| | | | | | | | Agenda Item - 3.f.
City of Garden Grove
INTER-DEPARTMENT MEMORANDUM
| To: | Scott C. Stiles
| From: | Patricia Song
| | Dept.: | City Manager
| Dept.: | Finance
| | Subject: | Approval of an Amendment to the Agreement with Union Bank N.A. for Banking Services. (Action Item) | Date: | 6/9/2020 |
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| | | | | | | | OBJECTIVE
To request the City Council to approve an extension to the agreement with Union Bank N.A. for banking services for the period from July 1, 2020 through June 30, 2021, with an additional one-year optional extension. |
| | | | | | | | BACKGROUND
On June 12, 2012, the City Council awarded a banking services contract to Union Bank N.A. for a five-year term. City Council authorized additional one-year extensions in 2017 and in 2018 respectively. The current agreement will expire on June 30, 2020. Due to the implementation of the City’s new Enterprise Resource Planning (ERP) system and the integration requirement with our banking institution, staff is requesting an additional one-year contract extension with another optional year through June 30, 2022. |
| | | | | | | | DISCUSSION
The implementation of the new ERP system is now substantially underway with a go-live date of July 1, 2020 for the first phase. Banking is an important component in this phase as all transmittals including Accounts Payable payment files and bank reconciliation files have to be developed and accepted by our banking service provider. It has taken a lot of staff and consultant’s time to complete all of the required configuration and test. Transitioning to another banking institution during the ERP implementation could potential delay the project go-live, and thus costing the City significant amount of money. To ensure limited resources are focused on completing the initial phase of the ERP project on time, and to develop a comprehensive Request for Proposal for banking services to cover all of the City’s needs, staff is requesting to extend the current contract through June, 2021, and possibly through June, 2022, if necessary.
Union Bank is a federally chartered U.S. banking institution, and is subject to oversight by U.S. regulatory agencies, including the Federal Reserve and the Federal Deposit Insurance Corporation (FDIC). Union Bank is a full-service commercial bank providing an array of financial services to individuals, small businesses, middle-market companies, and major corporations. Union Bank operates 414 branches in California, Washington, Oregon, Texas, New York, and Illinois as well as two international offices. Union Bank has solid investment grade credit ratings at each of the major rating agencies. Union Bank’s long-term rating at Standard & Poor’s is A+ and at Moody’s it is A2, both with a stable outlook. |
| | | | | | | | FINANCIAL IMPACT
The cost of banking services varies based on the volumes of transactions, and averages about $70,000 per year. The fee rates per transaction for FY20-21 will remain the same, and the cost is included in the adopted budget. |
| | | | | | | | RECOMMENDATION
It is recommended that the City Council:
- Approve an amendment to the existing contract with Union Bank N.A., to extend the City’s banking services for the period of July 1, 2020 through June 30, 2021.
- Approve the option to extend the said agreement for one additional year through June 30, 2022, if necessary.
- Authorize the City Manager to execute the amendment on behalf of the City and make minor modifications as appropriate
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| ATTACHMENTS: | | Description | Upload Date | Type | File Name | | Agreement | 5/29/2020 | Warrants | 6-9-20_AMENDMENT_3-Union_Bank.pdf |
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