting l)ftrans':l."C~ion:; and t1exi\)ility with '..T1l!',pitc':"l.ed tr~Ui~a..-::i(\n; The t.lm~ iC~,Lfds ttl.:: Cily'~ account hi t!hly <lJld. fOf that reQSon, has maintained its pric:.' 3t .:l {:{l!1st.l.Il! !ewl sinc'e 1989, Cnnst:qklcfltly. st:1ff recommends exten.:i'ng th·! Hz.rl.k (\1' Co.] i !(:1mia Ca(1tfa~t ,n C~ll\j\l!1C~ton with the Bank of Amer'.ca C"ontract, through ~ccmb<r ) I. i 995, FISCAl.-IMPACt A hudget arr..endme'nt is no! r.c\:es_~:if)' since gen~Tal banking services pfovided by Bank of ,\menca \,,"'ould b .... paid trum compens.ating b<llaIicc~;. am! satekeeping sen'ices are budgeted. J;/'ivlRONMENTAL ASSESSMENT There is no rleeG for an environmental assessment for this report. PREPARED BY: Lalo P:rez, Financial Analysr DEPARD.!ENT HEAD APPROVAld.r;,J:L.D -.~ E~niS(ln / -- Dlroctor of Finilncl}"· \. ; / I CITY MANAGER APPROVAl.' x.'c..~ / "'.'"'' '.' 'June· F1emlng / City ~ 1anager cc: "r. Page 3 of 3