INLAND EMPIRE UTILITIES AGENCY

REQUEST FOR PROPOSAL

Banking Services

RFP-KB-09-041

Proposal Due Date

October 27, 2009

4:00 p.m.

INLAND EMPIRE UTILITIES AGENCY

REQUEST FOR PROPOSAL

BANKING SERVICES

TABLE OF CONTENTS

I. INTRODUCTION 1

II. CONDITIONS QUALIFYING A BANKING INSTITUTION TO PROPOSE 1

III. RESPONSE GUIDELINES 2

IV. CONTRACT TERMS 4

V. DESCRIPTION OF OPERATING SYSTEM 5

VI. REQUIRED SERVICES

1. Deposit Services 7

2. Electronic Fund Transfers/Online Banking Services 8

3. Positive Pay 8

4. Stop Payments 8

5. Processing of Returned Items 9

6. Purchasing Card 9

7. Sweep Service 9

8. Daylight Overdraft Protection 9

9. Payroll Direct Deposit 9

10. Free Checking 10

11. Trustee Services 10

12. Check Imaging – CD ROM 10

13. Account Maintenance 10

14. Issuance of Credit Cards 11

15. Training and Support 11

16. Other Innovations, Services, and/or Enhancements 11

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INLAND EMPIRE UTILITIES AGENCY

REQUEST FOR PROPOSAL

BANKING SERVICES

TABLE OF CONTENTS

VII.PROPOSAL FORMAT AND CONTENT 11

1. Executive Summary 12

2. Banking Institution Identification 12

3. Client References 12

4. Banking Institution Qualification 12

5. Strategic Approach 12

6. Calculation of Bank Compensation 13

7. Conversion Plan 13

8. Resource Personnel 14

9. Backup, Emergency and Disaster Recovery 14

10. Cost Proposal 14

VIII.PROPOSAL EVALUATION AND CRITERIA 14

Attachment A – Cost Proposal 15

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INLAND EMPIRE UTILITIES AGENCY

RFP-KB-09-041 – Banking Services

I. INTRODUCTION

Inland Empire Utilities Agency (IEUA) is requesting proposals from qualified banking institutions to establish a contract for Banking Services. The primary objective of this proposal is to obtain the most efficient, high quality services at the most reasonable cost. The Agency is also interested in various technological advances and pilots that could improve our banking and cash management processes. Currently the Agency maintains a commercial banking relationship with three banking institutions.

IEUA was formed on June 6, 1950 under the Municipal Water Agency Act of 1911, as a municipal corporation, with a mission to supply supplemental imported water to the ChinoBasin. Since then, IEUA has expanded its mission from a supplemental water supplier to a regional wastewater treatment agency with domestic and industrial disposal systems, and energy/production facilities. In addition, IEUA has also become a recycled water supplier, a biosolids/compost provider, and continuing its leading role in water quality management and environmental protection.

The Agency's service area encompasses approximately 242 square miles in the western portion of San BernardinoCounty, in area most commonly referred to as the Inland Empire. The service area includes the Cities of Chino, Chino Hills, Fontana, Montclair, Ontario, Rancho Cucamonga, and Upland, as well as the Monte Vista and Cucamonga Valley Water Districts and services approximately 823,000 residents.

Additionally, the Agency provides administrative and operation services to two joint powers authorities (JPA):Inland Empire Regional Composting Authority (IERCA) and the Chino Basin Desalter Authority (CDA). The purpose of the IERCA is to provide for the operation of a regional nuisance-free, fully enclosedcomposting facility to producehigh grade compost for local agriculture and/or horticulture markets. The function of the CDA is to operate two desalination facilities in Chino that provide potable water to the southern region of the Chino Basin. The administration of the CDA is anticipated to transfer from the Agency to one of the CDA partner agencies as early as July 2010. The new agency may choose to change the banking services for the JPA at that time.

II.CONDITIONS QUALIFYING A BANKING INSTITUTION TO PROPOSE

To be considered for selection, the proposing banking institution must have the following qualifications:

1. The banking institutionmust be a qualified public depository, as defined by California General Statutes, and must perform its obligation under this proposal in compliance with all applicable federal and state laws and regulations, as well as statutes and policies. The banking institution must be able to offer the full range of banking services required by this request for proposal (RFP) throughout the duration of the contract with the Agency.

  1. The banking institution must be Federal or State of California chartered. The bank is required to collateralize public funds deposits under the California Government Code, Sections 53651 and 53652. Copies of the reports filed with the State of California shall be made available to the Agency upon request.
  1. The banking institution must either:

(a) Be at least three (3) years old; have total assets in excess of ten (10) billion dollars; and a core capital/asset ratio of 5% or better; or

(b) Have total assets in excess of two billion dollars;and a core capital/asset ratio of 6% or better.

  1. The banking institution has been evaluated by an independent rating service as “Outstanding” or “Satisfactory” for the last eight consecutive quarters.
  1. The banking institution must be in compliance and good standing with the Community Reinvestment Act.
  1. The banking institution must have experience in providing banking services for the public sector.

III.RESPONSE GUIDELINES

  1. Acceptable banking proposals should address all of the items identified in the Proposal Format and Content (Section VII),in the order that they appear. Deviation from these requirements may result in a reduced score in ranking. Each proposal package should contain one unbound original and five (5) bound copies of the proposal.
  1. Schedule (Dates are subject to change)

Request for Proposal IssuedSeptember 24, 2009

Mandatory Proposal ConferenceOctober 13, 2009

Due Date for ProposalsOctober 27, 2009

Interview with FinalistsNovember 17,2009

Finance Committee ApprovalDecember 9, 2009

Board ApprovalDecember 16, 2009

Selected Banking InstitutionNotifiedDecember 22, 2009

Award of ContractJanuary 6, 2010

Sign and Process ContractJanuary 20, 2010

Notice to ProceedJanuary 25, 2010

  1. A Proposal Conference will be held on Tuesday, October 13, 2009 at 1:30p.m. to answer any questions that prospective banking institutions may have regarding the Agency’s RFP at:

Inland Empire Utilities Agency – Board Room

6075 Kimball Avenue

Chino, CA 91708

An addendum to the RFP will be issued, if necessary, following the Proposal Conference.

  1. Banking institution mustattend the Proposal Conference in order to be considered eligible for the selection process. Proposals submitted only by the banking institutions attending the Proposal Conference will be evaluated.
  1. Any questions related to this RFP should be made in writing, submitted by no later than October 7, 2009 to Inland Empire Utilities Agency. Address all communications to Agency employee listed below.

For Contract:

Kathleen Baxter
Contracts and Procurement Department
6075 Kimball Avenue

Chino, CA 91708

(909) 993-1678 Voice (909) 993-1987or (909) 993-9056 Fax

To ensure that written requests are received and answered in a timely manner, e-mail correspondence is acceptable, but other forms of delivery, such as postal and courier services can also be used.

The Agency is not responsible for oral statements made by any other Agency employees concerning this request for proposal. If the banking institution requires specific information, the banking institution must request it in writing to Contracts and Procurement Department or Financial Planning Department.

6.All submitted proposals and information included therein or attached thereto shall become property of the Agency. Proposals and supporting materials will not be returned to the banking institutions.

  1. The banking institutions shall wholly absorb all costs incurred in the preparation of this proposal.
  1. Proposal packages shall be submitted in sealed envelopes clearly marked “BANKING SERVICES PROPOSAL” RFP No. RKB05019to:

Inland Empire Utilities Agency

Attn: Kathleen Baxter

Contracts and Procurement Department

P.O. Box 9020

Chino Hills, CA91709

Proposals must be received by4:00 P.M. on Tuesday, October 27, 2009.

  1. All proposals shall be firm for a period of ninety (90) days following the required date of submission.

10.The proposing banking institution may withdraw its proposal subject to the time restrictions indicated below, only if the banking institution can establish to the Agency satisfaction, that a mistake was made in preparing the proposal.

(a)The banking institution declaring a mistake must provide a written notice to the Agency within five (5) calendar days following the scheduled closing date, specifying in detail, how the mistake occurred, and how the mistake made the proposal materially different than it was intended.

(b) Withdrawal of the proposal will only be permitted for mistakes made in the completion of the proposal. The banking institution who claims a mistake shall be prohibited from submitting further proposals on the banking services in which the mistake in proposal was claimed.

11.The Agency reserves the right to accept or reject any or all proposals, or waive any irregularity in the best interest of the Agency.

12.After a final decision is made, the successful banking institution will be notified to negotiate a contract with the Agency and remaining vendors will be notified in writing of their selection status.

IV.CONTRACT TERMS

1.The selected banking institution shall be designated as the Agency’s depository for an initial three-year term, with an option to extend the contract for an additional three (3) year period under the same terms and conditions. Service fees and interest rates may be renegotiated after the initial contract term.

2. The depository contract shall provide that the Agency reserves the right to cancel any agreement at any time upon thirty (30) days prior written notice of its intent to terminate any agreement. The designated depository shall provide the Agency at least ninety (90) days prior written notice of its intent to terminate any agreement.

V.DESCRIPTION OF OPERATING SYSTEM

The Agency currently maintains bank accounts for each of the three entities: IEUA, IERCA and CDA. As mentioned in Section I Introduction, a change in the administration of the CDA as early as July 2010 may result in a change in the banking services for the JPA.

1.Description of Bank Accounts

  • General Accounts–These accountsareeachAgency’sgeneral operating accounts. Receipt of revenues can be in the form of checksandcash (mostly checks), wire transfers, and ACH receipts. Disbursements are made by checks, wire transfers,ACH payments, and EFT transactions set up by phone for payroll taxes, retirement and healthcare obligations.Computer-prepared check disbursements are made through these accounts. Currently, checks are prepared on Wednesday and Thursday of each week and released by the end of the next working day. A predetermined minimum amount is maintained in each general account. Funds are transferred from the overnight investment SWEEP account to cover daily disbursements not covered by deposits, (see SWEEP account description below)
  • Payroll Account – The Agency’s payroll account supports 26 bi-weekly payrolls per year. Agency’s employees are paid through a combination of automatic direct deposit and check. All deposits are from the General Account. Only IEUA maintains a payroll account.
  • SWEEP Account – This account serves as an overnight interest earning investment account for balances in the general account that exceed a minimum targeted base amount. Collateral of 110% minimum of the account balances must be provided by the banking institution in the form of treasuries or government agencies.
  • Money Market / Short Term Investment Accounts – This account provides each entity a liquid short term investment option with competitive yield in interest and flexibility.
  • Trustee Accounts – Custodial accountsare established to safe keep and clear securities on a delivery versus payment basis and report investments to ensure the protection of its security interest in portfolio investments.
  • Workers’ Compensation Account – This account is used to pay workers’ compensation claims. Disbursements are made by check. This account is only for the IEUA entity.
  • Gym Membership Account – This account is used to pay employees' monthly membership fees to 24 Hour Fitness. Monthly fees are drawn by 24 Hour Fitness. This is a benefit provided under the current employee contract due to expire on June 30, 2010.

2.Bank Account Transactions

During a fiscal year, on a consolidated basis (IEUA, CDA, and IERCA),approximately $150 million in electronic fund transfers, checks, and cash are deposited to the general accounts. The accountspayable disbursements areabout$165 million through electronic fund transfers and checks. The amount of payroll direct depositto employees and payroll taxes per payroll biweeklyaverage$690,000and $360,000, respectively. The custodial account balancefor the investment portfolio is approximately $70 million.

The number of transactions indicated in this RFP isaverage activity of the Agency’s bank accounts. Minimum and maximum transactions will vary based on the operational needs. The averagemonthlyvolume of activity for the major accountsper entity is as follow:

General Account
Average Monthly
Volume
Description / IEUA / IERCA / CDA / Combined
Number of Checks Paid / 750 / 42 / 38 / 830
Number of Checks Deposited / 156 / 40 / 10 / 206
Incoming Wires / 23 / 0 / 15 / 38
Outgoing Wires / 23 / 0 / 15 / 38
ACH Receipts / 6 / 1 / 1 / 8
ACH Payments / 71 / 1 / 6 / 78
Payroll Account (IEUA Only)
Description / Average Monthly
Volume
Direct Deposit Payments / 750
Number of Checks Paid / 58

VI. REQUIRED SERVICES

The services required to accommodate the Agency’s current and anticipated banking needs are as follows:

  1. Deposit Services

The banking institution must furnish the Agency with separate checking accounts for each entity. Deposits are normally made once a day and disbursements are also made through these accounts. The Agency currently replaced a courier service that picked up deposits on a daily basis with an automated electronic deposit system which allows the Agency to submit scanned checks electronically to banking institution for each entity on a daily basis. Original checks are retained by the Agency on site for minimum of 30 days and subsequently destroyed.

The Agency is to be given credit as collected funds for all items that are deposited on the same day as the deposit is made. Items deposited that clear at institutions located within the district of Federal Reserve Bank of San Francisco will be considered collected funds within one business day as a maximum. The banking institution will credit the Agency’s account for incoming wire transfers and ACH deposits on the day received regardless of the time of receipt during the day.

  1. Electronic Fund Transfers/Online Banking Services

The Agency currently utilizes Internet banking to initiate wire transfers, ACH transactions, and transfers between accounts when necessary. Notification of wire and ACH transfers is provided online. The Agency desires to continue using these types of services. In addition, the Agency is interested in setting up more electronic fund transfers (EFT) to make vendor payments such that an accounts payable file can be submitted electronically to the bank to process payments.

The banking institution must provide web based online banking service which also includes such services as electronic download of transactions, image inquiry, information reporting, business statements, stop payments, positive pay, account balance inquiry, transaction inquiry, deposit history and other online web applications that can provide added convenience and cost savings.

The electronic download of transactions should include all items posted to the general account(s) the prior business day and comply with BankAdministrationInstitute (BAI) format and compatible with the Agency’s ERP system (SAP).

  1. Positive Pay

The Agency currently utilizes positive pay services on the general accounts. Files are submitted to the current bank on the same day the check is issued. The proposed banking institution will provide this service to include such services as payment of matching checks by check number, vendor name and check amount, exception reports, return instructions, and holdover exceptions. Notification of file uploads and exceptions will be provided electronically via email or fax, where available.

The positive pay should enable the Agency to perform the following tasks on-line: monitoring debit, credit, or both types of transactions, reviewing of incoming ACH transactions not previously authorized, and pay and return the transactions. The above service transactions can only be accessed by the Agency's authorized staff.

  1. Stop Payments

The banking institution will provide online confirmations of stop payments. Stop payments shall be given same day notification.

Backup procedures (via phone and fax), forms and contacts shall be designated in the event of system failure or emergency. The banking institution will provide hard copy confirmations.

  1. Processing of Returned Items

The banking institution must redeposit returned items due to “non-sufficient funds”. Items returned a second time should be forwarded to the Agency on a daily basis.

  1. Purchasing Cards

The Agency is utilizing the CalCard purchasing cards programthrough U.S. Bank to streamline small dollar disbursements and reduce transaction processing costs. The purchasing card system must be compatible with the Agency’s ERP system (SAP), and include software and reports that allow the Agency to properly account for all authorized purchases by vendor. The system should provide detailed purchase records and allow for the allocation of costs to multiple general ledger accounts. Specifically, the Agency is looking for software which will interface with Agency software (SAP) for file importing/downloading purchasing card transactions directly into the Agency’s computer system. The banking institution must describe the service in detail and indicate the cost to the Agency for the service.

Current annual volume is estimated at approximately $100,000, using10cards. We anticipate expanding this program within a year to process between 25-50 cards with estimated annual expenditures ranging from $100,000 to $200,000.

  1. Sweep Service

The Agency utilizes the sweep investment service to sweep excess funds between the general account and the SWEEP account in order to maintain the minimum target balance designated for the deposit account. Currently, the target balance for the deposit accounts for IEUA and CDA are $700,000 and $50,000, respectively. The Agency anticipates the use of this service for all three entities.

  1. Daylight Overdraft Protection

The banking institution will provide a minimum of $5,000,000 daylight overdraft protection. The daylight overdraft protection will be provided at no additional cost to the Agency.

  1. Payroll Direct Deposit

The banking institution must provide payroll direct deposit service to the Agency’s employees. The banking institution must guarantee direct deposit amounts are available in individual personal bank accounts on the Agency’s bi-weekly pay date on Friday. All payroll deposits must be available to the employee at the start of business on pay day.