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HomeMy WebLinkAbout10-18-2016 Item 11 Banking Services Contract Award Meeting Date: 10/18/2016 FROM: Xenia Bradford - Interim Finance Director Prepared By: Vilma Warner- Finance Operations Manager SUBJECT: BANKING SERVICES CONTRACT AWARD RECOMMENDATION Award the banking services contract to JP Morgan and authorize the City Treasurer to execute the agreement. Background Bank of America informed the City in late February 2016 that it would not renew the City’s contract for economic reasons. Because of changes in Federal Banking Laws, banks have to maintain greater liquidity for governmental deposits. Bank of America extended the existing terms for banking services until September 30, 2016. After September 30, 2016, if new treasury and banking services is not secured with a new bank, Bank of America has indicated that they will provide banking services on a month to month basis fees adjusted upward. On May 5, 2016, the City Council approved a Request for Proposals (RFP) for banking services, which was sent to all banking institutions with full services branches located within San Luis Obispo. The RFP requested a qualified and insured financial institution to provide comprehensive banking services for general treasury and banking services related to its cash management operations. Although the City would normally have issued an RFP much sooner, the bank’s decision wasn’t communicated until days before the contract renewal period. Scope of 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, there are additional services required that are specific to the City as a municipal government. These include, but are not limited to: armored car service, parking meter coin counting, payroll deposit service, merchant services, positive pay; Local Agency Investment Fund (LAIF) and online daily cash balance reports. In addition to the scope of required services, proposers offered the City optional and additional services. These optional services included free or reduced price banking services to City employees (provided such benefits are provided to the similarly situated general public, i.e. those employed by other large employers), electronic accounts payable processing or any other service that the proposer believes will benefit the City. Safekeeping services for receiving, holding in trust, and processing matured investments owned by the City were not included in this RFP. The city currently contracts with Bank of New York for this service. 11 Packet Pg. 131 Proposal Evaluation and Selection Fifteen RFP’s were sent to banks with full service branches within the City. Five banks, Union Bank, Wells Fargo Bank, JP Morgan, Heritage Oaks Bank and Pacific Western Bank, responded to the RFP with proposals. Initial proposals were reviewed by a five-member committee and the top three banks who met and exceeded all requirements listed in the RFP were “short listed” and selected to provide in-depth presentations. The review committee evaluated the proposals based upon the following criteria: a) Meeting the requirements as detailed in the RFP and understanding of the work required by the City. b) Quality, clarity and responsiveness of the proposal. c) Demonstrated competence and professional qualifications necessary for successfully performing the work required by the City. d) Recent experience in successfully performing similar services. e) Proposed approach in completing the work. f) Additional services offered optimizing the use of information technology to streamline and automate processes. g) References. h) Background and related experience with the implementation process and of the specific individuals to be assigned to this project. i) Proposed compensation. The three banks selected for in-depth presentations were Union Bank, J.P. Morgan and Wells Fargo. After comprehensively reviewing the proposals, and holding interviews with each of the top three proposers to ensure complete understanding of the proposals, the review committee came to the following conclusions. The evaluation committee found JP Morgan scored highest after all the evaluations and interviews and references were completed based on the published criterion. The City anticipates enhancements to current practices as a result of the new relationship with JP Morgan. The City will have the ability to streamline processes and improve the levels of service we can offer to our residents, vendors and employees. FISCAL IMPACT The total cost of services, which are estimated to be $65,000 per year may be fully offset through interest income from deposited City funds and the earning credit at .35%; however, the offset depends on cash balance maintained by the City in the bank and the net cost to the City is a variable between the City investment policy and earnings compared to cash held in the bank available for earnings credit The responses to RFP were based on an estimated monthly volume cash balance of $19.9 million. With this estimate the cost of depository services with J.P. Morgan would be fully offset by earnings credit. 11 Packet Pg. 132 J.P. Morgan offers additional services, which may be elected to be implemented by the City such as traditional and E-Lockbox (payment collection center) as well as bank reconciliation automation. Additional fees may apply for these services depending on earnings credit offset. (please see attached fee schedule). The additional services will be evaluated by staff as part of implementation process to evaluate the return on investment and efficiencies that the City may achieve by utilization of these services and streamlining processes and taking advantage of new technologies which will reduce the cost of processing standard transactions. Additionally, as part of the agreement the City successfully negotiated an account credit of $20,000 to fully offset the cost of acquiring new banking related equipment such as scanners, checks and credit card processing machines. The contract term is for three years, during which time the cost of the services provided to the City are fixed. During the contract period, the City is not limited from using other financial institutions for other programs the City may want to use. Attachments: a - Banking Services Contract b - JP Morgan fee schedule 11 Packet Pg. 133 1 BANKING SERVICES AGREEMENT THIS AGREEMENT is made and entered into in the City of San Luis Obispo on this __1st._______day of November_______________________________, by and between the CITY OF SAN LUIS OBISPO, a municipal corporation, hereinafter referred to as City, and JP Morgan Chase % Co. hereinafter referred to as Banking Institution. W I T N E S S E T H: WHEREAS, on June 1, 2016 City requested proposals for banking services pursuant to Specification No 90450 and. WHEREAS, pursuant to said request, the Banking Institution submitted a proposal which was accepted by City for said banking services. NOW THEREFORE, in consideration of their mutual promises, obligations and covenants hereinafter contained, the parties hereto agree as follows: 1. TERM. The term of this Agreement shall be from the date of this Agreement is made and entered, as first written above, until acceptance or completion of said services. 2. INCORPORATION BY REFERENCE. The Banking Institution’s proposal dated June 1, 2016 are hereby incorporated in and made a part of this Agreement. 3. CITY'S OBLIGATIONS. For providing services as specified in this Agreement, City will pay and the Banking Institution shall receive therefore compensation as set forth in the Banking Institution’s proposal. 4. BANKING INSTITUTION’S OBLIGATIONS. For and in consideration of the payments and agreements hereinbefore mentioned to be made and performed by City, the Banking Institution agrees with City to do everything required by this Agreement. 5. AMENDMENTS. Any amendment, modification or variation from the terms of this Agreement shall be in writing and shall be effective only upon approval by the City Manager of the City. 6. COMPLETE AGREEMENT. This written Agreement, including all writings specifically incorporated herein by reference, shall constitute the complete agreement between the parties hereto. No oral agreement, understanding, or representation not reduced to writing and specifically incorporated herein shall be of 11.a Packet Pg. 134 Attachment: a - Banking Services Contract (1463 : Banking Services Contract Award) 2 any force or effect, nor shall any such oral agreement, understanding, or representation be bin ding upon the parties hereto. 7. NOTICE. All written notices to the parties hereto shall be sent by United States mail, postage prepaid by registered or certified mail addressed as follows: City Finance Director City of San Luis Obispo 990 Palm Street San Luis Obispo, CA 93401 Banking Institution Government Banking JPMorgan Chase Bank, N.A. 300 South Grand Ave., 3rd Floor, Los Angeles, CA 90071-3109 8. AUTHORITY TO EXECUTE AGREEMENT. Both City and the Banking Institution do covenant that each individual executing this agreement on behalf of each party is a person duly authorized and empowered to execute Agreements for such party. IN WITNESS WHEREOF, the parties hereto have caused this instrument to be executed the day and year first above written. ATTEST: CITY OF SAN LUIS OBISPO, A Municipal Corporation ________________________________ By:_____________________________________ City Clerk Finance Director APPROVED AS TO FORM: BANKING INSTITUTION ________________________________ By: _____________________________________ City Attorney Paul Dawkins, Vice-President 11.a Packet Pg. 135 Attachment: a - Banking Services Contract (1463 : Banking Services Contract Award) 11.b Packet Pg. 136 Attachment: b - JP Morgan fee schedule (1463 : Banking Services Contract Award) 11.b Packet Pg. 137 Attachment: b - JP Morgan fee schedule (1463 : Banking Services Contract Award) Page intentionally left blank.