HomeMy WebLinkAboutFIN-10-003 - Renewal of Banking Services AgreementREPORT
Report To:
Councillor B. Vrbanovic, Chair, and Members of
the Finance and Corporate Services Committee
Date of Meeting:
January 11, 2010
Submitted By:
Dan Chapman; General Manager of Financial Services and
City Treasurer
Prepared By:
Rosemary Upfold; Director of Accounting
Ward(s) Involved: N/A
Date of Report:
December 15, 2009
Report No.:
FIN-10-003
Subject:
RENEWAL OF BANKING SERVICES AGREEMENT
RECOMMENDATION:
THAT the option to extend the City of Kitchener’s banking services agreement with CIBC be
exercised for a period of five years from September 1, 2010 to August 31, 2015;
AND FURTHER THAT the Mayor and Clerk be authorized to execute the necessary
agreements with CIBC to effect the renewal, subject to the satisfaction of the City Solicitor
BACKGROUND:
As a result of a Request for Proposal (RFP) issued in 2005, Council awarded the City’s banking
services to CIBC for a period of five years from September 1, 2005 to August 31, 2010. At that
time, Council also authorized the inclusion of a provision in the agreement to provide the option
to renegotiate an additional five year agreement with the CIBC, subject to Council approval.
REPORT:
Renewal Proposal
Financial Services staff requested that CIBC provide current annualized banking volumes for
the City’s business account activities and volume driven services along with a proposal for a 5
year renewal. Staff then analysed the net cost to the City over a five year period. As well, the
fees proposed by CIBC were compared to the most recent annual report available on banking
pricing practices (based on the actual fees paid by business and government entities to
Canadian chartered banks).
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CIBC’s proposal to the City for banking services results in a net cost reduction of approximately
$10,000 per year over a 5 year period. The net cost includes the cost of the various service
charges less interest earned on the City’s consolidated bank balances. CIBC’s proposed fees
are considerably less than those identified in the banking survey data.
Potential Costs of Conversion to a New Banking Service
If the City were to consider changing banking services providers at this time, it would incur
conversion costs, set up fees and staff time in addition to the direct costs for the banking
services. In 2000, when the City switched to CIBC, the conversion process took approximately
5 months and involved in excess of 1,000 hours of time from staff in Accounting, Budgets,
Revenue, Purchasing, IT and Legal. The conversion costs, set up fees and staff time were
estimated to cost an additional $90,000. As there are currently many higher priority projects
identified for these divisions, external resources would likely be required to implement a banking
conversion resulting in even higher conversion costs.
The conversion costs do not take into consideration the intangible impacts of conversion such
as the knowledge of the current bank processes/systems and the banking relationships
developed over the last ten years, which would be foregone. Staff estimates it took nearly two
years before all aspects of the banking services were running smoothly.
FINANCIAL IMPLICATIONS:
The renewal of the CIBC banking agreement for the optional five year extension will result in an
annual savings of approximately $10,000 for the city’s banking services.
CONCLUSION:
Staff recommend that the City’s banking services agreement with CIBC be renewed for an
additional period of five years from September 1, 2010 to August 31, 2015. This
recommendation is based on:
CIBC has proposed a reduction of $10,000 in annual fees
CIBC’s proposed fees are well below the general banking survey data
Conversion costs would be greater than $90,000
Changing banks will result in business process inefficiencies until staff gain knowledge
of banking processes and develop banking relationships
Over the term of the agreement, staff and the CIBC will continue to explore opportunities to
improve service levels and reduce costs.
ACKNOWLEDGED BY:
Dan Chapman, General Manager of Financial Services & City
Treasurer
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