REPORT TO COUNCIL
SUBJECT
Title
Action on Agreements to Provide Comprehensive Banking Services to the City [Council Pillar: Manage Strategically Our Workforce Capacity and Resources]
Report
BACKGROUND
The Finance Department oversees the treasury responsibilities of the City of Santa Clara (City), including:
• Supervision of banking relationships;
• Receipt and custody of all cash and checks received from any source in compliance with the provisions of State law governing the handling, depositing, and securing of public funds;
• Receipt of credit and debit card transactions;
• Payment of debts of the City, including general accounts payable and payroll;
• Maintenance of petty cash and purchasing card programs, as deemed prudent for the efficient conduct of City business; and
• Custody and safekeeping of City investments and securities.
The Finance Department makes extensive use of banking services to manage the City’s treasury operations. Since the City’s current banking services contract with Bank of America has not been renegotiated in over 25 years and banking services, fees, and technology have changed substantially in the last two decades, the Finance Department initiated a review of the City’s banking contracts. In May 2019, the Finance Department hired a consultant to perform the following:
• Review the City’s current general banking, merchant card processing, purchase card and integrated accounts payables, and custody services;
• Analyze all of the City’s banking fees versus market;
• Analyze the technology and security controls within the City’s banking practices versus market;
• Analyze the banking products utilized within the City’s banking practices versus market; and
• Assist the City with preparing a Request for Proposal (RFP) for Comprehensive Banking Services.
By initiating a competitive procurement for banking services, the City can identify a banking institution that can offer the highest quality service, provide strong security, create efficiencies, and take advantage of new applicable technologies at the best overall value.
DISCUSSION
On October 28, 2019, the City released a Request for Proposal (RFP) No. 19-20-21 seeking proposals from qualified financial firms to provide general banking, merchant card processing, purchase card and integrated accounts payables, and custody services. The objective of the RFP was to procure appropriate, enhanced and cost-effective banking services while safely managing public funds, reducing risk, and improving productivity and the customer experience. The proposers had the option to propose on all four services requested in the RFP or for one or more of the services requested. The RFP was published on BidSync, the City’s e-procurement system. A total of 44 firms viewed the RFP, and 7 proposals were received from the following firms:
|
|
General Banking Services |
Merchant Card Processing |
Purchasing Card/ Integrated Payables (Commercial Card Services) |
Custody Services |
|
Bank of America |
X |
X |
X |
X |
|
Bank of the West |
X |
X |
X |
X |
|
BNY Mellon |
|
|
|
X |
|
JPMorgan Chase |
X |
X |
X |
|
|
MUFG Union Bank |
X |
X |
X |
|
|
Northern Trust |
|
|
|
X |
|
Wells Fargo |
X |
X |
X |
X |
Evaluation Process
The written proposals were evaluated and scored independently by a three-member evaluation team consisting of staff from the Finance Department against the criteria and weights demonstrated in the table below.
RFP Evaluation Weights
|
Evaluation Criteria |
Weight |
|
Operational Requirements • Understanding the needs and operational requirements of the City • Scope of Services offered, including degree of automation |
30% |
|
Firm Qualifications and Experience • Experience, resources, and qualifications of the firm and individuals assigned to City • Relevant experience managing similar account relationships with other government entities |
20% |
|
Financial Strength, Security and Regulatory Compliance • Financial strength of the proposing firm • Adequacy of financial controls, security and protection against loss • Compliance with all applicable state and federal regulations for services proposed |
10% |
|
Transition • Quality and scope of conversion/implementation • Value of new product or service suggestions or other new enhancements |
15% |
|
Fees • Proposed fees, compensation and earnings rates |
25% |
|
Total Score |
100% |
Bank of America, JPMorgan Chase, and Wells Fargo were selected for in-person interviews for the following services:
|
|
General Banking Services |
Merchant Card Processing |
Purchasing Card/ Integrated Payables (Commercial Card Services) |
Custody Services |
|
Bank of America |
X |
X |
X |
X |
|
JPMorgan Chase |
X |
X |
X |
|
|
Wells Fargo |
X |
X |
X |
X |
Following the interviews, JPMorgan Chase and Wells Fargo were selected through a competitive process based upon the above evaluation areas, which included a cost comparison of fee-related services. JPMorgan Chase was selected for three of the four services, including General Banking Services, Merchant Card Processing Services, and Purchasing Card/Integrated Payables (Commercial Card Services). JPMorgan Chase demonstrated its ability to offer a full range of banking and depository services, a dedicated team of experienced professionals directly assigned to the City’s account, superior online and technology capabilities, the highest earnings credit and deposit rates, and the lowest fees. JPMorgan Chase also provides superior assistance with Payment Card Industry (PCI) Compliance related to the City’s acceptance of payment cards and has strong fraud and security protection mechanisms in place to protect the City’s assets. The bank’s reporting suite offers robust reconciliations and other reports that are critical for the City’s financial reporting process. Additionally, JPMorgan Chase proposed the highest earnings credit and interest earnings rates, which will provide additional revenue to the City compared to the other proposers. JPMorgan Chase also proposed a $100,000 transition credit to offset transition costs associated with transferring the City’s banking services to JPMorgan Chase.
Wells Fargo was selected for the Custody Services. Wells Fargo has been providing custody services to the City since 2005 and has demonstrated its ability to provide excellent customer service. The custody team is familiar with the City’s account and has consistently delivered excellent support to the City. Wells Fargo’s fee proposal for custody services was materially less than all other proposals while providing a superior technology platform.
Summary of the Agreements
Due to the unique characteristics and complexities of the various service components outlined in the RFP, the City needs to enter into three separate agreements with JPMorgan Chase for General Banking Services, Merchant Card Services, and Commercial Card Services. The term of the proposed agreements with JPMorgan Chase will be a five-year initial term with one additional five-year option to extend at the sole discretion of the City. The total cost of the initial five-year term, before any earnings credit offset, is approximately $173,000, or approximately $35,000 annually. The City’s current annual cost for General Banking, Merchant Card Processing and Commercial Card Services is approximately $109,000. JPMorgan Chase’s annual fee proposal for these services results in annual savings of nearly $74,000 or approximately $370,000 over the initial five-year contract term.
The term of the Custody Services agreement with Wells Fargo is also for five-years with one additional five-year option to extend at the sole discretion of the City. The total cost of the initial five-year term is approximately $55,000, or $11,000 per year. Currently, the City pays approximately $9,000 annually for this service. Over the initial five-year period, the total cost is expected to be approximately $10,000 above the current expenses.
All four of the banking agreements with JPMorgan Chase and Wells Fargo, respectively, are currently in draft form and are included as attachments to this report. Final terms and conditions of the agreements are being negotiated with JPMorgan Chase and Wells Fargo Bank by the City Manager’s Office, City Attorney’s Office, and the Finance Department. Staff is requesting authority to complete negotiations on the terms and conditions with each bank and execute final agreements upon completion of such negotiations.
ENVIRONMENTAL REVIEW
The action being considered does not constitute a “project” within the meaning of a California Environmental Quality Act (“CEQA”) pursuant to the CEQA Guidelines section 15378(a) as it has no potential for resulting in either a direct physical change in the environment, or a reasonably foreseeable indirect physical change in the environment. Furthermore, the action being considered does not constitute a “project” within the meaning of the California Environmental Quality Act (“CEQA”) pursuant to CEQA Guidelines section 15378(b)(5) in that it is a governmental organizational or administrative activity that will not result in direct or indirect changes in the environment.
FISCAL IMPACT
The term of each Agreement with JPMorgan Chase and Wells Fargo is five years beginning on or about August 1, 2020 and ending on or about July 31, 2025, subject to the annual appropriation of funds.
Funding for year 1 of the agreements with JPMorgan Chase and Wells Fargo is included in the General Fund as part of the Finance Department’s Fiscal Year 2020/21 Operating Budget. Funding in future years will be incorporated as part of the budget development process. As discussed above, these agreements are expected to result in overall cost savings to the City estimated at approximately $360,000 over the initial five-year period.
COORDINATION
This report has been coordinated with the City Attorney’s Office.
PUBLIC CONTACT
Public contact was made by posting the Council agenda on the City’s official-notice bulletin board outside City Hall Council Chambers. A complete agenda packet is available on the City’s website and in the City Clerk’s Office at least 72 hours prior to a Regular Meeting and 24 hours prior to a Special Meeting. A hard copy of any agenda report may be requested by contacting the City Clerk’s Office at (408) 615-2220, email clerk@santaclaraca.gov <mailto:clerk@santaclaraca.gov>.
RECOMMENDATION
Recommendation
1. Approve and authorize the City Manager to continue negotiating the terms and conditions of the agreements and execute final agreements with JPMorgan Chase Bank, N.A. for General Banking, Merchant Card Processing, and Commercial Card Services for an initial five-year term starting on or about August 1, 2020 and ending on or about July 31, 2025, subject to the appropriation of funds;
2. Approve and authorize the City Manager to continue negotiating the terms and conditions and execute a final agreement with Wells Fargo Bank for Custody Services for an initial five-year term starting on or about August 1, 2020 and ending on or about July 31, 2025, subject to the appropriation of funds; and
3. Authorize the City Manager to execute a five-year option to extend the term of the Agreements through on or about July 31, 2030, subject to the appropriation of funds, with JP Morgan Chase and Wells Fargo Bank, respectively.
Staff
Reviewed by: Kenn Lee, Director of Finance
Approved by: Deanna J. Santana, City Manager
ATTACHMENTS
1. Draft of General Banking Services Agreement with JPMorgan Chase
2. Draft of Merchant Card Services Agreement with JPMorgan Chase
3. Draft of Commercial Card Agreement with JPMorgan Chase
4. Draft of Custody Services Agreement with Wells Fargo Bank