Agenda Report
Fullerton City Council
MEETING DATE: august 15, 2023
TO: CITY COUNCIL / SUCCESSOR AGENCY
SUBMITTED BY: Ellis chang, director of administrative services PREPARED BY: toni smart, fiscal services manager
SUBJECT: CONTRACT EXTENSION WITH BANK OF MONTREAL HARRIS BANK FOR FINANCIAL banking services
SUMMARY
The City’s agreement with Bank of the West (BOW) expires on March 16, 2024. Montreal Harris Bank (BHB) acquired BOW making BHB the successor-in-interest. Staff requests City Council approve Amendment Number Two to the banking services agreement with BHB for a five-year extension with two one-year options to renew.
RECOMMENDATION
1. Approve Amendment Number Two to the Professional Services Agreement with Bank of Montreal Harris Bank N.A. for a five-year extension, with two one-year options to renew
2. Authorize City Treasurer to execute and administer Amendment Number Two and additional options to renew, in a form approved by the City Attorney.
CITY MANAGER REMARKS
None.
PRIORITY POLICY STATEMENT
This item matches the following Priority Policy Statement:
Fiscal and Organizational Stability.
FISCAL IMPACT
BHB adjusted several line-item charges which will likely result in about $5,000 net additional savings in transaction related fees. BHB offers an increase in the earnings credit rate (ECR) applied to the City’s average bank balance. The earnings credit offsets customer transaction-related fees to determine the out-of-pocket cost for banking services. The net impact of these changes should result in minimal out-of-pocket costs for banking services.
DISCUSSION
Background
The City of Fullerton has had a strong and positive relationship with BOW since it acquired Sanwa Bank, the City’s prior banking services provider, in 2005.
The City bid banking services in early 2016, following a thorough and competitive bidding process, and determined BOW as the best candidate for banking services in terms of customer service, competitive pricing and technological advances. BOW’s annual bank fees at the time of the contract award, total about $20,000 lower than the next best overall bidding bank.
City Council approved a professional services agreement with BOW for banking services on March 15, 2016. The professional services agreement established a five-year term. Municipal agencies now commonly enter banking service contracts for seven to ten years due to technological implications and significant staff time to transition banks.
City Council approved Amendment Number One to the professional services agreement with BOW on December 15, 2020. Amendment Number One extended the banking services agreement three years to March 16, 2024 and provided reductions to several transaction fees.
Bank of the West Merger with BMO Harris Bank N.A.
BOW merged with and into BMO Harris Bank N.A. (BHB), a consolidated subsidiary of Bank of Montreal (BMO) in 2023. BHB assumed all duties and obligations of BOW. BHB is the tenth largest U.S. bank with a footprint in 32 states, serving over four million customers.
BOW is migrating to BHB’s software system and internal back-office systems due to the merger. This transition impacts City staff time as the online banking platform converts September 5, 2023. BHB will provide sufficient notice to the City prior to the routing number change to enable the City time to inform customers.
Professional Services Agreement Amendment No. Two
Staff determined that retaining and extending the current professional services agreement with BHB provided the most effective and efficient option at this time, following analysis for a possible extension. Staff anticipates conversion to the Tyler Munis system for all billing and cashiering functions utilizing the Tyler Cashiering platform in November 2023. Staff are coordinating with BHB to implement its new banking platform in coordination with Tyler Cashiering. Staff recommends retaining BHB to ensure continuity of banking services, given the status of the planned City and BHB system changes.
Staff anticipates adjustments to transaction fees and an ECR increase from 75 basis points to 150 basis points will lower costs and enable the City to more efficiently manage cash on hand.
Staff estimates the earnings credit would provide an additional $6,000 per month, or $72,000 annually, to cover banking fees, based upon City bank activity for May 2023 and the increased ECR from 75 to 150 basis points. The increase to the ECR also reduces the required excess bank balance the City must retain to support the earnings credit offsetting transaction costs.
Lastly, staff feels it prudent to postpone evaluating new banking services until after full implementation of Tyler Munis.
Attachments:
Attachment 1 – PSA Amendment No. Two with BMO Harris Bank N.A.
Attachment 2 – PSA and Amendment No. One with BOW
cc: City Manager Eric J. Levitt
Banking Services PSA Amendment No. 2
August 15, 2023 - Page 2