Mark O'Brien,
City of Corvallis“Greetings,
The following comments represent my personal viewpoint only and should in no way be construed as an official statement of the City of Corvallis or the Corvallis City Council.
It is my understanding that the City of Corvallis holds and invests public funds in a couple of areas. These include:
*State of Oregon Local Government Investment Pool- a short term investment fund focusing on, in priority order, safety, liquidity and return on investment and managed by the Oregon Short Term Fund Board under the authority of the State Treasurer’s office
*Federal Agency Coupon Securities- minimum risk investment products backed by the full faith of the US government
*Money Market Account-the City currently maintains a money market account with Umqua Bank, a local banking institution
*Basic Checking Account- the City has recently entered into a three year contract for checking account services with Wells Fargo Bank
I am including some background material from our Finance Director regarding the circumstances surrounding the City’s recent RFP for banking services. In this case, no local institution elected to bid for the City of Corvallis account and credit unions are legally barred from accepting public funds before Jan. 2013. It is my hope that a qualified local bank or credit union will bid for and be awarded the opportunity to provide checking account services to the City of Corvallis following expiration of our current contract.
Regard,
Mark O’Brien
City Council President
Background:
Banking Services (O’Brien)
The City has completed the request for proposal (RFP) process for banking services for the coming three year period. The City worked with the 509J School District and Benton County to complete a joint RFP process; all three entities, separately, awarded contracts to Wells Fargo. Contract awards were based on both cost (lower than current) and services offered. When this information was shared with the Investment Council at their meeting on November 3, 2011, the Council members had a discussion about why the award did not go to a community bank or credit union. Staff shared the following information, which was recommended by Councilor O’Brien to be shared with the full City Council:
There were only three bids submitted – US Bank, Wells Fargo, and Bank of America. The City had pre-proposal inquiries from both Umpqua and Key Bank, but neither submitted a proposal.
No credit union inquired about the City’s proposal process or submitted a proposal. This was expected since ORS 295.001 limits a credit union that holds public entity deposits to the amount of insurance coverage the National Credit Union Administration carries, which is currently limited to $250,000. The City has considerably larger sums than that go through its account in a single day many days each month. This limitation on credit unions has come up multiple times in legislative sessions over the last two decades without being revised.
The State requires depositories for public funds to meet certain collateralization benchmarks before the bank will be approved as a public depository. The larger banks can meet these requirements more easily because they have the resources to do so. Smaller community banks may be severely challenged to meet collateralization requirements, which may be 110% or more of the public deposit amounts in excess of FDIC insurance coverage requirements. A pay day for the City, which will also always be an accounts payable check run day, may have more than $3 million go through the bank on a single day; $2.75 million of that would have to be collateralized since it is over FDIC insurance amounts.
Staff looks for a bank that has excellent customer service and also provides a significant on-line tool set to manage the City’s bank account. The City makes 20 to 30 deposits daily and issues in excess of 1,500 payments each month between payroll and accounts payable. Electronic tools help to decrease overhead costs to the City and can be a major deterrent to fraud. Examples include: positive pay, where the City submits check register data (names and amounts) to the bank to match with checks when they are presented; and electronic funds transfers (in and out). As a result, a robust on-line tool set has become critical to the organization’s operations, and smaller community banks do not generally have the same level of electronic tool sets available.
Finance Department staff has begun working with Wells Fargo for the transition, which will occur in January 2012. Please contact Finance Director Nancy Brewer if you have other questions.
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