City Council
Report
City Council Meeting: December 13, 2022
Agenda Item: 5.G
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To: Mayor and City Council
From: Gigi Decavalles-Hughes, Director, Finance Department, Revenue Subject: Approval of First Modification to Banking Services Agreement with MUFG Union Bank, N.A. to provide banking services.
Recommended Action
Staff recommends that the City Council authorize the City Manager to negotiate and execute a first modification to agreement #10554 (CCS) with MUFG Union Bank, N.A., a California-based company, to extend the term for an additional two years for banking services. This will result in a seven-year amended agreement with no change to the estimated contract value of $300,000 with future year funding contingent on Council budget approval.
Summary
The City currently retains MUFG Union Bank, N.A., (Union Bank) to provide general banking services. The current contract expires on February 13, 2023. While staff has begun the process of conducting a Request for Proposal (RFP) for banking services, the process was delayed due to the acquisition of Union Bank by U.S. Bank. The extension of the current contract is necessary to ensure a prudent and efficient selection process for a new financial institution. Staff recommends a first modification to extend agreement #10554 (CCS) for an additional two years to February 13, 2025. The twoyear extension would ensure that staff has sufficient time to complete the RFP process, conduct contract negotiations, and transition to a new bank (if applicable), with minimal impact on City services.
Discussion
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Union Bank has provided banking services for the City since 2018. The services provided by Union Bank include timely processing of all types of deposits; a sophisticated on-line banking system providing an array of reporting, reconciliation, and payment services; “positive pay” to limit fraudulent check activity; timely processing of City payroll; a purchasing card system; and advanced technology that increases the efficiency of banking transactions, such as the use of remote deposit scanners, electronic payment systems; and other banking services.
The City’s bank deposits total approximately $725 million annually with a similar amount of payments made each year. The high level of financial activity, the complexity of the City’s financial operations, and the need to provide a safe and prudent stewardship of public funds require a full-service financial institution with experience providing banking services for large government entities. Minimum qualifications for banking services include sufficient capitalization to meet State legal guidelines regarding public funds, such as the requirement that all account balances in excess of FDIC insured amounts ($250,000) be collateralized. In addition, banks must have a Community Reinvestment Act (CRA) rating of “Satisfactory” or better to qualify for public fund deposits. The CRA is intended to encourage depository institutions to help meet the credit needs of the community in which they operate, including low-and moderate-income neighborhoods, consistent with safe and sound operations.
In July 2021 U.S. Bankcorp (a Minneapolis-based company) announced the acquisition of MUFG Union Bank’s core regional banking franchise from Mitsubishi UFJ Financial Group. On October 14, 2022, U.S. Bancorp announced that it has received all required U.S. regulatory approvals to move forward. The acquisition will close December 1, 2022, 6 to 12 months later than originally anticipated. This delay also postponed the start of the RFP process to avoid the possibility of having to conduct two bank transitions within a short period of time. Due to the complexity of the City’s banking needs, a full transition can take up to 18 months.
Staff is in the initial steps of conducting an RFP process for banking services, which will conclude in 2023. This extension to the contract is necessary to ensure a judicious selection process, allow adequate time for contract negotiations, and transition to a new bank, if required.
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Past Council Actions
Meeting Date Description
9/26/2017
(Attachment A)
Award Contract with MUFG Union Bank, N.A. to provide
banking services.
Environmental Review
This is not a project for purposes of CEQA.
Financial Impacts and Budget Actions
There is no immediate financial impact or budget action necessary as a result of the recommended action. Funding is available in the FY 2022-23 Budget in account Object 522180 (bank fees) in various funds where banking fees are charged. Future year funding is contingent on Council budget approval.
Prepared By: David Carr, Assistant City Treasurer
Approved Forwarded to Council
Attachments:
A. MUFG Union Bank, N.A. Oaks fy22-23
B. MUFG Union Bank Executed Contract 10554