On June 12, 2012, the City Council awarded a banking services contract to MUFG Union Bank N.A. for a five-year term. City Council authorized extensions in 2017, 2018, and 2019 respectively. The current agreement will expire on June 30, 2022. Due to various new service components integrated with the City’s recently implemented Enterprise Resource Planning (ERP) system, such as bank reconciliation, P-Card, and remote deposit, many new processes were established and are still under fine-tuning.  To maximize the efficiency and return on investment, staff is requesting another one-year contract extension with an additional optional year through June 30, 2024.

The City has recently successfully completed the implementation of the ERP system with the majority of the core modules went live in December 2021.  As part of the system conversion, many new processes were introduced to improve efficiency and enhance internal control.  Banking is one of the components that has undergone significant changes.  Staff redesigned Accounts Payable payment files and bank reconciliation files to allow smooth and secure transmissions between the banking institution and the City.  Additionally, the City implemented a brand new function called P-Card to automate City credit card payment and reconciliation process.  Significant amount of staff and consultant time were invested in the configuration of these new processes and functions, and they are specific to our current banking service provider, MUFG Union Bank N.A.  To fully take advantage of these investments in technology, it is in the best interest of the City to continue with MUGF Union Bank N.A. for additional period of time.  The additional time will also allow staff to evaluate the cost and benefit of switching banking service provider, and consider the best approach for the selection process.  Staff is requesting to extend the current contract through June, 2023, and possibly through June, 2024, if deemed necessary.

MUFG Union Bank, N.A. 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. MUFG Union Bank, N.A. has solid investment grade credit ratings at each of the major rating agencies.  Its long-term rating at Standard & Poor’s is A and at Moody’s it is A2, both with a stable outlook.

The net cost of banking services varies based on the volumes of transactions, and averages about $60,000 per year. The fee rates per transaction for FY22-23 will remain the same, and the cost is included in the City's operating budget.

It is recommended that the City Council:

• Approve Amendment No. 5 to the existing contract with MUFG Union Bank N.A., to extend the City’s banking services for the period of July 1, 2022 through June 30, 2023.

• Approve the option to extend the said amendment for one additional year through June 30, 2024, if necessary.

• Authorize the City Manager to execute the amendment on behalf of the City, to approve the option to extend if necessary, and make minor modifications to the contract as appropriate.