Council Date: July 20, 1999 Santa Monica, California

To: Mayor and City Council

From: City Staff

This report recommends that the City Council authorize the City Manager to negotiate and execute a contract for banking services with Bank of America and approve budget changes necessary to implement the services contract.

Prudent fiscal management requires that public agencies periodically review banking relationships to ensure the best available combination of service and pricing is being provided. The City’s current consolidated banking relationship has been in place since 1994. During this period, staff have negotiated various service and pricing improvements. Due to implementation of the City’s new automated financial management system, which incorporates a wide range of current and potential electronic financial capabilities, a comprehensive review of banking services available in the marketplace was necessary.

A Request for Proposal was therefore sent to seven banking institutions with operations readily available to the City. Formal proposals were received from the following:

Bank of America First Federal Bank of California

Wells Fargo Bank City National Bank

Union Bank of California

The following criteria were used for the evaluation of proposals:

1) Ability to meet legal requirements associated with local governments.

2) Ability to provide required and desired services necessary for efficient and effective City financial operations.

3) Financial strength and capacity of the banking institution.

4) Total cost to the City of Santa Monica.

5) Completeness of proposal.

An interdepartmental review committee composed of staff from the City Manager’s Office, and Finance and Resource Management departments was established to evaluate the proposals. After a thorough review of the proposals, the review committee selected Bank of America and Wells Fargo Bank for further in-depth evaluation, which included face-to-face interviews with key bank staff and reference checks. The review committee unanimously selected Bank of America because of their ability to provide the required and desired services at the lowest cost to the City.

Under the City’s current banking arrangement, bank service fees are paid by the bank earning interest on a minimal balance maintained in the City’s bank account. City staff has determined that the City would benefit by using a direct payment method to pay bank fees, thereby allowing the City to invest the minimal balance at a higher interest yield than paid by the bank. The estimated annual cost for banking services based on Bank of America’s proposal is $120,000. This expense would be more than offset by projected additional annual interest earnings of approximately $360,000. These new revenues and expenditures will be allocated to all City funds. Necessary revenue and expenditure budget adjustments are shown at Attachment I. The initial term of the contract will be three years with annual options to extend for additional periods of one year under the same terms and conditions. Bank of America has guaranteed their initial unit pricing at the same level for four years.

It is recommended that the City Council authorize the City Manager to negotiate and execute a contract with Bank of America for banking services, and approve the attached list of revenue and expenditure budget changes.

Prepared by: Mike Dennis, Director of Finance

Ralph Bursey, City Treasurer/Revenue Manager

David Carr, Assistant City Treasurer