Meeting_Body
FINANCE, BUDGET AND AUDIT COMMITTEE
JULY 17, 2019
Subject
SUBJECT: CUSTODIAL BANKING SERVICES
Action
ACTION: AWARD CONTRACT
Heading
RECOMMENDATION
Title
AUTHORIZE the Chief Executive Officer to award a five-year, firm fixed-unit rate Contract No. PS133590000 to US Bank N.A. for custodial banking services in an amount not to exceed $1,003,370 inclusive of two, one year options, effective October 1, 2019, subject to resolution of protest(s), if any.
Issue
ISSUE
The existing five-year banking custodial services contract with U.S. Bank Institutional Trust & Custody will expire on September 30, 2019.
Background
BACKGROUND
Metro’s Investment Policy requires that securities purchased for the investment of operating funds and collateral be maintained in the trust department or the safekeeping department of an established bank. The Treasurer is also required to report compliance with the investment policy and provide performance returns for the investments in a quarterly report to the CEO and Board.
Discussion
DISCUSSION
As of March 31, 2019, Metro Operating funds held in custody at US Bank totaled $1.6 billion. Operating funds are the pool of revenue used to pay expenses such as salaries, fuel, project costs, and supplies. To comply with the mandated Investment Policy, Metro requires an external trust department to provide custodial services of operating funds, compliance reporting, and performance measurement services.
Determination_Of_Safety_Impact
DETERMINATION OF SAFETY IMPACT
Approval of this item will not impact the safety of our patrons or employees.
Financial_Impact
FINANCIAL IMPACT
Total proposed fees of $1,003,370 over five years are based on a firm fixed rate applied to estimated market value of assets under custody, the number of transactions applied to a unit price, and the number of accounts subject to compliance monitoring and performance reporting services. The fiscal year 2020 fee of $200,674 is included in the FY20 Adopted Budget under Treasury cost center 5210, in Investment and Debt Management project 610340.
This multi-year contract will be managed by the Treasury department cost center and the Treasurer will be accountable for budgeting the cost in future years.
Impact to Budget
The source of funds for this contract is Prop A, Prop C, TDA Administration. These funds are not eligible for Metro Bus and Rail operations.
Implementation_of_Strategic_Plan_Goals
IMPLEMENTATION OF STRATEGIC PLAN GOALS
Recommendation supports strategic plan goal # 5.2 “Metro will exercise good public policy judgment and sound fiscal stewardship” by safeguarding Metro assets with an established custody bank.
Alternatives_Considered
ALTERNATIVES CONSIDERED
LACMTA’s Investment Policy mandates the use of an external custody bank to safekeep operating fund securities or cash.
Next_Steps
NEXT STEPS
Upon Board approval, staff will execute Contract No. PS133590000 to US Bank N.A. effective October 1, 2019 to provide custodial banking services.
Attachments
ATTACHMENTS
Attachment A - Procurement Summary
Attachment B - DEOD Summary
Prepared_by
Prepared by: Marshall M. Liu, Sr. Investment Manager, (213) 922-4285
Mary E. Morgan, DEO, Finance, (213) 922-4143
Reviewed_By
Reviewed by: Nalini Ahuja, Chief Financial Officer, (213) 922 3088
Debra Avila, Chief Vendor/Contract Management Officer (213) 418-3051
