The city renewed its longstanding relationship with Bank of America Tuesday night by approving a new five-year contract. Objections that Chase Bank wasn’t contacted and Citibank wasn’t allowed to submit a late bid lost out, with Mayor Pro Tem Kit Bobko and Council member Mike DiVirgilio in the minority.
City Treasurer David Cohn made the recommendation to re-up with Bank of America following a selection process in which 19 financial institutions were surveyed. Cohn, who unseated the late John Workman in last year’s election and is charged with managing the city’s investments, said in January that he “decided it was time to examine our relationship with our current bank, Bank of America.”
The new contract eliminates service fee charges, saving the city $24,000 a year, Cohn said. Cohn said that using Bank of America made sense because city workers haul $2 million in quarters a year from parking meters to the Pier Plaza branch.
“What are we going to do if we go to a bank without a branch in the city?” Cohn said. “When we got down to the last three finalists, we had to make sure they had a branch in the city or they had some means by which we could get $2 million a year efficiently and safely deposited. And it wasn’t going 8 1/2 miles away to another branch and it wasn’t hiring an armored car service that would cost about $18,000 a year.”
Citibank, which is located directly across the plaza from Bank of America, was eliminated as a finalist because it does not perform municipal services, Cohn said. Citibank Vice President Janice Webb told the council that Citibank, the largest municipal bond holder in California, has the capability of performing municipal services and hoped to submit a bid. Webb, who just recently heard that the city was seeking proposals for banking services, said she did not recognize the name of the Citibank official listed in Cohn’s report that Deputy Treasurer Maria Ghassemi contacted on April 12 during the selection process.
“I would have welcomed the opportunity to submit a proposal on behalf of Citibank,” Webb said.
Ghassemi “did the heavy lifting” in compiling the report, Cohn said. And because Ghassemi is out of the country tending to her ill father, Cohn said he could not elaborate on the Citibank contact William Blackwell, or to DiVirgilio’s question as to why Chase wasn’t contacted.
Chase is renovating part of the first floor of the former Bijou Building for a branch site.
Cohn said that speaking with other banks gave him the leverage to negotiate a better deal with Bank of America, which includes saving $22,000 a year as city switches from paper checks to electronic payments to vendors.
The requirements to do business with the city included experience with municipal services and willingness to sign a five-year contract with prices staying level for all five years as well as other needs, Cohn said.
Bobko made a motion to allow Citibank and Chase more time to submit proposals to city staff, but it failed. Council members Peter Tucker and Howard Fishman and Mayor Jeff Duclos voted to approve the new Bank of America contract. They said Cohn had done a thorough job and that proper due diligence had been done, including previous discussions of the banking issue earlier in the year.
Bobko and DiVirgilio criticized Cohn’s method of selecting a bank because he did not put out a formal Request For Proposals, which include publication notices in newspapers. “This is one of the pitfalls of not doing an RFP: You don’t get to vet things fully,” DiVirgilio said.
Cohn said as treasurer he is not required to do an RFP. Cohn said he does not have a finance committee as most California municipal treasurers do. Cohn said he consulted with numerous treasurers in the Southland, including the state director of treasuries, as well as City Manager Tom Bakaly. Cohn said how he conducted the bank selection was satisfactory to those officials’ standards.
“To move to another bank would be like uprooting a 40-year-old oak tree,” Cohn said, adding that the lowest bidder isn’t as important as the quality of services when selecting a bank partner for Hermosa Beach, which has 65 different service needs.
DiVirgilio obtained 500 to 600 pages of email correspondence between the deputy treasurer and treasurer and bank representatives through the Freedom of Information Act, and said the correspondence shows that Ghassemi repeatedly answers the same questions to several bank representatives.
“If we did an RFP, staff would have done less work, and an RFP communicates once to everybody,” DiVirgilio said.
The council voted unanimously to require an RFP when establishing a new banking contract when the new one runs out in five years, or seven if the city opts to extend the contract two years.
