HomeMy WebLinkAbout2002 11-18 FCAAGENDA
Brooklyn Center Financial Commission
Monday, November 18, 2002
6:00 PM
Lower Level Conference Room, City Hall
Agenda Item
1. Call to Order
2. Roll Call
3. Approval of Agenda
4. RFP-ACH (Automated Clearing House) Services
5. RFP-Insurance Agent Services
6. Joint City Council/Financial Commission Workshop
(Materials for this discussion will be provided under separate cover.)
7. Miscellaneous
8. Next meeting
9. Adjourn
PLEASE NOTE: The City Council will be meeting in special
session beginning at 6:00 PM on Monday, November 18, 2002.
The Financial Commission will convene in the Joint
Council/Commission Conference Room on the first floor of
City Hall to discuss other agenda items. Following the special
session, the City Council and Financial Commission will meet
jointly to continue discussion of the 2003 Budget.
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Memorandum
Date: November 13, 2002
To: Financial Commission
From: Douglas Sell
Director of Fiscal and Support Services
RE: Agenda Item#4
RFP-ACH (Automated Clearing House) Services
Introduction
With the advent of paying bills "on-line", we have received several requests for this
service from our utility customers. The service would permit our utility customers to
authorize the City, on the due date,to retrieve the amount due for public utility services
from the customer's checking/savings/money market account.
To implement the program, the City must have a banking partner capable of executing
the retrieval file on the appropriate date, depositing sums collected into a City account
and forwarding collection data to LOGIS to post to individual customer accounts. In
addition,the City must have a technology partner capable of creating the ACH file in a
• format acceptable to the banking partner with all the pertinent data(routing indicator,
account number, etc.). Finally,the customer must provide written approval to retrieve
amounts due from their specific account by providing account number(s),routing
indicators and financial institution name.
Request for Proposal (RFP)
We developed an RFP for the banking services portion, mailed that RFP to all banks
having presence in the community and received three responses.
Other Partners
We have discussed LOGIS participation and have been advised that they currently
provide this service to several member cities and that the cost of this service is built in to
our basic utility billing rate. The service is currently provided to Lakeville and
Robbinsdale. The LOGIS connection is available and the implementation can be effected
with minimal delay.
Analysis
Our analysis included an estimation of the number and types of transactions the City may
generate during the course of a year based on the current customer base. This includes
the number of ACH transactions generated,the number of"returned" (NSF items)based
on current trends and actual experience,the number of files to be created and the number
of Notice of Change(NOC)transaction that may be encountered.
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Our initial participation levels will be low, something in the neighborhood of 5%to 7%o
• based on the experience of other communities when this service was originally offered.
This was twelve to twenty-four months ago and they have trended upward since the
initial introduction. Their experience, over time, increased that participation to 12%to
18% of their residential customer base. For purposes of comparison,we have assumed a
15%participation rate as the optimum. For an outside comparison,we received data on
Excel Energy and Reliant Energy. Their current participation rate is 35%to 45%for
monthly billings. (Data from Twin City Federal.) Our billing cycle is quarterly and we
have assumed that one-third of those that participate on a monthly basis would
conceivably participate with the City in this program.
Recommendation
We are suggesting that the City move forward with our current banking partner,Wells-
Fargo, in this project. Their cost is similar on a per transaction basis with the other two
banking institutions. And,there are several benefits to Wells-Fargo's proposal. Amounts
collected are immediately deposited into our interest bearing account and then"swept"
into our money market on the day collection is effected from each customer. Amounts
received will be used in calculating our compensating balance agreement charges. Wells-
Fargo currently provides this service to two other cities in our area, Minneapolis and
Lakeville and has experience with LOGIS. There are no additional account maintenance
charges for having another bank account at another institution. Finally,there are no
additional collateral issues as we currently have a collateral agreement with Wells-Fargo
at a level that already covers our deposits. These are the tangible advantages.
Adding another banking service provider would increase the workload of reconciling
another account. (We currently have two bank accounts that are reconciled on a monthly
basis.) Dealing with another bank that has a relationship with our primary banker should
there be a transaction issue adds another level of inquiry should there be an issue. With
one primary vendor, it removes the some of the ambiguity of responsibility. The time
involved to ensure monies are promptly transferred from another banking service
provider to our primary banking service provider is another step added to the process that
could be eliminated by using the current banking service provider.
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FEES FOR ACH SERVICES
Notification File or
Setup Monthly Fee per Fee per Return of change Detail Wire
Vendor Fee Maint Fee File/Batch Transaction Items Pre-Note (NOC) Correction Collateral Funds
Wells Fargo Bank,NA $ - $ 20.00 $ 12.50 $ 0.08 $ 1.75 same as batch $ 1.75 No charge N/A N/A
Bremer Bank $ - $ 25.00 $ 7.00 $ 0.05 $ 4.00 $ 0.50 $ 2.00 $ 20.00 No charge $ 10.00
US Bank $ $ 15.50 $ 10.00 $ 0.06 $ 1.50 same as batch $ 1.50 $ 20.00 No charge $ 10.00
ASSUMPTIONS
Participation Levels 2% 5% 10% 15% 20% 25%
Number of customers participating 179 447 894 1,340 1,787 2,234
Number of Transactions per Year 716 1,788 3,576 5,360 7,148 8,936
Estimated Number of NSF's per year 2 5 10 15 20 25
Estimated Number of NOC's per year 4 10 20 30 40 50
ANNUALIZED COSTS/PER TRANSACTION COSTS
Vendor
Wells-Fargo,NA
Participation Levels 2% 5% 10% 15%° 20% 25%
Monthly fees $ 240.00 $ 240.00 $ 240.00 $ 240.00 $ 240.00 $ 240.00
File fees $ 300.00 $ 300.00 $ 300.00 $ 300.00 $ 300.00 $ 300.00
Transaction fees $ 57.28 $ 143.04 $ 286.08 $ 428.80 $ 571.84 $ 714.88
Notify of change $ 7.00 $ 17.50 $ 35.00 $ 52.50 $ 70.00 $ 87.50
Return items $ 3.50 $ 8.75 $ 17.50 $ 26.25 $ 35.00 $ 43.75
Total annual cost $ 607.78 $ 709.29 $ 878.58 $ 1,047.55 $ 1,216.84 $ 1,386.13
Cost per payment $ 0.85 $ 0.40 $ 0.25 $ 0.20 $ 0.17 $ 0.16
Bremer Bank
Participation Levels 2% 5% 10% 15% 20% 25%
Monthly fees $ 300.00 $ 300.00 $ 300.00 $ 300.00 $ 300.00 $ 300.00
File fees $ 168.00 $ 168.00 $ 168.00 $ 168.00 $ 168.00 $ 168.00
Transaction fees $ 35.80 $ 89.40 $ 178.80 $ 268.00 $ 357.40 $ 446.80
Wire transfer costs 24 annually $ 240.00 $ 240.00 $ 240.00 $ 240.00 $ 240.00 $ 240.00
Notify of change $ 8.00 $ 20.00 $ 40.00 $ 60.00 $ 80.00 $ 100.00
.Return items $ 8.00 $ 20.00 $ 40.00 $ 60.00 $ 80.00 $ 100.00
Total annual cost $ 759.80 $ 837.40 $ 966.80 $ 1,096.00 $ 1,225.40 $ 1,354.80
Cost per payment $ 1.06 $ 0.47 $ 0.27 $ 0.20 $ 0.17 $ 0.15
U.S.Bank
Participation Levels 2% 5% 10% 15% 20% 25%
Monthly fees $ 186.00 $ 186.00 $ 186.00 $ 186.00 $ 186.00 $ 186.00
File fees $ 240.00 $ 240.00 $ 240.00 $ 240.00 $ 240.00 $ 240.00
Transaction fees $ 42.96 $ 107.28 $ 214.56 $ 321.60 $ 428.88 $ 536.16
Wire transfer costs 24 annually $ 240.00 $ 240.00 $ 240.00 $ 240.00 $ 240.00 $ 240.00
Notify of change $ 6.00 $ 15.00 $ 30.00 $ 45.00 $ 60.00 $ 75.00
Return items $ 8.00 $ 20.00 $ 40.00 $ 60.00 $ 80.00 $ 100.00
Total annual cost $ 722.96 $ 808.28 $ 950.56 $ 1,092.60 $ 1,234.88 $ 1,377.16
Cost per payment $ 1.01 $ 0.45 $ 0.27 $ 0.20 $ 0.17 $ 0.15
.a,. ,
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Memorandum
Date: November 14, 2002
To: Financial Commission
From: Douglas Sell
Director of Fiscal and Support Services
RE: Agenda Item#5
RFP-Insurance Agent Services
Background
Earlier this fall, the City Council approved the RFP for Insurance Agent Services and we
submitted the RFP for bid. In response to our RFP, we received two proposals, one from
the current provider and one from a recognized agent servicing a number of
municipalities in Minnesota. Our initial opinion was that both proposals were greater
than what staff considered to be an equitable amount of compensation for services
rendered.
However, upon further discussion with both firms submitting proposals,we have
• discovered that the fees proposed may not be out of line when compared to the
commission basis of compensation for agent services. Commissions for liability and
property damage coverages are 7%to 10% of the premium base. In out case,that would
be between $10,500 and$15,000 in commission. In addition, commission on the
worker's compensation policy would o 0
be an additional 5/o to 7/o resulting in an additional
P p Y g
cost of$7,500 to $11,500. (Through arrangement with the LMCIT,the premium for
worker's compensation is limited to 3% of the premium or$5,100.)
The proposal from A.J. Gallagher provides for liability and property damage, inland
marine and performance bonds/policies. Their fee for these services is $11,000 and
includes the necessary preparatory work to procure these polices. It does not include the
worker's compensation policy and premiums associated with that policy. (According to
he current agreement,they are permitted to collect the premiums on the worker's
compensation policy.)
The proposal from T.C. Field provides for procurement of all insurance policies currently
in force including liability and property damage,worker's compensation, inland marine
and performance bonds. Their fee is $12,500 for these services and includes the
necessary preparatory work to procure these polices.
Process
Our current agreement expires on December 31, 2002. We do have the ability to extend
the agreement, if necessary, on a month-to-month basis. Our policy year is April 1 to
March 31. The first quarter of next year is important as we develop the data as the basis
• for our premium/ratings.
It is possible to have an agreement in place prior to year's end with either of the
companies noted above.
Recommendation
It is our suggestion that staff continue to negotiate with both vendor to develop an
acceptable agreement for services that best meets the City's needs and is within out fiscal
limitations. Following negotiation, that the City Council would award the services
agreement to the vendor that best represents our interests.
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