The Santa Barbara City Council has approved a two-year contract with Union Bank for banking services.
The city had put the contract out to bid, but decided to stay with Union Bank.
City Finance Director Bob Samario said that shortly after Union Bank acquired Santa Barbara Bank & Trust, the city’s banking fees went up.
As a result, the city decided to test the market and put out a request for proposals.
Six banks responded to the request and the city scored JP Morgan Chase Bank, Union Bank and Bank of the West the highest.
The city’s evaluation team threw out three other applicants, American Riviera, Farmers and Merchant and Montecito Bank & Trust, because they could not meet the minimum city requirements.
Montecito Bank & Trust, in particular, had only small government clients, no experience in implementing or transitioning services, and no “lock-box” services to process utility bills, according to Samario. Bank of the West was eliminated because it does not accept cannabis-related dollars.
When the city deposits funds, it won’t single out cannabis-related dollars, Samario said. Internally, the city of Santa Barbara will know how much comes from cannabis taxes, but when it makes a deposit, individual account sources are not listed.
“MUFG Union Bank will accept as deposits all legally collected fees and taxes from our government clients,” said Debbie Whiteley, a spokeswoman from Union Bank.
With Union Bank, the monthly fees would total about $2,000 per month, a drop from about $5,300 in the existing contract; with Chase Bank, the fee would be zero.
The city, however, preferred Union Bank because of the impacts of changing banks.
“Transitioning to a new bank typically takes at least one year and requires a significant amount of work by staff from Treasury staff and Information Technology staff,” Samario said.
“Much of the work involves changing out all electronic communication systems between the city and the new bank and testing processes. Over the next year, these same staff are involved in other system-related efforts, including implementing a new permit tracking system in Community Development, upgrading the city’s financial management system, and implementing a new time and attendance system. As such, their ability to devote time to implementing new banking services will be severely hampered by existing priorities.”
The city had faced pressure from some members of the community to find a bank with no ties to the Dakota Access Pipeline, an 1,100-mile pipeline that connects the Bakken shale oil fields in North Dakota to storage facilities in Illinois. Union Bank and Chase are both involved in the Dakota Pipeline, and lost 15 points by an evaluation team that rated their proposals.
The pipeline began operating in June. The Dakota Access Pipeline was opposed by environmental organizations and some Native American groups over risks to drinking water and the protection of sacred burial grounds. Some cities have adopted socially responsible investment policies and divested entirely from banks that financed the pipeline.
Montecito Bank & Trust does not have financial connections to the pipeline so the city is considering using the local bank for its investment trust services.
“Now we are in a great place where staff has a great recommendation that kind of blends the best of both worlds,” Councilman Gregg Hart said. “This should be a win-win for everyone involved.”
— Noozhawk staff writer Joshua Molina can be reached at jmolina@noozhawk.com. Follow Noozhawk on Twitter: @noozhawk, @NoozhawkNews and @NoozhawkBiz. Connect with Noozhawk on Facebook.
