Template revised January 10, 2019.
COMMISSION
AGENDA MEMORANDUM
Item No.
6d
ACTION ITEM
Date of Meeting
February 26, 2019
DATE: January 16, 2019
TO: Stephen P. Metruck, Executive Director
FROM: Diane Campbell, Treasury Manager
SUBJECT: Banking Services Contract
Amount of this request:
$5.0 million
Total estimated contract cost:
$14.7 million
ACTION REQUESTED
Request Commission authorization for the Executive Director to increase the amount of the
Port’s banking services contract by an additional $5,000,000 (from $9,700,000 to $14,700,000).
EXECUTIVE SUMMARY
This request is to add additional funds to the banking services contract. Because of significant
growth in the number of transactions and revenues at the Airport’s public parking facility and
certain marinas, banking fees have increased at a faster rate than originally projected for the
contract amount.
DETAILS
In 2014, Port staff completed a competitive banking services procurement that was approved
by Commission on August 6, 2013. Wells Fargo Bank was ultimately selected as the Port’s new
banking partner, which for the Port resulted in enhanced services and a lower fee schedule.
The banking services contract amount of $9,700,000 was intended to cover 7 years, (5-years
with the option to extend for 2 additional 1-year periods), effective August 1, 2014.
The existing banking contract amount was estimated using the actual banking services fees
incurred in 2012. Since 2012, annual banking services fees have grown from $1.4 million to
$2.0 million in 2018, a 45 percent increase, as follows:
2012 2018 change 2012 to 2018
$ % total $ % total $ % total
Banking Fees: 133,634 10% 176,859 9% 43,225 32%
Credit\Debit Card Fees 1,256,735 90% 1,833,424 91% 576,689 46%
Total Banking Fees 1,390,369$ 2,010,283$ 619,914$ 45%
COMMISSION AGENDA – Action Item No. 6d Page 2 of 5
Meeting Date: February 26, 2019
Template revised September 22, 2016; format updates October 19, 2016.
A high percentage of total banking fees, 91 percent, result from accepting payment cards
(credit and debit). Further, most of the payment card fees, 96 percent, paid to the card brands
(Visa and Mastercard), and card-issuing banks, are not negotiable for the Port. Only 4 percent is
paid to the Port’s banking partner:
2018
Merchant (Credit/Debit Cards) Services Fees $ % total
Card Brands (Visa & Mastercard) 150,520 8%
Card Issuing Banks 1,615,740 88%
Bank's Payments Cards Processor 67,164 4%
1,833,424
The rate of increase in banking fees can be primarily attributed to the significant growth
experienced at the Airport’s public parking facility and certain marinas. The Airport’s public
parking facility alone accounted for 98 percent of payment card transactions and 86 percent of
revenues paid with payment cards in 2018.
Included in the Aviation division’s long-term planning for the Airport public parking facility are
goals to maximize capacity, increase revenues, and improve the operational efficiency of the
facility. Noted efforts have included moving the rental car companies to the new consolidated
rental car facility freeing up two floors of parking spaces, directing cash paying parking
customers to use payment cards instead at the pay-by-foot booths, offering competitive
parking packages, selecting a new parking revenue control system and vendor, and in the future
introducing new valet services and web-based pre-booking reservations system. Accordingly,
since 2012, public parking revenues have grown cumulatively by approximately 54 percent, or
more than $30 million, due to increases in the number of transactions and higher tariffs.
Port-wide, revenues paid with payment cards have grown similarly, up 44 percent since 2012,
and the accelerated increase in associated banking fees have followed. As of January 2019,
approximately 4.5 years into the existing contract, $7.5 million has been spent, and only
$2.2 million remains, enough to cover approximately 11 months through November 2019.
Additional funds, $5 million, will be required to fund the banking contract services through the
end of the 7-year contract term. As described earlier, most of the fees are for merchant
services and are paid to Visa, Mastercard and card issuing banks, and not to the Port’s banking
partner.
The Port’s contract is approaching the end of the initial five-year period, July 31, 2019, and the
Port must provide 90 days’ notification to exercise the one-year optional period commencing
August 1, 2019 (notification must be provided no later than April 30, 2019.) Port staff is
satisfied with the performance of the Port’s banking partner, and it is their intention to execute
the optional years which were included in the commission authorization dated August 6, 2013
and do not require further authorization. That said, in order to have sufficient funding to
COMMISSION AGENDA – Action Item No. 6d Page 3 of 5
Meeting Date: February 26, 2019
Template revised September 22, 2016; format updates October 19, 2016.
exercise the optional periods, Commission authorization for additional funding is necessary.
The Port may terminate the contract with 180 days’ notice.
There are certain major projects in either the update or implementation stages, e.g., PeopleSoft
upgrade, the upcoming airport parking pre-booking reservation system, the new airport parking
revenues controls system implementation, and the marine management system replacement.
The Airport’s public parking revenue control system’s transition to the new vendor is ongoing
and coupled with the upcoming new pre-booking reservations system is at a critical stage. This
project’s schedule expands into the middle of 2020. Part of the process requires certifications
between the vendor’s and Port’s systems with the payments cards processor. To potentially
change banking partners in the middle of this project’s schedule would be disruptive. For this
reason, the recommended alternative is for additional funding of the banking services contract
through the end of the full contract term of seven years, to July 2021. Staff plans to initiate a
procurement for a new banking services contract this year and will return to the Commission
for contract authorization mid-year 2019.
ALTERNATIVES AND IMPLICATIONS CONSIDERED
Alternative 1 – Undertake a new procurement for banking and merchant services before the
current contract amount is depleted.
Cost Implications: At minimum 18 to 24 months’ time frame and +/- 5,000 staff hours,
estimated $250,000 to $400,000
Pros:
(1) Opportunity to review other qualified banks services, prices and technologies sooner
than under the other alternatives.
Cons:
(1) A new banking service procurement would need to begin immediately. Based on the
Port’s experience of needing two years for the prior procurement and complete
transition to the new banking partner, it would be challenging to complete a
procurement and transition by the time the contract amount is depleted.
(2) Given the time and complexity of selection and transition, time and employees’
resources may be insufficient to ensure the best results from a banking procurement
before the contract amount is depleted. Many of the required Port participants are
engaged in other projects that are undergoing updates or being implemented.
(3) Could add complexities to other major Port projects in update or transitioning status
that are tied to current bank and bank technologies.
(4) Would need to update or change existing Port platforms to new selected bank
platforms/technologies.
This is not the recommended alternative.
COMMISSION AGENDA – Action Item No. 6d Page 4 of 5
Meeting Date: February 26, 2019
Template revised September 22, 2016; format updates October 19, 2016.
Alternative 2 – Increase the contract’s approved amount to fund through the end of the first
one-year optional extension, July 31, 2020.
Cost Implications: $2,300,000 required; increases the contract total value to $12,000,000
from the original approved amount, $9,700,000.
Pros:
(1) Staff (Treasury, Accounting, ICT) are satisfied with the performance of the current
banking partner
(2) Accommodates unprecedented growth in banking fees
Cons:
(1) A new banking service procurement would need to begin immediately. Based on the
Port’s experience of needing two years for the prior procurement and complete
transition to the new banking partner, it would be challenging to complete a
procurement and transition in this time frame.
(2) Does not support certain major projects in either update or implementation stages, e.g.,
PeopleSoft upgrade, the upcoming airport parking pre-booking reservation system, the
new airport parking revenues controls system implementation, the marine management
system replacement. Potentially changing the banking partner at the critical timeframe
of these projects schedules would be disruptive.
(3) Many of the required Port participants are engaged in other projects that are
undergoing updates or being implemented.
This is not the recommended alternative.
Alternative 3 – Increase the contract’s approved amount to fund through the full seven-year
term, July 31, 2021.
Cost Implications: $5,000,000 required; increases the contract total value to $14,700,000
from the original approved amount, $9,700,000.
Pros:
(1) Staff (Treasury, Accounting, ICT) are satisfied with the performance of the current
banking partner
(2) A new banking service procurement would need to begin this year, based on the Port’s
experience of needing two years for the prior procurement and complete transition to
the new banking partner.
(3) Accommodates increased growth in banking fees due to growth in Port businesses.
(4) More supportive of certain major projects in either update or implementation stages,
e.g. PeopleSoft upgrade, the upcoming airport parking pre-booking reservation system,
the new airport parking revenues controls system implementation, the marine
management system replacement.
Cons:
(1) Many of the required Port participants are engaged in other projects that are
undergoing updates or being implemented.
COMMISSION AGENDA – Action Item No. 6d Page 5 of 5
Meeting Date: February 26, 2019
Template revised September 22, 2016; format updates October 19, 2016.
This is the recommended alternative.
FINANCIAL IMPLICATIONS
Cost Estimate/Authorization Summary
Capital
Expense
Total
COST ESTIMATE
Original estimate
$0
$9,700,000
$9,700,000
Revised estimate
0
14,700,000
14,700,000
AUTHORIZATION
Previous authorizations
0
9,700,000
9,700,000
Current request for authorization
0
5,000,000
5,000,000
Total authorizations, including this request
0
14,700,000
14,700,000
Remaining amount to be authorized
$0
$0
$0
Annual Budget Status and Source of Funds
Basic banking services fees are budgeted annually under non-operating expenses, and payment
card fees are budgeted as operating expenses to the appropriate departments.
ATTACHMENTS TO THIS REQUEST
(1) August 6, 2013, Commission memo and minutes.
PREVIOUS COMMISSION ACTIONS OR BRIEFINGS
August 6, 2013 – The Commission authorized the Chief Executive Officer to execute a
banking services contract.
