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AUTHORIZE AN AGREEMENT WITH BMO BANK N.A. (FORMERLY BANK OF THE WEST) FOR UTILITY BILLING REMITTANCE PROCESSING SERVICES (LOCKBOX SERVICES)
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RECOMMENDATION
It is recommended that the City Council approve a motion to:
1. Authorize the City Manager to execute an agreement with BMO Bank N.A. (formerly Bank of the West) (“Bank”) to provide utility billing remittance processing services (also known as lockbox services) through June 30, 2027, in the amount of $64,500 per year.
2. Approve findings pursuant to Stockton Municipal Code section 3.68.070 for an exception to the competitive bidding process.
3. Authorize the City Manager to take appropriate and necessary actions to carry out the purpose and intent of this motion.
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Summary
On February 2, 2017, a Request for Proposal (RFP) for lockbox services was released and the contract was awarded to Bank of the West as the most responsive bidder. Council approved of a 5-year agreement with Bank of the West (Attachment A) at its May 9, 2017, meeting. That agreement expired on June 30, 2023. Staff recommends executing a new agreement with Bank through June 30, 2027 (Attachment B), as the new agreement’s term will coincide with a separate 10-year agreement the City has with Bank. The annual cost of the lockbox services contract is $64,500. However, the City has never paid the fee, as our total aggregate balance with the bank offsets the annual cost. The services provided by Bank have added technological advances and significant efficiencies to the City’s current utility payment processing.
DISCUSSION
Background
The City of Stockton receives approximately 24,000 utility bill payments each month. To efficiently process these payments and enable the City to receive the funds promptly, the City requires an automated, full-service lockbox system. The lockbox system must have the capability to receive and process mailed remittances, deposit funds into a City account daily, send a daily electronic file of payment information, provide an online platform to view reports, and provide an electronic image of agreed-upon documents.
On February 2, 2017, an RFP for lockbox services was released. The RFP process ensured a fair and competitive procurement of cost-effective lockbox services. The City specified that the successful firm would provide high-quality services and support continued technological enhancements to further improve the City’s operations.
The City received ten responses from prospective firms and invited the four most qualified firms to be interviewed. Interview rankings were based on each respondent’s demonstrated breadth of service, experience, overall presentation, and pricing.
The review panel unanimously determined that Bank of the West was the best fit to provide lockbox services for the City of Stockton. Some key deciding factors found in the Bank of the West’s proposal include:
1. Local Presence: Bank of the West has five banking locations within the City of Stockton. Its main branch is located close to City Hall at 540 N. El Dorado Street. Lockbox payments will be received and processed by Bank of the West in California. Customer payments will no longer be received out of state.
2. Fixed Pricing and Transition offer: Bank of the West agreed to offer fixed pricing for the life of the contract and agreed to waive its fees for the first six months.
3. Online platform: Bank of West offers a strong online platform to meet all the City’s current lockbox needs and provide efficiencies to City operations, such as; reporting, secure transmittal of payments, dual custody for transfers, reviewing rejected items, online decision of rejected items, viewing other exceptions, uploading files, self-administration, end user management, and security.
4. Implementation: Bank of the West will complete implementation within a 40-day to 60-day timeframe.
5. Termination: While the term of the contract is for an extended period, the City can terminate the agreement at any time through written notice.
In May 2017, the City entered a 5-year agreement with Bank to provide lockbox services. The agreement’s term ran through June 30, 2023. Bank continues to provide these necessary services without a contract in place.
Present Situation
On May 9, 2017, Council approved of a 5-year contract with Bank at an annual cost of $64,500. The agreement’s term ran through June 30, 2023. Staff recommends Council approve this new agreement with Bank through June 30, 2027.
Findings
Stockton Municipal Code section 3.68.070(A) provides an exception to the competitive bidding requirements for purchases exceeding $100,000 when the City Council approves findings that support and justify the exception.
Findings to support this agreement include:
1. Bank was selected through a competitive RFP process for a 5-year agreement which recently expired. The agreement proposed here contains the same terms, conditions, and price as the previously negotiated agreement.
2. Bank has provided services to the City and is familiar with the City’s specific needs. There is an added benefit to having our aggregate balance with Bank compensating the annual cost of the service.
3. It is in the City’s best interest to maintain Bank lockbox services to ensure continued same-day processing of payments.
FINANCIAL SUMMARY
Based on estimated transaction volume, the average annual contract cost is $64,500 for services which for four years is a not to exceed total of $258,000. It is possible that some or all contract costs may be offset by an earnings credit provided by the bank based upon the average monthly balance maintained by the City. Staff will work with Bank to maximize earnings credits while considering the City’s cash needs.
The lockbox fees are charged to the Municipal Utilities Wastewater, Water and Stormwater Utility Funds.
Attachment A - 2017 Professional Services Agreement with Bank of the West
Attachment B - Professional Services Agreement with BMO