TO:
Honorable Mayor and Members of the City Council
THROUGH:
Talyn Mirzakhanian, City Manager
FROM:
Onyx Jones, Interim Finance Director
Julie Bondarchuk, Financial Controller
SUBJECT:Title
Consideration of a Resolution Approving an Agreement with US Bank for Banking Services (Interim Finance Director Jones).
ADOPT RESOLUTION NO. 24-0134
Body
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RECOMMENDATION:
Staff recommends that City Council adopt Resolution No. 24-0134 approving a three-year agreement with US Bank with an optional two-year extension.
FISCAL IMPLICATIONS:
Bank service charges and credit card fees are budgeted as part of the annual budget process. Approving a new agreement can save the City an estimated $18,945 annually in fees.
BACKGROUND:
The City selected Union Bank for banking services through a request for proposal in 1998. Union Bank offers comprehensive banking services to the City, including recordkeeping, lockbox, check and wire services, payment processing, fraud protection, internet banking, among others. Since partnering with Union Bank, Finance staff have been satisfied with the level of service and maintain a robust banking relationship with Union Bank.
Changing banks is a significant endeavor and is generally not subject to the competitive bidding process. The transition is labor intensive, time consuming, and can be disruptive to operations. Consequently, changes in banking services are typically driven by operational or service requirements.
DISCUSSION:
The parent company of US Bank, US Bancorp, acquired Union Bank in December 2022, and the Finance Department transitioned to US Bank in May 2023. Since then, Finance staff have experienced exceptional service.
Following the transition, Finance staff conducted a thorough review and renegotiated the existing agreement. The City was able to receive competitive terms from US Bank due to the City’s long-standing banking relationship. The proposed contract is a three-year term with an optional two-year extension with the following benefits:
- 1.50% Earnings Credit Rate (ERC)
- $5,000 loyalty bonus to be used for any banking services
- Cutting an additional 4.3% off fees
From August 2023 to July 2024, the City was charged $60,483 in fees, offset by $45,343 in interest (ERC of .75%), resulting in $15,140 in net payments. With the current contract, the City needed to maintain a $7,722,092 bank balance to offset these fees. The renegotiated rates lower this balance to $4,058,702. If these terms had been in place for the last 12 months, the City would not have paid any fees.
Staff recommends that the City Council adopt Resolution No. 24-0134 to approve a three-year agreement with US Bank with two optional one-year extensions.
PUBLIC OUTREACH:
After analysis, staff determined that public outreach was not required for this issue.
ENVIRONMENTAL REVIEW:
The City has reviewed the proposed activity for compliance with the California Environmental Quality Act (CEQA) and has determined that the activity is not a “Project” as defined under Section 15378 of the State CEQA Guidelines; therefore, pursuant to Section 15060(c)(3) of the State CEQA Guidelines the activity is not subject to CEQA. Thus, no environmental review is necessary.
LEGAL REVIEW:
The City Attorney has approved the agreement as to form.
ATTACHMENTS:
1. Resolution No. 24-0134
2. Agreement - US Bank