Template revised January 10, 2019.
COMMISSION
AGENDA MEMORANDUM
Item No.
8c
ACTION ITEM
Date of Meeting
June 25, 2019
DATE: June 18, 2019
TO: Stephen P. Metruck, Executive Director
FROM: Diane Campbell, Treasury Manager
Dan Thomas, Chief Financial Officer
SUBJECT: Banking Services Contract RFP
Estimated request amount:
$48,200,000
ACTION REQUESTED
Request Commission authorization for the Executive Director to execute contracts for banking
services for up to ten years, a five-year base term with option(s) to extend for up to five
additional years. The estimated contract amount is $48,200,000 over ten years.
EXECUTIVE SUMMARY
Banking services included are detailed in the “Banking services to be procured” section of this
memo. The Port has two years remaining under its current banking services contract (five-year
initial term, with two one-year extensions). Given the long lead time and amount of effort
required to competitively procure, and the significant systems integrations required for
implementation, Port staff plans to issue a request for proposals (RFP) for banking services in
Q4 2019, with a longer contract term of up to ten years, including the right to cancel with 180
days’ notice, and continuing the current practice of annual reviews of performance and services
updates. The actual contract costs will vary depending on the growth of credit and debit card
transactions, which generate the largest component of banking services fees.
Since 2016 the Port’s banking services fees have increased by 9 percent per year. Projecting a
similar average growth rate in credit and debit card transactions, the maximum contract value
would be $48.2 million over ten years. The total cost estimate includes all services – some costs
will be determined through the RFP process, but the majority are estimates based on credit and
debit card fees. The Port intends to develop a solicitation that allows the Port to award one or
more contracts for the four types of banking services described below, depending on what is in
the Port’s best interest.
Social Responsibility
There may be financial and operational impacts in implementing an unbundled approach to
banking services. However, separating the services facilitates the Port’s goals to provide
COMMISSION AGENDA – Action Item No. 8c Page 2 of 7
Meeting Date: June 25, 2019
Template revised September 22, 2016; format updates October 19, 2016.
greater opportunities to a broader range of providers including women and minority- owned
businesses. A social responsibility section will be included in each of the services out for bid.
Sources internal and external to the Port will be included to help draft questions and criteria
during the RFP development phase, while being mindful of the Port’s authority. Examples of
sub-groups within the broad topic of social responsibility may include environmental, social
responsibility and governance.
JUSTIFICATION
A new procurement is necessary because the current Wells Fargo banking contract cannot be
extended beyond July 2021. Staff anticipates a two-year time frame to accommodate both the
competitive selection and implementation of any new provider(s) and services, so plan to
initiate the process in 2019. A contract term of 10 years has benefits such as the potential to
lock in lower annual pricing over a longer time period and will not only align with recent
industry trends and best practices, but also supports the longer-term nature of the Port’s
existing, new and upcoming platforms and information systems with interfaces connected to
the Port’s vendors and banking partner’s systems and technologies. Staff will seek Commission
authorization for a technology implementation project once the scope of the selected proposal
is known.
DETAILS
Port of Seattle’s banking requirements
The Port’s options for banking partners is limited for two primary reasons that mitigate the
Port’s exposure to bank risk: (i) the Port may only use banks and credit unions that are Qualified
Public Depositories (QPD) approved by the State of Washington (the “State”), see Appendix A,
and (ii) due to the Public Deposit Protection Commission (PDPC) depository limitations, most
QPDs do not qualify to provide banking services to the Port. Additionally, the types of services
the Port requires to handle the volume and size of transactions, to support operational
efficiency, and especially those that mitigate fraud (e.g. fake checks being drawn against or
unauthorized debits from bank accounts), are not offered by other QPDs that do meet PDPC ‘s
depository limitations.
To operate on sound business principles, the Port requires its banking partner to have a depth
and commitment of resources both financially and technologically. These requirements further
narrow the list of QPDs who have the capacity to handle the Port’s business. Since 2012, the
Port’s two largest single deposits were $681 million and $621 million. With the PDPC deposit
limitations along with the Port’s requirements, see Appendix B, only five QPD’s responded to
the Port’s 2013 RFP.
The importance of the technologies of the banking partner
While the Port is limited in the number of banks it can contract with and in its ability to
negotiate only 11 percent of total fees, (the bulk of the fees, merchant services, are non-
negotiable) the most important areas the Port can select for are services and technological
COMMISSION AGENDA – Action Item No. 8c Page 3 of 7
Meeting Date: June 25, 2019
Template revised September 22, 2016; format updates October 19, 2016.
capabilities. While this procurement covers banking services, the most critical aspects relate to
the Port’s systems and technologies involved in receiving and disbursing Port monies, and how
they interface with those of the banking partner.
The Port’s last banking procurement began in 2013, with the entire process taking two (2) years
and more than 4,500 staff hours from multiple departments: Treasury, Accounting and
Financial Reporting’s (AFR) Revenue Services, Disbursements and Business Technology teams,
Information Communication and Technology (ICT), the Airport Public Parking team,
Recreational Marinas and Commercial Operations, and Central Procurement Office’s Senior
Purchasing Manager. Approximately 60 percent of the Port’s resources came primarily from
ICT and AFR. More than a dozen ICT team members participated from several disciplines
including project management, software development and testing, systems engineering,
Enterprise Resource Planning’s (ERP) management and development/programming, and
information security.
More than 95 percent of the ICT resources were dedicated to the evaluation of the bank’s
systems and technologies, testing all Port systems, tools and technologies with those of the
selected banking partner, to ensure every function and interface connected with receiving and
disbursing Port funds were fully operational, safe and secure, before and after the transition.
Authorization for a technology implementation project will be sought when the scope of the
selected proposal is known.
Accordingly, the Port’s banking partner must (i) have a secure, user-friendly electronic banking
platform providing a wide range of utility for multiple users and departments, (ii) have state-of-
the-art technological capabilities, providing products, services, reporting, platforms with
traditional, e-commerce and emerging solutions that easily integrate safely and securely with
the Port’s financials and vendors systems, (iii) be capable of meeting the Port’s current and
future growing banking needs, and (iv) contribute to improving the Port’s operational
efficiency.
Banking services to be procured
This RFP will allow for the four services listed below to result in contract(s) with one or multiple
vendors and provide the opportunity for Proposers to offer on one, multiple or all services.
1. Banking (funds deposit and disbursement services)
2. Merchant Services (debit and credit cards payments processing and deposits)
a. Point-of-sale (in-person, card-present, payments at terminals)
b. E-Commerce/Payment Gateway (online, card-not present, payments)
3. Lock Box (central receipt and deposits of checks from customers)
4. Commercial Credit Cards - P-Card (Purchasing) and T&E Card (Travel & Expense)
For services related to commercial credit cards, staff may also consider the State’s commercial
card program, in addition to opportunities for Women and Minority Business Enterprise banks
COMMISSION AGENDA – Action Item No. 8c Page 4 of 7
Meeting Date: June 25, 2019
Template revised September 22, 2016; format updates October 19, 2016.
to participate. In addition, staff is assessing whether evaluation criteria may be included to
promote diversity and inclusion.
FINANCIAL IMPLICATIONS
Projected fees for 10 years between 2021 to 2031
Cost Estimate/Authorization Summary
Expense
Total
COST ESTIMATE
Original estimate
$48.2 million
$48.2 million
AUTHORIZATION
Previous authorizations
0
0
Current request for authorization
$48.2 million
$48.2 million
Total authorizations, including this request
$48.2 million
$48.2 million
Remaining amount to be authorized
$0
$0
Breakout of banking services fees
Banking services fees can be divided between (i) direct costs, fees paid to Wells Fargo Bank and
Wells Fargo Merchant Services for general banking services and credit and debit cards
processing services, respectively, and (ii) indirect costs, merchant fees collected by the card
issuing banks and the card brands Visa and MasterCard. The direct costs, approximately 11
percent, are negotiable, the indirect costs approximately 89 percent, are not. Estimates for this
procurement are outlined in the table below.
2021 - 2031
$
Annual
Average
%
Total
%
Merchant
Banking Fees:
3,616,653 361,665 8%
Wells Fargo Merchant Services
(1)
(or Processor)
1,575,308 157,531 3% 4%
Direct subtotal 5,191,961 519,196 11%
Merchant Services
(1)
Fees:
Card Brands (Visa & Mastercard) 3,666,755 366,676 8% 8%
Card Issuing Banks 39,341,284 3,934,128 82% 88%
In-Direct subtotal 43,008,039 4,300,804 89%
Merchant Services total:
44,583,347 4,458,335 92%
Total Fees: 48,200,000$ 4,820,000$
100% 100%
(1)
Merchant Services (Credit/Debit Cards) Fees
COMMISSION AGENDA – Action Item No. 8c Page 5 of 7
Meeting Date: June 25, 2019
Template revised September 22, 2016; format updates October 19, 2016.
Annual Budget Status and Source of Funds
Fees are budgeted annually; banking services in the non- operating budget and merchant
services as operating expense to the affected departments.
ATTACHMENTS TO THIS REQUEST
None
PREVIOUS COMMISSION ACTIONS OR BRIEFINGS
February 26, 2019 – Commission authorized the Executive Director to increase the amount
of the Port’s existing banking services contract by an additional $5,000,000 (from
$9,700,000 to $14,700,000).
August 6, 2013 – Commission authorized the CEO to execute a contract for banking services
for five years with the option to extend for two additional one-year periods at an
estimated cost in banking fees of $9,700,000.
COMMISSION AGENDA – Action Item No. 8c Page 6 of 7
Meeting Date: June 25, 2019
Template revised September 22, 2016; format updates October 19, 2016.
Appendix A
Who can the Port of Seattle bank with?
State law (Chapter 39.58 RCW) dictates who the Port can bank with.
The Office of the State Treasurer lists the financial institutions in Washington State who are
authorized to accept public deposits
https://www.tre.wa.gov/wp-content/uploads/pdpc_CH39-58RCW.pdf
Qualified Public Depositary (QPD)
Financial institutions (banks and credit unions) who want to bank public entities moneys, must
apply to the State to become a Qualified Public Depositary (QPD).
Financial institutions apply for qualification and among other things, agree to post
collateral to cover deposits.
As of January 2019 the QPDs list has 61 banks and 18 credit unions
the number of QPDs vary over time, due to mergers, new qualifiers, or QPDs who
choose to withdraw
WA State PDPC QPD listing as of January 2019
Banks: https://www.tre.wa.gov/wp-content/uploads/BT-2018-nov-dec-2019-
Jan.pdf
Credit Unions: https://www.tre.wa.gov/wp-content/uploads/CU-2018-oct-nov-
dec-2019-jan-2.pdf
Public Deposit Protection Commission (PDPC)
https://www.tre.wa.gov/partners/public-deposit-protection-commission-pdpc/
The PDPC (State Finance Committee) is comprised of:
the State Treasurer (Chair),
Governor and Lieutenant Governor
The PDPC ensures public funds deposited in banks are protected if a financial institution
becomes insolvent
PDPC determines which financial institutions qualify
PDPC performs quarterly reviews and publishes the list and updated status
PDPC Deposit Limitations:
Governmental entities may deposit funds in any Washington State branch of public
depositaries listed.
Banks - Total deposits by any one depositor may not exceed the depositary's
Washington Proportional Net Worth per RCW 39.58.130.
Credit Unions - Total deposits by any one depositor in any one credit union may not
exceed the maximum amount insured by the national credit union share insurance fund
per RCW 39.58.240
COMMISSION AGENDA – Action Item No. 8c Page 7 of 7
Meeting Date: June 25, 2019
Template revised September 22, 2016; format updates October 19, 2016.
Appendix B
Port of Seattle’s Banking Requirements:
The Port’s selected bank must at all times during the banking contract comply with all
PDPC requirements related to the services it provides the Port, including the ability to
accept large deposits (PDPC deposit limitations).
For the Port to operate on sound business principles the Port requires its bank to have
adequate net worth, as published by PDPC, ensuring the Port is not in violation of PDPC
statutes.
The Port’s banking partner must have:
a strong electronic banking platform that could safely and securely integrate and
operate efficiently with the Port’s financials and vendors systems;
depth in financial and technology resources to meet and enhance the Port’s growing
needs
