HomeMy WebLinkAbout02/07/2012 03Ci City's Banking Services; Response to Citizen Question (L; 4-1)
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BUSINESS OF THE CITY COUNCIL
YAKIMA, WASHINGTON
AGENDA STATEMENT
Item No. 3 G S
For Meeting of February 7, 2012
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ITEM TITLE: Response to Glenda Phillips' question regarding the City's banking
servicesat the City Council meeting January 17, 2012
SUBMITTED BY: Cindy Epperson, Acting Finance & Budget Director
Tara Lewis, Financial Services Officer
CONTACT Cindy Epperson, Acting Finance & Budget Director 509 - 576 -6644
PERSON /TELEPHONE:
SUMMARY EXPLANATION:
Currently the City of Yakima has four major bank accounts at three national banks, each of which has branches
in Yakima and a corporate presence in the State of Washington. The City also holds a number of smaller bank
accounts for funds that need to be kept separately such as Inmate deposits, Housing loan payments, etc. For the
sake of efficiency most of these smaller accounts are kept in the same banks as the City's major accounts.
The State of Washington requires that all state and local governments use banks which qualify as a Public
Depository The Public Deposit Protection Commission (PDPC) at the State approves and monitors bank
participation. The PDPC requires that participating banks pledge collateral to secure public deposits that exceed
the amount insured by the FDIC (currently $250,000 per account holder). From the bank's perspective
participation in PDPC is expensive in that the pledged collateral reduces their available capital for banking
activities and increases their risk should a member institution become insolvent. The PDPC saved a large
number and amount of public deposits in this state when Washington Mutual (WAMU) failed a few years ago.
The other participating banks had to contribute to cover losses not covered by WAMU's pledged collateral. All
public agencies recovered 100% of their funds on deposit. Due to the cost of participation, smaller local
institutions often choose to limit their participation in PDPC and will only take nominal deposits.
Recently Yakima Federal agreed to issue a Certificate of Deposit to the City for no more than $250,000. The
earnings rate on the CD is higher than the City can earn in the Local Government Investment Pool. However, the
President of Yakima Federal had to personally approve the transaction due to the institution's policy of limiting
their public depository exposure. (Incidentally, the City's Office of Neighborhood Development has an account at
Yakima Federal to receive homeowner loan payments. The balance in the account is under $250,000 which is
the maximum coverage per account holder under FDIC.) The City anticipates working with other local public
depositories in the future should the interest earnings continue to be favorable to other investment vehicles.
Our current major banking relationships are set forth in the table below:
Bank Yakima Branch Major Account Description
Purpose _
Bank of America N. 2 Street Claim Warrant To Pay Vendors and
Account non- employment
invoices
Key Bank E. Yakima Ave. Depository Account Deposits received by
the city in cash or
checks.
US Bank W. Yakima Ave Payroll Account To Pay Employees
and employment
related invoices
US Bank* W. Yakima Ave Electronic Depository Deposits received via
Account Online Banking or
Credit/Debit card
*The only current banking contract is the Electronic banking agreement with US Bank that was awarded after
competition and negotiation in 2009. Although the majority of the contractual arrangement has been
implemented, the final implementation of ePayment services for customer utility payments is still in process.
(This service will allow customers to access their utility bill online and to make payment via the Internet with a
direct debit from checking /savings or with a credit/debit card. This final implementation was held until the City's
new webmaster could be hired in late 2011.) All other banking contracts have expired and relationships continue
with annual review of services and pricing. Fees and services are re- negotiated as appropriate.
The initial philosophy for using three major banks was to use public depositories doing business in Yakima that
could provide the intense levels and volumes of service required by the City. Instead of negotiating a single
contract for all services, banks were asked to respond to Requests for Proposal on our three major service
priorities at the time. Each of the three banks listed above was awarded a piece of the City's business. Later,
electronic services were separately bid and awarded as noted above.
While it is evident that the City treasury could gain certain efficiencies with a single banking institution in terms of
transferring balances, reconciling accounts and maintaining administrative relationships, the cost (measured
mostly in time and staff resources) to re- establish our accounts, the underlying technology, the business
processes, etc. is prohibitive at present. It is our goal to continue to maintain our banking relationships that are
providing excellent service and to achieve greater efficiencies gradually by combining services and re-
negotiating various aspects of the banking and treasury services as deemed appropriate over time.
Resolution Ordinance Other (specify)
Contract: Mail
Contract Term: Amount: Expiration Date:
Insurance Required? No
Funding
Source: Phone:
APPROVED FOR
SUBMITTAL: City Manager
STAFF RECOMMENDATION:
BOARD /COMMISSION RECOMMENDATION:
ATTACHMENTS:
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