TO: HONORABLE MAYOR FROM: Julia H. Cooper
AND CITY COUNCIL
SUBJECT: SEE BELOW DATE: May 31, 2022
Approved Date
6/9/2022
SUBJECT: AMEND AGREEMENTS WITH WELLS FARGO BANK, NATIONAL
ASSOCIATION FOR BANKING SERVICES
RECOMMENDATION
Adopt a resolution authorizing the Director of Finance to negotiate and execute amendments to extend the terms of the current agreements with Wells Fargo Bank, National Association for general banking, lock box services, and merchant card services from July 1, 2022 to June 30, 2024, subject to the appropriation of funds.
OUTCOME
Approval of a two-year extension of the current agreements with Wells Fargo Bank, National Association (Wells Fargo) will allow staff to complete a request for proposal (RFP) process, negotiate new agreements for banking services, and complete a transition of service to a new provider, if necessary, without interrupting critical banking and financial services.
BACKGROUND
On June 1, 2009, the City of San José (City) executed agreements with Wells Fargo to provide banking and financial services including general banking and lockbox services, merchant card processing services, and securities custodial services for an initial term of July 1, 2009 to June 30, 2012 with three two-year options for extending the agreements at the City's sole discretion through June 30, 2018.
On June 20, 2016, the City executed the third option extending the agreements through June 30, 2018. On June 19, 2018, the City Council approved extending the agreements for an additional one-year term through June 30, 2019, in order to ensure vital banking services that would have expired on June 30, 2018 would continue uninterrupted through the banking services RFP process, contract negotiations, and if necessary, through the transition period to a new bank.
COUNCIL AGENDA: 06/21/22
FILE: 22-950
ITEM: 2.16
HONORABLE MAYOR AND CITY COUNCIL
May 31, 2022
Subject: Amend Agreements with Wells Fargo Bank, National Association for Banking Services
On March 19, 2019, the City Council voted to reject all proposals for RFP 17-18-05 based on the City’s then current adopted Wage Theft Prevention Policy (0-44), approved extending the banking services agreements for another one-year term through June 30, 2020, and directed staff to explore the feasibility of an alternative delivery model for banking services and to report back to the City Council before the issuance of the next RFP.
On June 16, 2020
1, the City’s Department of Finance staff presented its analysis on the exploration of the feasibility of alternative delivery models and recommended issuing a single RFP for general banking, lockbox, and merchant card services and issuing a separate RFP for investment custodial services as outlined in the memorandum. Additionally, on June 5, 2020, an information memorandum was released addressing questions raised by the City Council related to public banks.2 Concurrently, the City Council approved staff’s analysis and approved the extension of the agreements for a two-year period through June 30, 2022.
On February 22, 2022, the City’s securities custodial services account with Wells Fargo was fully transitioned to Principal Financial Services, Inc. as part of the Wells Fargo divestiture of its institutional trust and custody business line, and the subsequent acquisition of that business line by Principal Financial Services, Inc. As the annual expense for securities custodial services is well within the City Manager’s authority, future agreements for these services will be entered into under that authority.
ANALYSIS
A successful banking relationship for a large, complex organization such as the City is integral to the smooth, efficient operation of the City’s finances. Finance staff – including the Procurement and Treasury Management units – have been coordinating the preparation of a detailed RFP package to seek providers for general banking, lockbox services, and merchant card processing services. Such an RFP has not been issued since 2018, as the circumstances that prompted the City Council rejection of the last solicitation of bank proposals at that time have not fundamentally changed.
Responding to a lengthy and complex banking services RFP is an expensive and time-consuming undertaking for potential respondents and the review of the responses is an equally time- consuming process for City staff. While staff still expects a robust response to a new RFP, absent a resolution of the wage theft policy issue, it is highly probable that potential respondents would not invest the time or expense in responding if the conditions resulting in the rejection of the proposals in 2019 remain the same.
1 Extension of Banking Services Agreements with Wells Fargo Bank, June 16, 2020, item 3.6 https://sanjose.legistar.com/View.ashx?M=F&ID=8594924&GUID=516C7557-8E3D-413E-8EF1-D3A32C3054B1
2 Public Banking Review Information Memo, June 5, 2020
https://sanjose.legistar.com/View.ashx?M=F&ID=8594924&GUID=516C7557-8E3D-413E-8EF1-D3A32C3054B1
HONORABLE MAYOR AND CITY COUNCIL
May 31, 2022
Subject: Amend Agreements with Wells Fargo Bank, National Association for Banking Services
The current two-year extension of the agreements for general banking, lockbox services, and merchant card processing services expire on June 30, 2022. Extension of the Wells Fargo agreements for general banking, lockbox, and merchant card processing services is necessary to continue smooth financial operations for the City. Even if the wage theft policy issue is resolved, an extension would be necessary to complete the RFP process, contract negotiations and, if necessary, a transition period should a new provider be selected.
CONCLUSION
Approval of a two-year extension of the current agreements with Wells Fargo will allow staff to complete an RFP process, negotiate new agreements for general banking, lockbox services, and merchant card processing services and complete a transition of services to a new provider, if necessary, without interrupting critical banking and financial services.
EVALUATION AND FOLLOW-UP
This memorandum will not require any follow-up from staff.
CLIMATE SMART SAN JOSE
The recommendation in this memorandum has no effect on Climate Smart San José energy, water, or mobility goals.
PUBLIC OUTREACH
This memorandum will be posted on the City Council Agenda website for the June 21, 2022 City Council meeting.
COORDINATION
This report was coordinated with the City Manager’s Budget Office and City Attorney’s Office.
COMMISSION RECOMMENDATION/INPUT
No commission recommendation or input is associated with this action.
HONORABLE MAYOR AND CITY COUNCIL
May 31, 2022
Subject: Amend Agreements with Wells Fargo Bank, National Association for Banking Services
COST SUMMARY/IMPLICATIONS
The FY 2022-2023 Proposed Operating Budget for Banking Services is $957,000, inclusive of general banking, lockbox services, and merchant card processing services, with approximately $20,000 for securities custodial services which are not included in this recommendation. The funding source is the General Fund from a City-wide appropriation.
BUDGET REFERENCE
Fund
# Appn # Appn Name
Total
Appn
Amt. for
Contract
2022-23
Proposed
Operating
Budget
Page
Last Budget
Action (Date,
Ord. No.)
001 TBD
(Citywide)
Banking Services $712,000 $692,000 803 N/A
423 TBD Banking Services $95,000 $95,000 894 N/A
515 TBD Banking Services $170,000 $170,000 940 N/A
Total $977,000 $957,000
* The 2020-2021 Proposed Operating Budget was released on May 4, 2022 and is scheduled to be reviewed on June 14, 2022 and adopted on June 21, 2022 by the City Council.
CEQA
Not a project, Public Project Number PP17-003, Agreements/Contracts (New or Amended) resulting in no physical changes to the environment.
/s/
JULIA H. COOPER
Director of Finance
For questions, please contact Luz Cofresí-Howe at [email protected] or (408) 535-7041.