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: