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Item 1.E.
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| City Council Regular | |
| Date: | 02/13/2023 |
| Title: | Depository and Banking Services Contract with US Bank |
| Presented by: | Liz Kampa |
| Department: | Finance |
| Presentation: | No |
| Legal Review | Yes |
RECOMMENDATION
Staff recommends that the City Council approve, and the Mayor sign, the contract with US Bank for three years, with seven allowable renewal terms, for up to ten years.
BACKGROUND (Consistency with Adopted Plans and Policies, if applicable)
US Bank has managed the City's depository and banking services since 2002. The current contract with US Bank expires February 28, 2023.
The State of Montana competed and executed a contract with US Bank for a wide range of banking services in 2021 and has made it available to municipalities through a Cooperative Purchasing Agreement. Pursuant to MCA 18-4-402 and the City's Purchasing Procedures, local government agencies are permitted to take advantage of the cost savings realized by the State's purchasing volume and other Cooperative Purchasing programs. Cooperative purchasers benefit by purchasing through State term contracts through time and cost savings, expedited order processing, as well as insuring all procurement is completed via proper procurement rules governed by the State and City.
Staff recommends the contract term of 10 years due to all the technology involved with banking services and the amount of time, effort, and costs necessary to switch to another vendor. This would include: the costs of changing checks, grant, and electronic banking transactions; utilizing both banking companies for a transition period; and, any integration costs associated with a new vendor and any third parties necessary.
The recommended contract term with US Bank is a 3-year contract, with 7 one-year allowable renewals, beginning on March 1, 2023, and expiring on February 28, 2033.
The State of Montana competed and executed a contract with US Bank for a wide range of banking services in 2021 and has made it available to municipalities through a Cooperative Purchasing Agreement. Pursuant to MCA 18-4-402 and the City's Purchasing Procedures, local government agencies are permitted to take advantage of the cost savings realized by the State's purchasing volume and other Cooperative Purchasing programs. Cooperative purchasers benefit by purchasing through State term contracts through time and cost savings, expedited order processing, as well as insuring all procurement is completed via proper procurement rules governed by the State and City.
Staff recommends the contract term of 10 years due to all the technology involved with banking services and the amount of time, effort, and costs necessary to switch to another vendor. This would include: the costs of changing checks, grant, and electronic banking transactions; utilizing both banking companies for a transition period; and, any integration costs associated with a new vendor and any third parties necessary.
The recommended contract term with US Bank is a 3-year contract, with 7 one-year allowable renewals, beginning on March 1, 2023, and expiring on February 28, 2033.
ALTERNATIVES
City Council may:
- Approve the contract with US Bank for Depository and Banking services; or,
- Not Approve the contract with US Bank for Depository and Banking services, and provide further guidance to staff.
FISCAL EFFECTS
US Bank will provide the City with an Earnings Credit Rate (ECR) based on the target monthly Federal Funds effective rate on 100% of collected daily balances. The above-market ECR will allow the City to use balances to assist in the offset or reduction of banking services fees. Essentially, the banking service charges will be paid for with interest on the balance of the City's bank accounts. The bank fees would be substantially higher if we didn't utilize the cooperative purchasing contract. The earning credits (or interest rate) are equal to 100% of Federal Funds, currently at a rate of 4.5%. This rate is offered to the City because of the State's volume. This also allows the City to retain and reinvest more funds than in previous contract years.
SUMMARY
Staff recommends that the City Council approve, and the Mayor sign, the contract with US Bank for three years, with seven allowable renewal terms, for up to ten years.