HomeMy WebLinkAboutC24551 Trust Agreement Wells Fargo Corporate Trust Services - Joint ConsiderationContract No. C24551 I : E
CITY OF PALM DESERT
OFFICE OF THE CITY TREASURER
STAFF REPORT
REQUEST: RENEW THE TRUST AGREEMENT BETWEEN WELLS FARGO
CORPORATE TRUST SERVICES AND THE CITY OF PALM DESERT
FOR ANOTHER FIVE YEARS (JOINT CONSIDERATION WITH THE
PALM DESERT CITY COUNCIL, REDEVELOPMENT AGENCY, AND
FINANCING AUTHORITY).
SUBMITTED BY: Paul S. Gibson, C.C.M.T., City Treasurer
DATE: April 14, 2011
CONTENTS: 1) Wells Fargo Letter Request for a Contract Renewal
2) 2005/2011 Wells Fargo Fee Proposal
3) Comparison of Trustee Fees
Recommendation
By Minute Motion, that the City Council approve the renewal of the trust
agreement between Wells Fargo Corporate Trust Services and the City of Palm
Desert for another five years.
Committee Recommendation
At its March 22, 2011 meeting, the Audit, Finance, and Investment Committee voted
unanimously to recommend that the City Council adopt the above motion.
Background
Wells Fargo Corporate Trust Services ("Wells Fargo") is the current bond trustee for the City of
Palm Desert ("City"). The City originally contracted with Wells Fargo in 2006, and the end of
that contract term is approaching.
Wells Fargo provides the City with the following services: (1) payment of debt service; (2)
early redemption of municipal bonds; (3) custodianship of project funds; (4) investment of bond
proceeds, and (5) clearance of trust securities trades.
The City's relationship with Wells Fargo has been excellent. The trust staff who have been
assigned to the City's account have been highly professional and highly responsive to
customer needs. Wells Fargo has also kept all of the commitments that it has made. The
G:\Finance\Niamh Ortega\Staff Reports\SR - Wells Fargo Trust Agreement renewal 041411.docx
Staff Report
Renewal of Wells Fargo Trust Agreement
April 14, 2011
Page 2 of 2
bank's computer systems are sophisticated and reliable. City staff has been able to download
monthly cash balances in a timely manner, which is a distinct departure from the City's
experience with prior trustees.
Wells Fargo has proposed a five-year contract renewal with trustee fees frozen at 2005 levels.
In other words, there will be no increase in trustee fees for the next five years. For purposes of
comparison, Wells Fargo provided a survey of fees that other trustees charge. City Treasury
staff contacted several of the local agencies that were listed in this survey, in order to verify
that the fees represented were accurate. They were. Wells Fargo is one of the lowest -cost
providers in the survey, with $1,300 in annual administrative fees.
U.S. Bank and BNY Mellon are the other major providers of municipal trust services in
California. Both have previously worked for the City as a trustee. Both relationships were
unsatisfactory. U.S. Bank had unreliable computer technology, and subsequently relocated to
Minnesota which caused operational problems in terms of time zones. BNY Mellon was poorly
coordinated, and failed to honor its commitment to reduce the cost of its mutual funds for the
investment of the City's bond proceeds.
In summary, the field of corporate trustees has shrunk due to mergers and acquisitions. A
transfer of trust services entails a significant amount of staff time and cost. Since Wells Fargo
has provided excellent service during the term of its first contract, Staff recommends that the
City renew its trust agreement with Wells Fargo Corporate Trust Services for another five
years, from date of expiration.
Submitted By:
aaul. Gibson, C.C.M.T., City Treasurer
Approval:
n M. Wohlmuth, City Manager
III d BY RDA �`5-0)
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V L R l 1 a E Original on on file with City Cierk's Office
CITY COUNCIL ACTION
APPROVED--- ✓
DENIED
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VERIFIED BY:
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Original on File with City Clerk's 617fice
Original on 1"Jo v¢ L'._J i Clerk's Office
Staff Report
Renewal of Wells Fargo Trust Agreement
April 14, 2011
Page 2 of 2
bank's computer systems are sophisticated and reliable. City staff has been able to download
monthly cash balances in a timely manner, which is a distinct departure from the City's
experience with prior trustees.
Wells Fargo has proposed a five-year contract renewal with trustee fees frozen at 2005 levels.
In other words, there will be no increase in trustee fees for the next five years. For purposes of
comparison, Wells Fargo provided a survey of fees that other trustees charge. City Treasury
staff contacted several of the local agencies that were listed in this survey, in order to verify
that the fees represented were accurate. They were. Wells Fargo is one of the lowest -cost
providers in the survey, with $1,300 in annual administrative fees.
U.S. Bank and BNY Mellon are the other major providers of municipal trust services in
California. Both have previously worked for the City as a trustee. Both relationships were
unsatisfactory. U.S. Bank had unreliable computer technology, and subsequently relocated to
Minnesota which caused operational problems in terms of time zones. BNY Mellon was poorly
coordinated, and failed to honor its commitment to reduce the cost of its mutual funds for the
investment of the City's bond proceeds.
In summary, the field of corporate trustees has shrunk due to mergers and acquisitions. A
transfer of trust services entails a significant amount of staff time and cost. Since Wells Fargo
has provided excellent service during the term of its first contract, Staff recommends that the
City renew its trust agreement with Wells Fargo Corporate Trust Services for another five
years, from date of expiration.
Submitted By:
*aulS.-4Gibso:n,�C.C.M.T., City Treasurer
Approval:
On M. Wohlmuth, City Manager
February 16, 2011
Mr. Paul Gibson, Director of Finance
The City of Palm Desert
73-510 Fred Waring Drive
Palm Desert, CA 9226o
RE: Wells Fargo Bank Corporate Trust Services
Dear Paul,
Wells Fargo Corporate Trust
707 Wilshire Blvd - 171h Floor
Los Angeles, CA 90017
Stuart Weiss
213.614.3356 — office
310.387.9210 — mobile
213.614.3355 - fax
Thank you for our frank discussion of January 19th. To further respond and follow up, what follows is topical
information and commentary on our Corporate Trust and Escrow Services. I invite your further feedback; Rob
Schneider and I stand ready to return for another in -person meeting at your request.
Wells Fargo Bank — Corporate Trust Services: Our Mission; Our Goal for the City of Palm
Desert
We aim to be the premier market provider of corporate trust services and apply our expertise for the benefit to
the City, their finance professionals and others. Past our core competencies as trustee, registrar and paying
agent we will continue offer the City a full range of financial services in coordination with their needs and other
Bank departments and professionals.
Wells Fargo Advantages — Technology
We continue to meet the needs of the City of Palm Desert through the development and use of cutting -edge
technology. Wells Fargo Corporate Trust has a dedicated Systems & Technology Group staffed with more than
loo professionals who work closely to meet the increasing requirements for fast and accurate information. Our
Internet service, Trust Portfolio Reporting (TPR) is among the finest in the nation. TPR is based on the
principal that our clients require easy access 24/7/365 to two basic pieces of information: Assets held in trust
on any given date and historical activity in any trust account for any time period. The City of Palm Desert has
routine use of this service and the prerogative to extend its access to designated professionals upon their
direction to us.
Another service is also available to the City of Palm Desert: Trust Information Delivery (TID). It provides
convenient access to Wells Fargo trust statements and reports. An email notification can be sent to authorized
Palm Desert professionals as soon as new reports are available. Once accessed the statements can be printed,
electronically stored and forwarded if appropriate.
Wells Fargo Corporate Trust Team for the City of Palm Desert
The long-standing nature of our relationship with the City is in great part due to the Bank's approach to the
tasks at hand and the personnel assigned to be responsible for them. There is an Account Team assigned to the
City.
They service the Palm Desert relationship together and act as a back-up to one another in order to provide a
"seamless" level of service.
Together we'll go far
17TT9*04
The Primary Relationship Manager, Rob Schneider has overall responsibility to administer the accounts,
negotiate the financing documents, direct the account set-up, monitor the day-to-day administration of the
accounts, and assist with customer inquiries. The Secondary Relationship Manager, Katherine Valdivia will be
available as a backup to Rob.
The Relationship Specialist, Jane Thang handles the daily account processing, executes draws, GIC and other
transactions, investment trades, and assures liquid funds are "swept" into an overnight investment sweep
vehicle. By ensuring that Rob, Kathy and Jane are well trained to handle a variety of accounts and have
experience executing all types of transactions, at least one of the them will be available as necessary to assist
the financial professionals of the City when called upon.
As a practice Rob, Kathy and Jane are available Monday through Friday 7 A.M.-4 P.M. and provide prompt
responsiveness to phone calls and emails. Secondarily, the assigned Business Development Officer for the City,
Stuart Weiss is available via cell phone and e-mail off -hours and on weekends if any urgent matters arise.
Rob Schneider has a long standing relationship with the City of Palm Desert. He has worked with City accounts
over the past 13+ years at three different institutions: Bank of America; U.S. Bank and for the past five years
here at Wells Fargo Bank. Rob has now worked at Wells Fargo for over ten years.
Rob is intimately familiar with the City of Palm Desert's bond issues and has an excellent working relationship
with the each and every City finance professional that touches the bond issues.
Wells Fargo's History in Riverside County and Commitment to the City of Palm Desert
Unlike our competitors, Wells Fargo Bank has a long-standing and rich history in Riverside County. Our roots
date back to 1875 when Agents Elyron and Rosenthal established a Wells, Fargo & Company Express office in
the City of Riverside. In 196o Citizen's National Bank of Los Angeles opened a de novo office in the City of
Riverside. In 1963 Crocker National Bank purchased Citizens Bank and in 1986 Wells Fargo Bank purchased
Crocker which established the Wells Fargo Bank name in the County of Riverside for the first time.
In the City of Palm Desert we operate from five different locations and with a total of 82 full time employees.
Wells Fargo strongly believes in giving back to the communities where we do business. In 2010 the Wells Fargo
Foundation made 23 donations to 15 charitable organizations from the City of Palm Desert. The total donation
amount was $304,845.13. Our Riverside and San Bernardino Counties Community Support Representative for
the Wells Fargo Foundation, Ms. Robin Hought is located at 74199 El Paseo, Suite 104, Palm Desert.
Pricing for Corporate Trust Services — Methodology and Commentary
I requested comparative trustee fee information from selected underwriters and financial advisors. This
information should be considered public in nature. Focusing on the Annual Fees, the disparity is notable and a
result of various market and relationship circumstances.
As the number of new bond issues has significantly diminished in the past few years, the competition amongst
trustees to receive new appointments has caused fees to compress. While this is beneficial to the issuers in the
short term, it is questionable as to whether or not the bidding trustees will be profitable at those levels and
therefore raise their rates in the future.
For certain issues the fees are higher. This could reflect the complexity of the given issue (BABs, variable rate,
etc.) and the resulting additional trustee duties. It could also reflect a previously agreed to fee model between
the issuer and the selected trustee.
Pricing Proposal from Wells Fargo Bank to the City of Palm Desert
Given the snapshot fee comparison provided, we are confident that our current pricing for the City at $1,300
per issue is very competitive with the current market while being profitable to the Bank: "Win -Win". We pledge
to abide by those fees as originally proposed in Section C of RFP No. 2oo5 dated September 16, 2oo5 for at
Page 2 of 3
least the next five years. This includes "value -adds" such as providing statement copies to external parties and
TPR access at no extra charge.
With regard to adding value to our relationship with the City of Palm Desert, Rob and Jane monthly make
reimbursements on the Letter of Credit draws and the monthly Collar Payments for the City's Energy Bond
Issue. We are sensitive to the reduced staffing that has occurred in the City's Finance Department and by
taking care of these reimbursements Rob and Jane are saving valuable City staff time and saving the City
money by eliminating their charge for sending wires.
A Final Word
We consider the City of Palm Desert to be one of our most important, corner -stone relationships. Rob, Jane
and I pledge to continue our diligent work for the City and always be available to be of service when called
upon. We are proud to be a part of the City's Bond Issue Team and will continue to extend our work to those
team members who can include, Richards, Watson & Gershon, Del Rio Advisors, Fulbright & Jaworski, Jones
Hall, Stinson Securities, Kinsell Newcomb & DeDios and others. Given all of the above, we hope that we can
continue our work together without the exercise of an RFP process at this time.
Sincerely,
Stuart Weiss
Vice President
stuart.weiss(&wellsfargo.com
Cc: Thomas Jeffrey, City of Palm Desert
Rob Schneider
Page 3of3
* THIS PRICING ALSO APPLIES TO 2011 CONTRACT RENEWAL
WELLS FARGO BANK
SECTION C
RFP NO.2005: FEE PROPOSAL
ESTIMATED
TOTAL DIRECT
SERVICES
ANNUAL VOLUME
UNIT PRICE
FEE PRICE
Acceptance Fees (Conversion)
Per Bond Issue
No Charge
$0.00
Acceptance Fees New Issues
Per Bond Issue
$1,500
$1,500
Counsel Fees (Conversion)
Per Bond Issue
No Charge
$0.00
Counsel Fees New Issues
Per Bond Issue
$300
$300
Trustee Fees
Per Bond Issue
All Fixed Rate
Total Annual
Assessment
Administration Fee
NOTE. It is Wells Fargo's practice
District, Tax
for all issues -
to charge an "all inclusive" Annual
Allocation and
$23,400
Fee. No additional add -on or
Lease Revenue
(For 18 issues)
transactional fees for tasks
Bonds -
performed such as the production of
$1,300.00*
checks or wires or the processing of
construction requisitions will be
charged.
Fiscal Agent Fees
As shown above
Included in Annual
Administration
Paying Agent Fees
No Charge
$0.00
Registrar Fees
No Charge
$0.00
Transfer Agent Fees
No Char e
$0.00
Defeasance Escrow Agent Fees
$350
To Be Determined
Depository Agent Fees
No Char e
$0.00
Tender Agent Fees
No Charge
$0.00
Letter of Credit Draw Charges
No Charge
$0.00
Bondholder Account Maint. Charges
No Charge
$0.00
Wire Transfer Charges
No Charge
$0.00
Redemption Charges
No Charge
$0.00
Security Trade Charges
No Charge
$0.00
Collateral Maintenance Charges
$500 per annum
Depends on # of
(assuming we are
accounts for which
responsible for
collateral
calculating mark-
maintenance is
to -market,
necessary
otherwise — to be
waived)
Out-of-pocket Charges'
At Cost
At Cost
Itemize All Other Expenses Below:
$
$
Investment Contracts — One time
Per Agreement -
$500 Per
charge to set-up and review (See
$500
Agreement
Below
1 Wells Fargo does not charge for "Indirect Out of Pocket Expenses"
Forward Delivery Agreements —
Annual Fee See Below
Per Agreement
$1,000
$1,000 Per
Agreement
TOTAL ANNUAL FEES
$
$23,400.00
► Each offeror shall be responsible for contacting the Municipality's current trustee, BNY
Western Trust, for data on the annual volume for each service.
Any new bonded debt that the Municipality issues after January 1, 2006, shall be subject to the
terms, provisions and pricing of this RFP and of the resultant trust services contract, while the
latter is in effect.'
*$1,300 Annual Administration Charge is for the following eighteen issues:
1. Assessment District No. 98-1 Limited Obligation Refunding Bonds (1915
Special Improvements Act).
2. 1996 Revenue Bonds (1915 Special Improvements Act & 1986 Marks -Roos
Local Bond Pooling Act).
3. 1997 Revenue Bonds (1915 Special Improvements Act & 1982 Mello -Roos
Community Facilities Act).
4. 2003 Assessment Revenue Bonds (1915 Special Improvements Act & 1986
Marks -Roos Local Bond Pooling Act).
5. 1995 Series Tax Allocation Revenue Bonds (Project Area No. 2).
6. 1996 Series A — Tax Allocation Revenue Refunding Bonds.
7. 1997 Series Tax Allocation Refunding Revenue Bonds.
8. 1998 Series Tax allocation (Housing Set -Aside) Revenue Bonds.
9. 1998 Series Tax Allocation Revenue Bonds (Project Area No. 4).
10. 2001 Series Tax Allocation Revenue Bonds (Project Area No. 4).
11. 2002 Series A Allocation Refunding Revenue Bonds (Project Area No. 1, as
Amended).
12. 2002 Series A Tax Allocation Refunding Revenue Bonds (Project Area No. 2).
13. 2002 Series Tax Allocation (Housing Set -Aside) Revenue Bonds.
14. 2003 Series Tax Allocation Revenue Bonds (Project Area No. 2).
15. 2003 Series Tax Allocation Revenue Bonds (Project Area No. 1).
16. 2003 Series Tax Allocation Revenue Bonds (Project Area No. 3).
17. 2004 Series A Tax Allocation Refunding Revenue Bonds (Project Area No. 1,
as Amended).
18. 2003 Series A Lease Revenue Bonds (County Facility Projects).
2 Trustee Fees Only
3 Acceptance Fee and Trustee Counsel Fee for New Issues are shown in Fee Proposal
ADDITIONAL INFORMATION RELATING TO FEES:
INVESTMENT AGREEMENT
If applicable, there will be an Annual Fee of $500.00 for the set-up, review and maintenance of
any STANDARD investment agreement or similar instrument. The investment activities
included in this fee assume there will be no more than one (1) draw on the instrument per month.
Fees for NON-STANDARD agreements such as repurchase/swap/hedge agreements or for
investment funds held outside the bank (such as CAMP or LAIF) charges will be negotiated
separately.
FORWARD DELIVERY AGREEMENT
As shown above, Should a Forward Delivery Agreement be used in connection with this
financing, a minimum Annual charge of $1,000 will be assessed.
Sweep Funds
Wells Fargo currently offers a full range of money market funds free of additional transactional
charges. If more detailed information is required, please feel free to contact us. Management
fees for the funds vary. Yields quoted are net of those fees.
Extraordinary Fees
Fees indicated in this proposal do not include fees for unusual or extraordinary services such as
arbitrage calculations, default administration, dissemination agent services or other duties as may
be mandated by further laws or regulatory agencies. We do provide such extraordinary services
for additional fees.
Terms and Conditions
1. Fees for extraordinary services, such default administration, will be negotiated and charged
based upon time expended and personnel involved.
2. Should this documentation change substantially or the transaction become increasingly
complex prior to final closing, Wells Fargo Bank reserves the right to adjust its fees
accordingly.
3. Billings over 30 days past due are subject to a 1.5% per month late payment penalty on
balance due.
Wells Fargo's bid is based on the following assumptions:
• The Registered Bonds are in book entry or fully registered form
• Number of Series : One (1) per Issue
• Number of funds/accounts : Five (5) per issue
• Number of closings : Not Applicable for Successor issues
• Interest rate: Fixed
• Frequency of interest payments to holder: Semi -Annually and Monthly
• Frequency of principal payments to holders: Annually
This proposal is based upon the assumptions listed above which pertain to the
responsibilities and risks involved in Wells Fargo undertaking the role(s) of Trustee, Fiscal
Agent and Paying Agent. These assumptions are based on information provided to us as of
the date of this proposal. Our proposal is subject to review and acceptance of the final
documents. Should any of the assumptions, duties or responsibilities change, we reserve the
right to affirm, modify or rescind our proposal.
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