City Council Memorandum
TO: HONORABLE MAYOR AND CITY COUNCIL DATE: MARCH 1, 2022 FROM: FINANCE DEPARTMENT WARDS: ALL
SUBJECT: SERVICE AGREEMENT FOR GENERAL BANKING AND MERCHANT CARD PROCESSING SERVICES WITH BANK OF AMERICA FOR FIVE (5) YEARS WITH THE OPTION TO EXTEND FOR AN ADDITIONAL TWO-YEAR TERM FOR $351,000 ANNUALLY ISSUE:
Approve a Service Agreement with Bank of America for General Banking and Merchant Card Processing Services for an initial five (5) year term with the option to extend for one additional two-year term for $351,000 annually.
RECOMMENDATIONS:
That the City Council:
Approve a Service Agreement with Bank of America for General Banking and Merchant Card Processing Services for the initial five (5) year term with the option to extend for one additional two-year term for $351,000 annually; and Authorize the City Manager or his designee to execute the agreement with Bank of America, including making minor and non-substantive changes.
BACKGROUND:
The City has relationships with multiple financial institutions to provide banking services, investments, lines of credit, loans, and merchant services. The City has a fiduciary responsibility to manage the public's money in accordance with State and Federal laws and local policies. The City is responsible for over $800 million across various accounts and may reallocate several million dollars on any given day.
The Finance Department is responsible for administering the City's banking relationship. Periodically, the contract for banking and merchant card services is put out for solicitation through a Request for Proposal ("RFP") process to be certain that the City is receiving the most favorable pricing available and to determine if there are any processing efficiencies available through other vendors.
The prior agreement with Bank of America N.A. reached the end of its term on April 30, 2021, at which time staff obtained Council approval to extend the contract to April 30, 2022, allowing services to continue until a new contract is awarded through the RFP process, and if necessary, a conversion to a new service provider.
DISCUSSION:
On April 6, 2021, RFP No. 2068 was posted through the City’s bidding portal to solicit qualified proposals from all interested banking institutions for the City of Riverside Banking and Merchant Card Processing Services. The RFP outlined a series of required services for both categories which also included optional services. The RFP asked the proposers to demonstrate their firm’s experience, operational functionality, social responsibility, financial strengths, transition implementation, if applicable, and fees.
A total of thirty (30) prospective bidders registered and downloaded the RFP file; resulting in a total of six (6) proposals being received. After review of the submissions, all proposals were found to be responsive. In May 2021, an evaluation committee was formed, consisting of nine evaluators from various City departments such as Riverside Public Utilities, the Innovation Technology Department, and the Finance Department. Additionally, the evaluation committee also had one evaluator from the City of Anaheim and two evaluators from a financial consulting company, which reviewed and evaluated the proposals.
To further obtain a better understanding of the top three scored proposals for both categories, interviews were conducted with Wells Fargo, Bank of America and JP Morgan Chase. After a thorough review of a total average score between the proposals and interviews, Bank of America was ranked the highest scored vendor in both categories of Merchant Card Processing and General Banking. Staff underwent negotiations with Bank of America, resulting in lower transaction fees than originally proposed.
General Baking Services
Merchant Card Services
Vendor
Final Ranking
Vendor
Final Ranking
Bank of America
1 Bank of America
1 Wells Fargo
2 Wells Fargo
2 JP Morgan
3 JP Morgan
3 US Bank
4 MUFG
4 MUFG
5 Value Payment Systems
5 The Purchasing Manager concurs with the recommendation in accordance with Purchasing Resolution 23812.
STRATEGIC PLAN ALIGNMENT:
This project aligns with Strategic Priority 5 – High Performing Government and goals:
5.2 Utilize technology, data, and process improvement strategies to increase efficiencies, guide decision making, and ensure services are accessible and distributed equitably throughout all geographic areas of the City.
5.4 Achieve and maintain financial health by addressing gaps between revenues and expenditures and aligning resources with strategic priorities to yield the greatest impact.
The banking relationship with Bank of America will facilitate the use of the most current technologies in banking services, contributing to increased efficiencies across the full spectrum of the City’s financial dealings.
This item aligns with each of the five Cross-Cutting Threads as follows:
Community Trust – Bank of America provides statements and reporting that provides insight into City’s fiscal health and are used to advance financial transparency.
Equity – This banking relationship will enable enhanced services to all City residents regarding payment for City services.
Fiscal Responsibility – This banking relationship demonstrates fiscal responsibility through a wide range of services that include rebates to the City averaging $270,000 annually.
Innovation – Bank of America uses the most current technology in the banking services industry, which will contribute to increased efficiencies within the management of the City’s financial accounts.
Sustainability & Resiliency – This banking relationship will provide information required for fully informed decision making regarding fiscal health and funding of long-term needs.
FISCAL IMPACT:
The fiscal impact associated with this Agreement is estimated to be $351,000 per fiscal year and is estimated based on historical averages.
Based on historical data, Merchant Service fees average $1.5 million annually and are partially offset by interest earned, and rebates received through various Banking Service programs, which will vary depending on interest rates, daily balances, and spending averages. Merchant Services fees are allocated to the benefitting City departments and budgeted in their respective operating budgets each year; approximately 85% of these fees are allocated to RPU. The amount of approximately $351,000 ultimately paid under the terms of the Agreement is budgeted to General Fund, Finance Administration, Professional services account number 2300000-421000, and is based on the volume of transactions and services received. Additionally, the Agreement enables staff to generate earnings credit based on the amount of funds held at Bank of America such that monthly fees for general banking services are virtually eliminated altogether.
Prepared by: Phebe Timarong, Administrative Analyst
Certified as to
availability of funds: Edward Enriquez, Chief Financial Officer/Treasurer Approved by: Kris Martinez, Assistant City Manager
Approved as to form: Phaedra A. Norton, City Attorney
Banking and Merchant Card ● Page 2