Memorandum

City of Lawrence

Finance Department

To:  Dave Corliss, City Manager

From:  Ed Mullins, Finance Director

            Brian Watson, Assistant Finance Director

            Tammy Bennett, Assistant Public Works Director

Date:  December 23, 2013

Subject:  Banking Services

Background 

The current banking agreement with US Bank has expired.  On November 4, 2013, the Finance Department issued an RFP to provide banking services to the City of Lawrence beginning in 2014. The successful bank would provide banking services to the City of Lawrence for one year with up to four one year extensions. Banking services include depository and account services, image and data retention services, ACH/Wire services, remote deposit, e-Lockbox, and payroll paycards.  Proposals for optional services, such as purchasing cards and lockbox processing, were also requested.  The department received responses from four banks, including Commerce Bank, Intrust Bank, UMB Bank and US Bank.

Analysis

The four proposals were reviewed by a committee that consisted of the Finance Director, Assistant Finance Director, and Assistant Public Works Director. The proposals were evaluated based upon service costs, interest earnings, financial strength, and services provided. The analysis showed US Bank offered the best combination of service fees, interest earnings, and earnings credit. US Bank would pay 60 basis points earnings credit and interest at 3.5 basis points.  Intrust Bank had the lowest cost of services, followed by US Bank and UMB Bank. Intrust Bank also proposed an interest rate floor of 10 basis points, but no earnings credit.  As a result, the net cost of service was higher than US Bank.  UMB Bank offered a higher interest rate, but it was not enough to offset their higher service charges.  The bank has only two locations in Lawrence. Commerce Bank offered the highest interest rate, but a lower earnings credit than US Bank.  US Bank had a high financial strength rating and was one of the largest banks in the country to not require TARP funding. 

US Bank proposed a minimum earning credit of 60 basis points plus a minimum interest rate of 3.5 basis points. As long as short term interest rates stay below 64 basis points, US Bank would pay the city a higher combined rate of interest and earning credit. US Bank also stated that their interest rate may rise if market interest rates increase. In addition, US Bank provided the most competitive rebate rate for purchasing card spend at 1.34% or twice the rate of the city’s current provider. It is expected, the rebate will earn an additional $15,000 per year at current spend levels. 

The Finance Department has been pleased with the service provided by US Bank.  A more detailed analysis revealed that US Bank continued to offer the greatest value and scope of services as well as offering depository branches that are the least distance from City locations needing to make deposits. 

Recommendation

US Bank provided the City of Lawrence with the best overall banking proposal, has a high financial strength ratio, and has provided good customer service.  As a result of the expanded services, highest combined interest rates and earning credit, and lower net cost of service, it is the committee’s recommendation the City Manager be authorized to enter an agreement with  US Bank to act  as the City’s depository and purchasing card provider.