HomeMy WebLinkAboutUnion Bank Background (Finance)Background
In 1969, the City Council approved a Banking Agreement between the City of National City and
Bank of America. The City has been satisfied with the service from Bank of America during its
42-year relationship. However, the banking industry and related technologies have changed
considerably since 1969, and the apparent need to provide efficiencies and cost savings in
today's economic climate made it necessary to issue a request for proposals (RFP) for banking
and custody services.
With the merger of the Community Development Commission with the City of National City, it
was also necessary to bring both organizations under the same banking relationship. Having two
different banking relationships created repetitive, duplicative demands on staff in areas such as
bank reconciliations, repayments between the City and CDC and more importantly, increased
banking fees. Consolidation of banking services would promote more effective and efficient
banking services.
On September 9, 2010, the City and CDC opened a RFP for banking and custody services and
accepted proposals through October 4, 2010. A four -member committee, which consisted of the
City Treasurer, the Assistant City Manager, the Director of Finance and the Financial Services
Officer, reviewed the proposals and interviewed and ranked the financial institutions.
The minimum qualifications for the financial institutions to meet were:
• Be a federally or State of California chartered financial institution.
• Be a member of the Federal Reserve System and have access to all services.
• Be a qualified depository for public funds.
• Be a full service bank in good standing among other comparable banks.
• Be capable of providing the services sought by the City and the CDC.
• Have an established office within the City limits.
• Agree to assign experienced and dedicated staff who is committed and capable of servicing
our accounts.
• Be in compliance and good standing with the Community Reinvestment Act.
• Be sufficiently capitalized to accommodate our cash/investment management needs.
The City and the CDC received three proposals from the following banks: Bank of America,
Union Bank and Wells Fargo Bank. The committee interviewed all banks and evaluated each
using the following criteria:
• Financial Strength of the bank and the ability of the bank to protect and collateralize City
deposits
• Cost to the City and ability to guarantee pricing for the contract period
• Quality of references and overall experience with public agencies
• Qualifications and strength of the relationship management team
• Ability to offer product and service enhancements and
• Location of bank offices
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Union Bank was ranked first overall by the committee. The pricing proposed in the RFP was
significantly lower than the other banks. Union Bank committed guaranteed fixed pricing for
five years and provides a $3,000 allowance to offset the cost of implementation. The
management team is committed to quarterly customer service visits and is readily available in
downtown San Diego. The bank also provided suggestions and specific services for
improvement in areas of the City's cash management practices (remote deposit check processing
and payee positive pay).
The current annual analysis charge for the City is approximately $20,000 and credit card
processing services is approximately $30,000. In the City's experience, the pricing associated
with accepting credit card payments is largely dictated by Visa and Master Card, who can
increase pass -through charges with only a 30-day notice, and very little can be negotiated with
the pricing. The City will work with Union Bank to create cost efficiencies in the future.
It is estimated that the conversion of banking services would be approximately 6-8 weeks and
will include the following phases: establish an implementation team, documentation preparation,
technical implantation and training. Union Bank staff will be on site working with
implementation members and City staff will receive webinar or telephone training. Attached is
Union Bank's conversion plan to transfer banking services.
Recommendation:
Authorize the Mayor to execute the agreement with Union Bank, N.A., for banking and custody
services and, and authorize the City Manager to execute other related documents as deemed
necessary
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