City Council
Report
City Council Meeting: December 12, 2023
Agenda Item: 5.G
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To: Mayor and City Council
From: Gigi Decavalles-Hughes, Director, Finance Department, Revenue Subject: Award Contract for Banking Services to JPMorgan Chase Recommended Action
Staff recommends that the City Council:
1. Adopt a finding of no possibility of significant effect pursuant to Section 15061(b)(3) (Common Sense Exemption) of the California Environmental Quality Act (CEQA) Guidelines.
2. Award RFP #360 to JPMorgan Chase Bank, N.A. to provide banking services for the Finance Department.
3. Authorize the Director of Finance/City Treasurer to negotiate and execute an agreement with JPMorgan Chase Bank, N.A. in an estimated amount of $800,000 for eight years, with future year funding contingent on Council budget approval.
Summary
The City maintains general banking services with one institution in order to maximize its cash flow and earnings, as well as minimize administrative costs and service fees. The City is proposing to contract with JPMorgan Chase Bank, N.A. (JPMorgan Chase) to provide banking services. Staff recommends an eight-year agreement with JPMorgan Chase for an estimated amount of $800,000 for banking services.
Discussion
Banking services are needed for revenue collection, payment processing, cash management, debt management, financial reporting and analysis, online and mobile banking, and other services. City operational needs and State legal requirements limit the pool of banks able to provide City banking services. Also, on February 28, 2017, 2 of 5
Council approved resolutions that disqualified banking institutions that have been subject to a consent order for improper sales practices by the Consumer Financial Protection Bureau (CFPB) or other federal or State regulatory agencies with jurisdiction to protect consumers from providing banking services to the City if the consent order was issued within five years of the City’s solicitation for such services. Pursuant to these resolutions, proposals from Bank of America and U.S. Bank National Association were disqualified from consideration. The City previously contracted with Union Bank for banking services. Union Bank, however, was subsequently acquired by and merged into U.S. Bank, which is one of the banks that was disqualified per the criteria in the prior resolutions.
JPMorgan Chase has several years of experience with government agencies, meets the required criteria, has capacity to remain current with evolving technology, and is financially stable. In addition, they have a robust security system in place that meets the industry best practices and the requirements of the global regulators. JPMorgan Chase is a leading global financial services firm with assets of more than $3.7 trillion. They have deposits of approximately $2.4 trillion as of March 2023.
City bank deposits are approximately $760 million annually with a similar amount of payments issued to vendors. These deposits come from a variety of traditional sources, such as direct payments of wire transfers, ACH payments, checks, cash and credit cards to the City for taxes and services, as well as other types of deposits such as online payments, payments by mobile devices, and deposits from lockbox facilities.
Payments to vendors are also made in several different ways. This high level of financial activity, the complexity of the City’s financial operations, and the need to provide a safe and prudent stewardship of taxpayer funds require a full-service financial institution with experience providing banking services for large government entities. This full suite of services includes “positive pay” to limit fraudulent check activity; quick processing of City payroll; timely processing of all types of deposits; a sophisticated online banking system providing an array of reporting, reconciliation, and payment services; a purchasing card system; advanced technology that increases the efficiency of banking transactions, such as the use of the remote deposit scanner; and certain 3 of 5
investment services. In addition to the above considerations, banks must have sufficient capitalization to meet State legal guidelines regarding public funds, such as the requirements that all deposits in excess of FDIC insured amounts be collateralized.
Finally, banks must have a Community Reinvestment Act (CRA) rating of “Satisfactory” or better to qualify for public fund deposits. The Community Reinvestment Act is intended to encourage 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.
Based on the current volume of transactions, the annual estimated cost for JPMorgan Chase is $100,000 for banking services for an estimated amount of $800,000 for an eight-year term. An estimate is necessary for the cost for banking services because fees are based on the City’s bank account balance which is constantly fluctuating. The City will continue to use U.S. Bank until full transition to JPMorgan Chase in FY 2024-
25. Consultant Selection
Bidder Recommendation
Best Bidder JPMorgan Chase Bank, N.A. (JPMorgan Chase)
Evaluation Criteria Experience with similar projects of comparable complexity and working with municipalities, financial strength, technical competence, methodology, value-added- breath of services, ability to meet work plan/timelines, stability, and cost of services.
Municipal Code SMMC 2.24.190
RFPs Received
Bank of America Bank of the West JPMorgan Chase Bank, N.A U.S. Bank National Association
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RFP Data
Date Posted Posted On Advertise In
(City Charter & SMMC)
Vendors
Downloaded
Date Publicly
Opened
4/6/23 City's Online
Bidding Site Santa Monica Daily Press 16 5/18/2023
Environmental Review
The award agreement is exempt from CEQA pursuant to Section 15061(b)(3) of the CEQA Guidelines. The award agreement is covered by the common-sense exemption which states that CEQA does not apply, “where it can be seen with certainty that there is no possibility that the activity in question may have a significant effect on the environment.” The award agreement will provide banking services to the City.
Therefore, it can be seen with certainty that the agreement would not result in adverse physical impacts on the environment, and as such, is exempt from CEQA.
Financial Impacts and Budget Actions
Staff seeks authority to approve funding from various City Funds to award an agreement with JPMorgan Chase for banking services for an estimated eight-year total of $800,000. Please note that the contract would be executed FY 2023-24, but due to the transition period, costs would be incurred starting FY 2024-25. During the transition Best Bidder Justification
Based on the evaluation criteria and criteria in SMMC 2.24.190, staff recommends JPMorgan Chase as the best bidder. JPMorgan Chase has been providing banking services to government clients for over 150 years; serves 1,900 government clients in all 50 states and provides financial solutions to all types of government through their Government Banking specialized industry group; its financial strength is indicated by its strong long-term issuer ratings of Aa2/A+/AA; and it has more than $2.4 trillion in deposits and total assets of more than $3.7 trillion across their diverse group of markets.
In addition, JPMorgan Chase maintains a rigorous program to safeguard their clients’ information.
Their security program is designed to address the risks presented by an evolving threat landscape, and meet regulatory expectations in the places that they operate. This includes three (3) global cybersecurity operation centers, a firmwide cyber program around data protection, and cyber resiliency.
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period (FY 2023-24), there would be no banking activities and no expenses would be incurred with JPMorgan Chase.
Agreement Request
FY 2024-25
Request Estimated
Amount
Future Years Estimated
Amount Department Account # Total EstimatedContract Amount $100,000 $700,000
Various Accounts
(Object 534000)
$800,000
Future year funding is contingent on Council budget approval.
Prepared By: David Carr, Assistant City Treasurer
Approved Forwarded to Council
Attachments:
A. OAKS Initiative Form