HomeMy WebLinkAbout09/01/1992, C-5 - AWARD OF BANKING SERVICES CONTRACT itlll�fN►►I�IIIIII`�( II f MEEfI DATE:
city o san LUIs oBispo - -
COUNCIL AGENDA REPORT TEM NUMBEfj/f��
FROM: William C. Statler, Director of Finance i-i,y
Prepared by: Linda Asprion, Revenue Manager
SUBJECT: AWARD OF BANKING SERVICES CONTRACT
CAO RECOMMENDATION
Award the banking services contract to Bank of America and authorize the mayor
to execute the agreement.
DISCUSSION
Five years ago the Bank of America was awarded the banking services contract through the
request for proposal (RFP) process. While their services have been satisfactory, Bank of
America's five year contract has expired. Accordingly, RFP's were sent to the all banking
institutions with full-service branches located within San Luis Obispo.
Scope of Services in the Request For Proposal
The RFP scope of services was organized into three parts:
■ Required Services As detailed in the RFP, prospective banks must be able to provide
certain services to the City. In addition to account services that would be similar to
personal banking needs, required services also include: armored car service, parking
meter coin counting, and daily cash balance reports via on-line terminal connection.
■ Optional Services. Depending on cost and availability, the City may be interested in
additional services, and as such, the banking institutions were requested to provide i
costs for these potential services. Optional services included the cost differential if
the City purchased an encoder and endorser for processing checks, direct deposit of
employee paychecks via electronic transfer of funds, account reconciliation, and any
special account considerations for City employees.
■ Additional Services Other services not identified in the RFP which the banking
institution would like the City to consider.
Payment Options in Request For Proposal
The RFP requires proposers to offer three options for payment of service charges:
■ Variable Compensating Balance Method Under this approach, the compensating
balance required to be maintained by the City varies monthly based on the City's
transaction volumes and the proposer's unit prices for services, reserve requirement
and earnings allowance.
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COUNCIL AGENDA REPORT
■ F&ed Compensating Balance Method Under this approach, the collected balance
required to be maintained will be a minimum, non-variable balance each month
which will fully compensate the proposer for services provided.
■ Direct Payment of Service Charges Under this approach, no compensating balance
will be maintained by the City. The City will pay for actual charges for services
provided.
i
Review of Proposals
Two banks, First Interstate Bank of California and Bank of America responded to the RFP
with proposals. The two proposals were reviewed and rated by the Assistant City
Administrative Officer, the Director of Finance, and the Revenue Manager. The review
committee evaluated the proposals based upon the following criteria:
■ Understanding the scope of work.
■ Quality and responsiveness of the proposal.
■ Ability of the banking institution to meet service requirements.
■ Related experience of the institution and references.
i
■ Anticipated compensating balance requirements or direct charges for required
services.
While the evaluation of the proposal packages used the combination of the criteria listed
above, the anticipated direct charges for required services carried significant weight in the
review process. As such, a worksheet itemizing the cost for the services currently used and
optional services was prepared and is included in this report as Attachment 1. This
worksheet indicates that Bank of America's charges are minimally less than First Interstate's
charges.
After comprehensively reviewing the proposals, and holding follow-up meetings with each _
proposer to ensure complete understanding of the proposals, the review committee came
to the following conclusions:
■ Overall cost of services between the two proposers is very competitive. The overall
comparison provided in Attachment 1 shows the two proposals as being within $30.70
per month of each other, with Bank of America being slightly less than First
Interstate Bank. However, because not all of the services are directly comparable,
this summary should not necessarily be relied upon as an absolute price comparison,
but rather as confirmation that the fees and services offered by the two banks are
very competitive.
■ Both First Interstate Bank and Bank of America are capable of satisfactorily
servicing the City's account.
■ Since costs and services are comparable, there is no compelling reason to incur the
significant staff and supply costs associated with converting banks. However, if the
City was dissatisfied with the services currently being provided by the Bank of
America, we would recommend awarding the contract to First Interstate Bank even
though they are slightly more expensive.
In summary, after comprehensively evaluating the proposals, the review committee
recommends Bank of America be awarded the contract to provide the City's banking
services.
FISCAL IMPACT
The City currently uses the "variable compensating balance" method to pay for the bank
charges. Under this method, the earnings allowance provided by the bank is based upon
the average of the 90-day Treasury Bill auction discount rates for the previous month. As
interest rates drop, the earnings on the City's bank balance are less, requiring a higher cash
balance to cover the bank charges.
When interest rates on investment vehicles are at reasonable levels "variable compensating
balance" is the most economical method for the City to pay for bank charges. However, in
the current economy with interest rates on most investment vehicles between 3010 and 4%
it will be to the City's benefit to directly pay the bank for some of the service charges and
retain a minimal cash balance. The cash that would have been in the bank account would
be placed in the Local Agency Investment Fund (LAIF) earning a higher level of interest
(LAIF June 1992 interest rate was 5.323%) than the banks' earnings allowance.
While the difference in interest rates is not dramatic, the amount of money earning interest
makes the dollars significant. As an example:
$1,500,000 @ 3.5% per year = $52,500.00
$1,500,000 @ 5.323 per year = $79,845.00
As reflected above, there would be a $27,000 per year advantage to the City in paying
directly for services rather than using compensating balances. However, some level of cash
balances must be retained for cash flow purposes. Accordingly, we anticipate using a
combination of compensating balances and direct charges in paying for banking services.
The method of payment for banking services will be evaluated on an on-going basis in order
to maximize the City's earning potential.
SUMMARY
Costs and services are comparable between First Interstate Bank and Bank of America.
Since there is no compelling reason for the City to change banks and incur significant staff
and supply costs associated with changing to another banking facility, staff recommends that
Council award the banking services contract to Bank of America and authorize the Mayor
to execute the agreement.
ATTACHMENTS
1. Banking Services Proposal Comparison
2. Banking Services Agreement
Bank of America's and First Interstate Bank's proposals are on file in the Clerk's Office
C'_'Y OF SAN LUIS OBISPO
Attachment.
BANKING SERVICES PROPOSAL. COMPARISON
BANK OF AMERICA FIRST INTERSTATE
C' -RENT BASE SERVICES VOLUME UNIT COST TOTAL UNIT COST TOTAL
Au�vunt Maintenance 4 $15.00 $60.00 $15.00 $60.00
Items Paid 3,000 $0.08 $240.00 $0.10 $300.00
Items Deposited(2)
B of A "On Us" 2,610 $0.085 $221.85
B of A "AII Others" 7,390 $0.095 $702.05
FIB "On Us" 368 $0.08 $29.44
FIB "AII Others" 9,632 $0.10 $963.20
Compensating Balance(2)
Using $4 Mill/Mo deposited @ 3.7%
BofA
$1,044,000/$355.00/30 days ($98.03)
FIB
$147,200/$355.00/30 days ($13.82)
Deposit Tickets 400 $1.10 $440.00 $1.10 $440.00
Items Returned 25 $3.00 $75.00 $5.00 $125.00
Wire Transfers(1)
Monthly Maintenance 1 $50.00 $50.00 $5.50 $5.50
Outgoing Wires(with LAIF) 7 $7.50 $37.50 $12.00 $84.00
Incoming Wires (with LAIF) 5 $8.50 $28.30 $7.50 $37.50
Payments 15 $10.00 $150.00 $5.00 $75.00
Daq Account Balance Notification 1 $95.00 $95.00 $127.00 $127.00
Armored Car Daily Pick-up $227.00 $227.00 $225.00 $225.00
Processing Parking Coin(3) $1,306.40 $1,306.40 $1,280.00 $1,280.00
Cash Flow Advantage for FIB ($265.00)
Account Reconcilement Services 1 $529.05 $529.05 $593.00 $593.00
Safekeeping Services
Book entry settlement 1 $15.00 $15.00 $15.00 $15.00
Security Movements 1 $30.00 $30.00 $35.00 $35.00
Dividend Disbursal 2 $19.50 $39.00 $22.50 $43.00
Trades 1 1 $40.00 1 $40.00 1 $60.00 1 $60.00 -
TOTAL $4,188 12 $4,2tt$ 82
OPTIONAL SERVICES
Encoder ($400.00) ($280.00)
Direct Payroll Deposit $140.00 $250.00
(1) Set-up fees of$153.00 at First Interstate.
LAIF transfers at B of A are free for withdrawals and $1.40 for deposits.
( 1.1% of deposits are "On Us" or same day credit at Bank of America
.,.68% of deposits are "On Us" or same day credit at First Interstate Bank
(3) B of A= 5 days a week pick-up and full credit in 4 working days
First Interstate = 3 days a week pick-up and credit of $500 per bag same day with adjusting entries
Attechment2z. . .
PROFESSIONAL SERVICES AGREEMENT TO PROVIDE
BANKING SERVICES
This agreement is made this 1st day of September, 1992 by and between the CITY
OF SAN LUIS OBISPO, California(hereinafter referred to as"City"), and Bank of America,
NT & SA, (hereinafter referred to as "Contractor").
WITNESSETH:
WHEREAS, the City desires to retain certain banking services; and
WHEREAS, City desires to engage Contractor to provide these banking services by
reason of its qualifications and experience for performing such services, and Contractor has
offered to provide the requested services on the terms and in the manner set forth herein.
NOW THEREFORE, in consideration of their mutual covenants, the parties hereto
agree as follows:
1. PROGRAM COORDINATION:
A. CITY. The City Treasurer or designated representative shall be the Program
Manager representing the City for all purposes under this agreement. He
shall supervise the progress and execution of this agreement.
B. CONTRACTOR. Contractor shall assign a single Program Manager to have
overall responsibility for the progress and execution of this agreement for
Contractor.
2. DUTIES OF CONTRACTOR:
A. Services to be furnished. The Contractor shall coordinate and implement the
banking services for the City under the direction of the City Treasurer or
Program Manager. These services shall include, but not be limited to, those
services outlined in the Request For Proposal For Banking Services SPCN _
#92-04-03 and responded to by the Contractor in their proposal dated May
28, 1992 and proposal addendum dated July 13, 1992.
B. Laws to be observed. Contractor shall:
1. Procure all permits and licenses, pay all charges and fees, and give all
notices which may be necessary and incidental to the due and lawful
prosecution of the services to be performed by contractor under this
agreement;
2. Keep itself fairly informed of all existing and proposed federal, state
and local laws, ordinances, regulations, orders, and decrees which may
affect those engaged or employed under this agreement, and materials
used in Contractor's performance under this agreement, or the conduct
of the services under this agreement.
3. At all times observe and comply with and cause all of its employees to
observe and comply with all of said laws, ordinances, decrees and
orders mentioned above.
C. Release of reports and information. Any reports, information, data or other
material given to, or prepared or assembled by, Contractor under this
agreement shall be the property of City and shall not be made available to
any individual or organization by contractor.
D. Qualifications of Contractor. Contractor represents that it is qualified to
furnish the services described under this agreement.
3. DUTIES OF THE CITY:
City agrees to cooperate with Contractor in its performance of work.
4. COMPENSATION:
Pricing for these banking services will be as stated in Contractor's proposal dated
May 29, 1992, and addendum dated July 13, 1992, and held through December 31,
1992. Each January 1st thereafter prices are subject to change. The increase shall
not exceed the percentage change in the U. S. Consumer Price Index - All Urban
Consumers (CPI-U) for the preceeding twelve (12) month period ending in
September of the prior year. A written notice will be provided 30 days prior to the
price revision.
Contractor will be compensated by the "Variable Compensating Balance" method in
conjunction with "Direct Payment" for costs incurred.
5. TERM OF CONTRACT:
This contract shall be for a period of three years with the option to renew for an
additional three years.
6. TERMINATION:
The City retains the right to terminate this agreement for any reason by notifying
Contractor in writing thirty (30) days prior to termination and by paying the
compensation due and payable to the date of termination.
6.6
7. INSPECTION:
Contractor shall furnish City with every reasonable opportunity for City to ascertain
that the services of Contractor are being performed in accordance with the
requirements and intentions of this agreement. 'All work done and all materials
furnished, if any, shall be subject to the City Program Manager's inspection and
approval. The inspection of such work shall not relieve Contractor of any of its
obligations to fulfill its agreements as prescribed.
8. ASSIGNMENT:
This agreement is for the performance of professional banking services and is not
assignable by the Contractor without prior written consent of the City.
9. NOTICE:
All notices hereunder shall be given in writing and mailed, postage prepaid, by
Certified Mail, addressed as follows:
To City: City Clerk
City of San Luis Obispo
P. O. Box 8100
San Luis Obispo, CA 93403-8100
To Contractor: Assistant Vice President
Bank of America NT & SA
San Luis Obispo Branch #61
1105 Higuera Street
San Luis Obispo, CA 93406
10. INTEREST OF CONTRACTOR:
Contractor covenants that it presently has no interest, and shall not acquire any
interest, direct or indirect, financial or otherwise, which would conflict in any manner
or degree with the performance of the services hereunder. Contractor further
covenants that, in the performance of this agreement, no subcontractor or person _
having such an interest shall be employed. Contractor certifies that no one who has
or will have any financial interest under this agreement is an officer or employee of
the City. It is expressly agreed that, in the performance of the services hereunder,
Contractor shall at all times be deemed an independent contractor and not an agent
or employee of the City.
11. INDEMNITY:
Contractor hereby agrees to indemnify and save harmless City, its officers, agents and
employees from:
�5�8
A. Any and all claims and demands which may be made against City, its officers,
agents or employees by.reason of any injury to or death of any person or
corporation caused by an negligent act or omission of Contractor under this
agreement or of Contractor's employees or agents.
B. Any and all damage to or destruction of the property of City, its officers,
agents or employees, occupied or used by or in the care, custody or control
of Contractor, or in proximity to the site of Contractor's work, caused by any
negligent act or omission of Contractor under this agreement or of
Contractor's employees or agents.
C. Any and all claims and demands which may be made against City, its officers,
agents or employees by reason of any injury to or death of or damage suffered
or sustained by any employee or agent of Contractor under this agreement,
however caused, excepting, however, any such claims and demands which are
the result of the negligence or willful misconduct of City, its officers, agents,
or employees.
D. Any and all claims and demands which may be made against City, its officers,
agents, or employees by reason of any infringement or alleged infringement
of any patent rights or claims caused by the use of any apparatus, appliance,
or materials furnished by Contractor under this agreement; and
E. Any and all penalties imposed or damages sought on account of the violation
of any law or regulation or of any term or condition of any permit, when said
violation of any law or regulation or of any term or condition of any permit
is due to negligence on the part of the Contractor.
12. WORKERS COMPENSATION:
Contractor certifies that it is aware of the provisions of the Labor Code of the State
of California,which require every employer to be insured against liability for workers
compensation or to undertake self-insurance in accordance with the provisions of that
code, and it certifies that it will comply with such provisions before commencing the
performance of the work in this agreement.
13. INSURANCE:
Contractor shall provide proof of insurance in accordance with Insurance
Requirements for Consultants as described in Exhibit "A" attached hereto and
incorporated herein by reference as though fully set forth.
14. AGREEMENT BINDING:
The terms, covenants, and conditions of this agreement shall apply to, and shall bind,
the heirs, successors, executors, administrators, assigns, and subcontractors of both
parties.
15. WAIVERS:
The waiver by either party of any breach or violation of any term, covenant, or
condition of this agreement or of any provision, ordinance, or law shall not be
deemed to be a waiver of any subsequent breach or violation of the same or of any
other term, covenant, condition, ordinance, or law. The subsequent acceptance by
either party of any fee or other money which may become due hereunder shall not
be deemed to be a waiver of any preceding breach or violation by the other.party of
any term, covenant, or condition of this agreement or of any applicable law or
ordinance.
16. COSTS AND ATTORNEY'S FEES:
The prevailing party in any action between the parties of this agreement brought to
enforce the terms of this agreement or arising out of this agreement may recover its
reasonable costs and attorney's fees expended in connection with such action from
the other party.
17. DISCRIMINATION:
No discrimination shall be made in the employment of persons under this agreement
because of race, color, national origin, ancestry, religion, sexual orientation, or sex
of such person.
If Contractor is found to be in violation of the nondiscrimination provisions of the
State of California Fair Employment Practices Act or similar provisions of federal
law or executive order in the performance of this agreement, it shall thereby be
found in material breach of this agreement. Thereupon, City shall have the power
to cancel or suspend this agreement, in whole or in part, or to deduct from the
amount payable to Contractor the sum of Twenty-Five Dollars ($25) for each person _
for each calendar day during which such person was discriminated against, as
damages for said breach of contract, or both. Only a finding of the State of
California Fair Employment Practices Commission or the equivalent federal agency
or officer shall constitute evidence of a violation of contract under this paragraph.
If Contractor is found in violation of the nondiscrimination provisions of this
agreement or the applicable affirmative action guidelines pertaining to this
agreement; Contractor shall be found in material breach of this agreement.
Thereupon, City shall have the power to cancel or suspend this agreement, in whole
or in part, or to deduct from the amount payable to the Contractor the sume of Two
Hundred Fifty Dollars ($250) for each calendar day during which the Contractor is
found to have been in noncompliance as damages for said breach of contract, or
both.
18. AGREEMENT CONTAINS ALL UNDERSTANDINGS
This document represents the entire and integrated agreement between City and
Contractor and supersedes all prior negotiations, representations, or agreements,
either written or oral. This document may be amended only by written instrument,
signed by both City and Contractor. All provisions of this agreement are expressly
made conditions. This agreement shall be governed by the laws of the State of
California.
IN WITNESS WHEREOF, City and Contractor have executed this agreement on the
day and year first above written.
CITY OF SAN LUIS OBISPO BANK OF AMERICA
William C. Statler Louise Nicholson
City Treasurer Vice President
ATTEST:
Pam Voges, City Clerk
INSURANCE REQUIREMENTS
Consultant shall procure and maintain for the duration of the contract insurance against claims for injuries to persons or damages
to property which may arise from or in connection with the performance of the work hereunder by the Consultant, his agents,
representatives, employees.
Mnimum Scope of Insurance
Coverage shall be at least as broad as:
1. Insurance Services Office Commercial General Uabllity coverage (occurrence form CG 0001).
2. Insurance Services Office form number CA 0001 (Ed. 1/E7) covering Automobile Liability, code 1 (any auto).
3. Workers' Compensation insurance as required by the State of California and Employer's Uabiliy Insurance.
4. Errors and Omissions Uabiliy insurance as appropriate to the consultant's profession.
Knimum Umits of Insurance
Consultant shall maintain limits no less than:
1. General Uabiliy: $1,000,000 per occurrence for bodily injury, personal injury and property damage. If Commercial
General Uabiliy or other form with a general aggregate limit is used, either the general aggregate limit shall apply
separately to this projec:/location or the general aggregate limit shall be twice the required occurrence limit.
2. Automobile Uability: :1,000,000 per accident for bodily injury and property damage.
3. Ernployer's Uability. 51,000,OOJ per accident for bodily injury or disease.
4. Errors and Omissions Uability. 51,000,000 per occurrence.
Deductibles and Self-Insured Retentions
Any deductibles or self-insured retentions must be declared to and approved by the City. Al the option of:he City, either: the
insurer shall reduce or eliminate such deductibles or self-insured retentions as respects the City, its officers, officials,employees
and volunteers; or the Consultant shall procure a bond guaranteeing payment of losses and related investigations, claim
administration and defense expenses.
Other Insurance Provisions
The general liability and automobile liability policies are to contain, or be endorsed to contain,the following provisions:
1. The City, its officers, officials, employees, agents and volunteers are to be covered as insureds as respects: liability
arising out of activities performed by or on behalf of the Consultant', products and completed operations of the
Consultant; premises owned, occupied or used by the Consultant; or automobiles owned, leased, hired or borrowed
by the Consultant. The coverage shall contain no special limitations on the scope of protection afforded to the City,
its officers, official, employees, agents or volunteers.
2. For any claims related to this project,the Consultant's insurance coverage shall be primary insurance as respects the
City, its officers, officials, employees, agents and volunteers. Any insurance or self-insurance maintained by the City,
its officers, officials, employees, agents or volunteers shall be excess of the Consultant's insurance and shall not
contribute with it.
3. Any failure to comply with reporting or other provisions of the policies including breaches of warranties shall not &"act
coverage provided to the Ciy, its officers, off cia% employees, agents or volunteers.
4. The Consultant's insurance shall apply separately to each insured against whom claim is made or suit is brought,except
with respect to the limits of the insurer's liability.
S. Each insurance policy required by this clause shall be endorsed to state that coverage shall not be suspended,voided,
cancelled by either party, reduced in coverage or in limits except after thirty (30) days'prior written notice by certified
mail, return receipt requested, has been given to the City.
Acceptability of Insurers
Insurance is to.be placed with insurers with a current KM. Sest's rating of no less than A.-MI.
Verification of Coverage
Consultant shall furnish the City with original endorsements effering coverage required by this clause. The endorsements are
to be signed by a person authorized by that insurer to bind coverage on its behalf. All endorsements are to be received and
approved by the City before work commences.