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ITEM 3.6 Approve Institutional Trust and Custody with US BankD tSTeF O MINNESOTA V DEPARTMENT INFORMATION Request for City Council Action ORIGINATING DEPARTMENT: REQUESTOR: ETING DATE: Administration Dan Jordet, AS February 23, 2015 PRESENTER(s): REVIEWED BY: ITEM #: Consent agenda Lori Johnson, CA 3.6 Approve Institutional Trust and Custody with US Bank AGENDA ITEM DETAILS RECOMMENDATION: It is recommended that US Bank Institutional Trust and Custody be added to the approved list of depositories for the City of Otsego. ARE YOU SEEKING APPROVAL OF A CONTRACT? IS A PUBLIC HEARING REQUIRED? No No BACKGROUND INFORMATION: In order to consolidate and better manage the City's investment assets it has been recommended that all investment instruments be held by one depository for safekeeping and administration. Currently, the City uses three different brokers who hold securities that they have purchased on the City's behalf. Using additional brokers from the approved list of six would require additional safekeeping arrangements to be set up with those brokers. With the proposed designation of US Bank Institutional Trust there is one central location for investment transactions. Four banking concerns who originally expressed interest in responding to the City's RFP for Custodial and Safekeeping of investment instruments were contacted. The four included: • The Bank of Elk River • Wells Fargo Bank • U.S. Bank • BMO Harris Bank KleinBank indicated early in the process that they did not have a department handling such arrangements. RFP's went out on 26 December 2014 with a response deadline of 15 January 2015. After several telephone conversations with The Bank of Elk River and a very good effort on their part to find a way to deliver custody and safekeeping services, they determined that they, like KleinBank, did not have the capacity to provide the requested services. They referred the request to United Bankers Bank who, although they provide such services, is allowed by their charter only to provide such services to other banks. Wells Fargo received and acknowledged receipt of the RFP and promised to respond. When the deadline came and went with no response I called to inquire about the lack of response. Their response was to produce a "rate sheet" 15 days after the deadline. BMO Harris did not return my calls looking for a contact and address for RFP distribution. U.S. Bank provided the only full and complete response to the RFP request. The estimated annual cost of the proposal is about $ 11,500 or 4.792 basis points (0.04792%) of the average $ 24,000,000 portfolio. Increased return expected through DVP processing and single account monitoring need only be about 1/3 of 1% of the average portfolio turnover each year to break even with this management method. SUPPORTING DOCUMENTS: x ATTACHED ❑ NONE POSSIBLE MOTION Please word motion as you would like it to appear in the minutes. Move adoption of Resolution 2015-13 establishing an additional depository for City funds. BUDGET INFORMATION ACTION TAKEN ❑ APPROVED AS REQUESTED ❑ DENIED ❑ TABLED ❑ OTHER (List changes) COMMENTS: Request for Proposals Custody and Safekeeping for City Investment Securities City of Otsego The City of Otsego is searching for an institution to provide investment safekeeping and custody services for the City's investment portfolio. The portfolio to be held in this account will range from $ 15,000,000 in total face value to $ 24,000,000 in total face value during the fiscal year. Assets will include bank certificates of deposit, government backed securities, treasury bills, government backed agency bonds, and other investments authorized and allowed by Minnesota Statutes 118A and City Investment Policy. The service will also provide for an interest bearing money market account to facilitate transactions and hold cash which is not invested in specific instruments. This Money Market account must be available for electronic transfers to and from the City operating accounts. The successful provider will provide the City a monthly statement of transactions from the accounts during each calendar month and the detailed balance of assets held at the end of each month giving type of asset, title of asset, CUSIP number, interest rate, face value, date of purchase, date of maturity, price paid for the security, accrued interest to the end of each month and current market value of each asset. As long as each month's reporting includes at least the information detailed above, the format of reporting may be determined by the safekeeping institution. Transactions for investment asset purchases or redemptions of assets held in the account will use the delivery versus payment (DVP) process. The City will notify the custody and safekeeping institution of any purchase transactions to be perfected by the institution in advance using a form agreed to by the City and the institution. The form will be transmittable by fax or e-mail. If redemptions of securities occur the institution will perfect these transactions and notify the City of the security redeemed, the amount received, including accrued interest, the CUSIP number and the date of the transaction within 1 business day of the transaction occurring. This may be done by either fax or e-mail. In order to evaluate potential service providers, please supply the following information about your institution if you are interested in working with the City of Otsego in this situation: ® Name of Institution, including any specific departmental designation ® Contact information for the institution including address, general telephone number and e-mail contact address ® Name and Title of Primary Customer Service Contact for the City's business ® Contact information for the Primary Customer Service Contact including address, general telephone number, direct telephone number and e-mail contact address 1 • Listing of fees charged for providing the requested services including: o Annual Fee (if any) o Monthly account fees (if any) o Transaction Fees (differentiated by category if there are different categories) • Current Money Market rate provided to accounts such as the cash holding account described above • Statement of any minimum balance requirement required to earn that interest • An example of a monthly statement communicating the requested information • An example of a standard transaction form authorizing DVP transaction (if available) • Any other fees or charges which may be incurred in the establishment or function of this account • A Statement that the Institution understands what services have been requested and agrees to provide such services at the rates and within the timeframes of the request/response • A list of at least three cities currently using similar services provided by your institution for reference check purposes. Questions regarding this request may be directed to: Daniel Jordet Administrative Services Director City of Otsego (763) 235-3161 djordet@ci.otseQo. mn. us Responses are due by January 15, 2015 at: City of Otsego Investment Custody and Safekeeping 13400 90th Street N.E. Otsego, MN 55330 If submitted by e-mail please send to: finance@ci.otsego.mn.us Proposals will be evaluated based on recommendations by references and fees. It is hoped that an institution will be appointed for custody and safekeeping of investment securities at the January 26 meeting of the City Council. 2 bank. INSTITUTIONAL TRUST & CUSTODY F S"`S`"'ate C-7 PRO - FORMA FEE SCHEDULE CUSTODY SERVCIES ONLY CITY OF OTSEGO MN EFFECTIVE: January 15, 2015 CUSTODY SERVICE FEES Estimated Fee General Fund - Operating Portfolio (self directed/broker dealers) Total Market Value $20,000,000 5.00 bps 0.0005 x my of assets $ 10,000.00 Money Market Balance - Sweep / Short Term Investments Choice of Sweep Options (First American MMK Funds, MMK Portal, USB Proprietary Investments) US Bank Open CP $0 0.00 bps 0 x my of assets Money Market Funds $4,000,000 0.00 bps 0 x my of assets No charge for cash balances held in custody TOTAL MARKET VALUE $24,000,000 Total Asset Based Fees Unit Price $ 10,000.00 CUSTODIAL ACCOUNTING AND REPORTING SERVICE FEES Domestic Depository Settlements (Buy & Sell - DTC, FED) $ Account Level Fees Unit Price Annual Volume 500.00 Standard Consolidated Accounting & Reporting (per account) $ 500.00 1 $ 500.00 Web -Based Performance Reports $ 1,000.00 0 $ - Web -Based On -Line Reporting - Trust & Custody Portal Included 1 $ - Web -Based Statements - Delivered Monthly, Annually Included 1 $ - Total Account Level Fees - Physical Settlements (Partnerships, Insurance Policy, Hedge Fund) $ 500.00 CUSTODIAL TRANSACTION AND SETTLEMENT FEES Unit Price Annual Volume Domestic Depository Settlements (Buy & Sell - DTC, FED) $ 5.00 100 $ 500.00 Maturities and Principal Paydowns $ 5.00 50 $ 250.00 Outgoing Wires & ACH Transfers (no charge for incoming) $ 5.00 50 $ 250.00 Mutual Fund Settlements (buy/sell/dividend reinvest) $ 5.00 0 $ - Physical Settlements (Partnerships, Insurance Policy, Hedge Fund) $ 25.00 0 $ - Repurchase Agreement Settlements $ 10.00 0 $ - Income Payments $ - 250 $ - Total Transaction and Settlement Fees $ 1,000.00 TOTAL CUSTODIAL ACCOUNTING REPORTING AND TRANSACTION FEES $ 11,500.00 4.792 avg bps GENERAL SERVICE AND FEE ASSUMPTIONS This fee schedule is quoted based on the utilization of the US Bank Proprietary Funds for the investment of short-term cash. Custodial reporting fee's are waived assuming US Bank is hired as discretionary investment manager Discretionary investment management fee does not include underlying mutual fund expense ratio's There is no administration fee or fund settlement transaction charge for assets held in a sweep or proprietary fund There is no charge for transition or implementation US Bank will assign a dedicated client service team for all servicing requests DISCRETIONARY INVESTMENT MANAGEMENT SERVICES INLCUDE • Risk Tolerance Assessment • Portfolio Cash Flow Needs Assessment and Analysis • Investment Objective Determination and Measurement • Investment Policy Statement Review, Construction and Compliance Testing • Ongoing Manager Searches (with no limitation on the number of searches) • In Person Investment Committee Meetings and availability to staff as needed 1 of 1 • Initial Manager Selection • Modem Portfolio Theory -Based Asset Allocation • Manager Probation and Replacement Triggers • Asset Allocation Rebalancing Triggers • Comparative Performance -Based Assesment and Rankings • Custody, statements and financial reporting INSTITUTIONAL RETIREMENT & TRUST TRUST AND CUSTODY FEE PROPOSAL Proposal Date: February 1, 2015 Prospect Name: City of Otsego TR USTEEICUSTOD Y PER ANNUM FEES UNIT PRICE Domestic Administration Basis Points Separately Managed & Mutual Commingled Fund Portfolios 5.00 DomesticAdministration Subtotal 5.00 Accounting & Reporting Per Account Web -Based On -Line Daily Access - TPR, TID Included Statement Accounting & Reporting $750 Global Custody - Statement Accounting & Reporting $750 DOMESTIC TRANSACTIONS SECURITY SETTLEMENTS & MONEYNIOVEMENT Per Transaction Domestic Depository Settlements $0.00 • Includes DTC, Fed/Repo, ADR, Free Receives/Delivers, Maturities DTC Settlements (IncludesADR's) $10.00 DTC -Held Free Receives / Delivers $10.00 Bond & Repo Maturities $5.00 Mutual Fund Settlements $5.00 Derivative Transactions $5.00 Domestic Equity Income Payments $0.00 Domestic Treasury/Bond Income Payments $3.00 Principal & Interest Payments - Pooled Assets $3.00 Principal & Interest Payments - CMO/Mortgage Backed Securities $5.00 Outgoing Wires $10.00 Incoming Wires $0.00 MINIMUM ANNUAL FEE $10,000 t (7L4- A -Aa JPS NOTES: This document is intended for proposal purposes only and is not intended to replace the Fee Agreement that will need to be executed if the business is accepted. This Fee Proposal is valid for 90 days following the Proposal Date. Should there be any material change to the proposed structure or asset base, or should the Prospect fail to transfer any assets scheduled for receipt to Wells Fargo within 60 days of the Effective Date of the Fee Agreement, Wells Fargo reserves the right to redefine fees and/or service conditions. No Asset Based Domestic Administration fee nor fund settlement transaction fees will be assessed for assets held in a Wells Fargo Proprietary Fund. There is no charge for the collection of interest income and dividends. If Wells Fargo is required to repeat or expand the scope of any services due to inaccurate, incomplete, or unusable data/information supplied by the Prospect or its authorized agents, an additional fee may be charged for such services. Wells Fargo is entitled to prompt reimbursement of all extraordinary out-of-pocket expenses incurred in the performance of its services including, but not limited to, fees for legal process, outside legal fees, and courier services. Additional services not detailed in this Fee Proposal may be negotiated by and between Wells Fargo and the Prospect. This Fee Proposal is confidential and intended only for the sole use of the Prospect named above. CITY OF OTSEGO COUNTY OF WRIGHT STATE OF MINNESOTA RESOLUTION NO: 2015-13 RESOLUTION ESTABLISHING ADDITIONAL DEPOSITORY FOR CITY FUNDS WHEREAS, the City of Otsego must, each year, designate official depositories for City funds and approve the investment brokers to be used for invetment of City funds in accourance with the City's Investment Policy and Minnesota Statutes 118A.02; and WHEREAS, Resolution 2015-02, adopted January 12, 2015, specifies that the Administrative Services Director may recommend additional depositories, brokers or other repositories for City funds during the coming fiscal year. NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF OTSEGO, WRIGHT COUNTY, MINNESOTA THAT: U.S. Bank Institutional Trust and Custody is hereby designated as an approved depository and safekeeping trustee for the City of Otsego's investment instruments. ADOPTED by the Otsego City Council this 23rd day of February, 2015. ATTEST: CITY OF OTSEGO Jessica Stockamp, Mayor Tami Loff, City Clerk MOTION made by Council Member and SECONDED by Council Member IN FAVOR: OPPOSED: