AGENDA #4p

 

MEMORANDUM

 

TO:                  Mayor and Town Council

 

FROM:            W. Calvin Horton, Town Manger

 

SUBJECT:       Banking Services Agreement and Revision of Cash Management Plan

 

DATE:             June 30, 2004 

 

 

The attached resolutions would authorize the Town of Chapel Hill to enter into an agreement with Central Carolina Bank to provide banking services for a three year period beginning in August 2004, and amend the Town’s Cash Management Plan.  Extensions of this agreement beyond this three year period would be contingent upon receipt of satisfactory service from Central Carolina Bank. 

 

BACKGROUND

 

Proposals for banking services were last solicited by the Town of Chapel Hill in 1997.  In keeping with sound financial practices, we recently sought proposals to determine which financial institution could provide the Town with the best combination of services and investment options available at a reasonable cost.  As we examined banking service alternatives, we also determined that we should amend the Town’s Cash Management Plan so that we could obtain the highest level of service at the lowest overall cost to the Town.

 

DISCUSSION

 

Banking Services

 

On May 7, 2004, we sent a Request for Proposal to the following banks:

 

·        Bank of America

·        Branch Banking and Trust

·        Central Carolina Bank

·        First Citizens Bank

·        RBC Centura

·        Wachovia Bank

 

We held a required conference for the bankers on May 17, 2004.  Except Branch Banking and Trust (BB&T) which is anticipating an upcoming merger, all the banks attended the conference and submitted requests for proposals by the May 24, 2004 due date.

 

A committee comprised of four members of the Finance Department reviewed each of the banking services proposals.  In reviewing proposals for banking services, we were interested in the ability of the banks to provide a number of necessary services, including: 

 

·        Investment options, including an overnight investment sweep account

·        Cumulative CD-Rom for check image storage and retrieval

·        Current day availability of information online

·        Lockbox services processed nearby

·        Positive Pay fraud prevention services

·        Payroll Cards for those employees not on direct deposit

·        Availability of employee banking services for all Town employees, such as free checking, reduced fees on loans and seminars on financial planning

 

The committee first considered services that each bank could provide.  After each member of the committee had reviewed all five proposals independently, the committee met as a group to compare what they viewed as strengths and weaknesses associated with each proposal.  Following this review, the committee analyzed a comparison of fees charged by each bank.  While available services are critical to meeting the needs of the Town, the costs of obtaining these services is also an important consideration as we strive to maintain sound financial practices. The selection was narrowed to two banks based on investment options, services and costs.  References were checked for these two banks to determine the satisfaction of other local government entities with services received.

 

After careful review and consideration of proposals received and discussions with other local government finance staff, we believe that Central Carolina Bank could provide the best combination of services and investment options required by the Town at a reasonable cost.  Central Carolina Bank currently provides banking services for Orange County, the Town of Hillsborough, Chapel Hill/Carrboro Schools, Durham County, City of Durham and several other municipalities.

 

In addition to the availability of the services requested, references indicated that Central Carolina Bank offered responsive, high quality customer service.  The Town of Chapel Hill is already utilizing the services of Central Carolina Bank for one of its Public Housing accounts and has had a positive relationship with this bank.  In addition, Orange County uses the same financial software system utilized by the Town of Chapel Hill, and indicated that the banking reconciliation process and other processes are compatible with our financial software system.  

 

Cash Management Plan

 

As we reviewed the Town’s Cash Management Plan in conjunction with soliciting proposals for banking services, we determined that the Town’s Plan considered interest income received from banking without considering the expenses or service level related to banking services.  Our current Plan requires a high investment rate for bank deposits.  Section VI, 4-2 of the Town’s current Plan states that the Town’s bank shall provide:

 

A fully secured and collateralized time deposit investment account with open maturity dates each 30 days and with a rate of return at least equivalent to or higher than the official State Funds Certificate of Deposits rate established by the N.C. Council of State.

 

As currently written, no bank proposal that we received met our investment policy.  We believe that we should amend the Cash Management Plan to permit bank selection based on interest received, charges incurred, and service level provided.  Because banks establish interest rates for investors at the same time they establish a fee schedule, we have found that, while some banks offer higher interest rates, they simultaneously offer higher fees.  We believe that the Town should be able to seek a bank which can provide a good balance between interest return and bank fees charged.

 

We recommend that the Cash Management Plan be revised to include the acceptance of electronic payments such as credit cards, debit cards and electronic fund transfers and to include all investments authorized by G.S. §159-30(c) and G.S. §147-69.1(c).  Section VI, 4-2 discussed above should be revised to state that a financial institution should provide “investment options, including an overnight investment sweep account, which will provide a competitive interest rate with minimal fees.”  A proposed addition in Section VII includes the required semi-annual submission of the LGC-203, Report of Cash Balance, to the Local Government Commission. Also, the Cash Management Plan should be revised to delete references made to the Town’s policy on apartheid.

 

RECOMMENDATION

 

We recommend that the Council adopt the two following resolutions:

 

That the Council amend the Cash Management Plan of July 11, 1988, to require that the Town select a financial institution that offers an investment interest rate consistent with State statute, and to update the Plan to reflect current practices.

 

That the Council authorize the Town to enter into an agreement with Central Carolina Bank, allowing this financial institution to provide banking services to the Town of Chapel Hill for a period of three years beginning in August 2004.  Extension of the agreement period would be contingent upon receipt of satisfactory service from Central Carolina Bank.

 

 

A RESOLUTION AUTHORIZING THE TOWN TO ENTER INTO A BANKING AGREEMENT WITH CENTRAL CAROLINA BANK (2004-06-30/R-11)

 

BE IT RESOLVED by the Council of the Town of Chapel Hill that the Council hereby authorizes the Town to enter into a banking agreement with Central Carolina Bank for a period of three years beginning in 2004.

 

This the 30th day of June, 2004.

 

 

A RESOLUTION AMENDING THE CASH MANAGEMENT PLAN (2004-06-30/R-12)

 

WHEREAS, the Town established a Cash Management Plan on July 11, 1988; and

 

WHEREAS, the Town seeks as a depository, a financial institution offering a high rate of return on cash deposits after taking into account service charges and service level;

 

NOW, THEREFORE, BE IT RESOLVED by the Council of the Town of Chapel Hill that the Cash Management Plan be revised to read as follows:

 

SECTION I

 

The Council hereby charges the Finance Director, with the cooperation of all Town departments and officials, to devise and implement a Cash Management Plan which addresses cash receipts, cash mobilization and management of available resources (investments), cash disbursements, banking relations, and monitoring and reporting on the Plan.  The Finance Director shall submit the Cash Management Plan to the Town Manager for review and approval.  The Town Manager shall issue implementing instructions, consistent with this resolution, for the Cash Management Plan as part of the Administrative Policies and Procedures of the Town.

 

SECTION II

 

The independent auditor for the Town of Chapel Hill shall monitor the Town’s compliance with the established Cash Management Plan and the reports of the Finance Director thereon.  He shall report his findings and recommendations annually to the Council as part of the Town audit.

 

SECTION III

 

The following procedures are hereby established and shall be incorporated in the cash receipts section of the Cash Management Plan:

 

  1. Except as otherwise provided by law, all taxes and other moneys collected or received by an officer of employee of the Town shall be deposited in an official depository in accordance with G.S. §159-32.

 

  1. Moneys received shall be deposited daily in the form and amounts received, except as otherwise provided by statute.  These moneys shall be deposited in such a manner as to receive the current day’s credit.

 

  1. The Town may receive electronic payments as defined in G.S. §147-86.20 and in accordance with G.S. §159-32, including credit cards, debit cards, and electronic fund transfers.

 

  1. Moneys due to the Town either by another governmental agency or by an individual shall be promptly billed, collected and deposited.  The Finance Director shall monitor the status of all uncollected moneys owed to the Town and implement measures to collect any and all delinquent accounts except as otherwise provided by law.

 

  1. The Finance Director shall periodically review each revenue source of the Town and examine the methods for prompt billing, collection, depositing and reporting of those sources.  These methods shall be analyzed with individuals in other departments responsible for the particular revenue source, and changes shall be instituted if quicker and more efficient means of revenue realization are possible.

 

SECTION IV

 

The following procedures are hereby established and shall be incorporated in the cash mobilization and management of available resources (investments) section of the Plan:

 

  1. The Finance Director shall establish a central depository system for the Town.

 

  1. Pursuant to G.S. §159-25(4), the Finance Director shall receive and deposit all moneys accruing to the Town in to the Town’s cash concentration account, unless another officer or employee is duly authorized to do so and is supervised by the Finance Director.

 

  1. All moneys received from the State shall be received through the North Carolina Electronic Payment Program where applicable.

 

  1. The Finance Director shall review daily the position of the cash concentration account and invest any and all excess deposits.  Eligible investments shall be strictly in accord with G.S. §159-30(c) and G.S. §147-69.1(c) including obligations of the U.S. Government, time deposits, repurchase agreements, and the North Carolina Cash Management Trust.

 

  1. The Finance Director shall strive to keep 100% of the Town’s moneys invested at all times.  This necessitates the cash concentration or checking account being kept in an interest-bearing account.

 

  1. The Finance Director shall continuously forecast the Town’s future cash needs and invest moneys for longer periods of time where practicable.

 

 

SECTION V

 

The following procedures are hereby established and shall be incorporated in the cash disbursements section of the Town’s Cash Management Plan:

 

  1. The method in which appropriations and other available resources are expended shall be performed pursuant to G.S. §159-28(b).

 

  1. Billings to the Town for goods received or for services rendered shall not be paid early or late, but on the discount date or the due date to the extent practicable.

 

  1. The Finance Director shall establish a system of inventory and check to insure that inventories will remain at levels necessary to conduct business without being excessive.

 

  1. The Finance Director will consolidate all payments to a particular vendor, rather than issuing separate checks for each billing, to the extent practicable.

 

  1. A cost-effective disbursement cycle shall be established to create the maximum amount of investable funds while at the same time insuring all bills are paid by their due date.  The disbursement cycle shall be reviewed periodically by the Finance Director and changes shall be instituted when appropriate.

 

SECTION VI

 

The following procedures are hereby established and shall be incorporated in the banking relations section of the Cash Management Plan:

 

  1. The Finance Director will maintain the minimum number of bank accounts for official operation.  A cash concentration account and imprest payroll account shall be required accounts.

 

  1. The Finance Director shall maintain in the Town’s accounts enough moneys to meet the Town’s daily obligations.

 

  1. An official depository shall be selected based on a competitive proposal.  A Request for Banking Services shall be submitted to those financial institutions the Finance Director has determined to be financially sound, based on a comprehensive analysis of the institutions’ financial positions.  The selection process will be carried out every three years.  The Finance Director shall recommend an official depository to be designated by the Council based on his evaluation of the proposals.

 

  1. In order to serve as the Town’s depository, a financial institution shall provide the following as minimum services:

 

a)      Automatic payroll deposit capability (through the electronic Automated Clearing House system) which is compatible with the Town’s established automatic payroll deposit system including specific payroll time schedules.

 

b)      Investment options, including an overnight investment sweep account, which will provide a competitive interest rate with minimal fees.

 

c)      Capability to process for deposit all coins and currency collected from the Town’s public transportation system and parking facilities.

 

  1. Any financial institution not selected as the official depository but receiving Town funds for investment shall be analyzed by the Finance Director for financial stability if the amount of time deposits exceeds the federal depository insurance coverage of $100,000.

 

SECTION VII

 

The following procedures are hereby established and shall be incorporated in the monitoring and reporting section of the Cash Management Plan:

 

  1. The Finance Director shall report quarterly to the Council concerning the status of investments, the collateralization of Town moneys, and the comparison of actual receipts and disbursements to the budgeted figures and cash flow projections.

 

  1. The Finance Director shall submit semi-annually the LGC-203, Report of Cash Balance, to the secretary of the Local Government Commission pursuant to G.S. §159-33.  

 

  1. Significant changes in banking services or costs, and the issuance of a Request for Proposal for Banking Services will be reported to the Council.

 

  1. The Finance Director shall report regularly to the Council on delinquent special assessment accounts.

 

  1. Each year the Plan shall be reviewed by the Finance Director during budget preparation.  The Finance Director shall propose amendments to the Plan, as appropriate, to further enhance the Town’s Cash Management Program.  All Plan amendments shall be submitted to and approved by the Town Manager before being implemented.

 

SECTION VIII

 

All employees of the Town shall follow the Cash Management Plan and provisions of this resolution, and the willful or continued failure to do so is sufficient cause for possible disciplinary action.

 

This the 30th day of June, 2004.