Upon the City of Franklin failing to reach an agreement to renew its more than eight-year banking contract with Fifth Third, the city now proceeds with U.S. Bank until services can be secured elsewhere or a contract with U.S. Bank is renewed.
As recently as Jan. 14, the city’s Budget and Finance Committee was preparing to hear a resolution that renewed the city’s contract with Fifth Third Bank to render custodial services for the city’s non-pension investments — a contract that costs the city close to $10,000 a year to maintain and represents the handling of millions of dollars in assets. Within the next week, negotiations with the Cincinnati bank fell through.
“We were not able to reach contract terms with Fifth Third between our law department and their attorneys,” according to Kristine Brock, assistant city administrator.
Franklin accrues maturities on its non-pension investments monthly, which necessitates consistent custodial banking services of U.S. Treasury securities and financial instruments that the city holds, including the city’s reserve funds. While the majority of the city’s investments tend to be short-term in order to fit within tax cycles, reserve-fund investments can sometimes stretch to as much as four years.
The agreement also originally served the purpose in August 2013 when it was entered of allowing the fees to be automatically deducted on a quarterly basis without the need for checks to be written.
U.S. Bank already maintained a similar contractual relationship — which is already in compliance with state requirements — with the city for pension-related investments, and this has led the city to expand that relationship to pick up the slack after talks with Fifth Third fell through.
The city’s investment policy is supervised by Brock and Comptroller Mike Lowe.
The transition involves transferring the custody services to U.S. Bank from Fifth Third according to City Purchasing Manager Brian Wilcox, who helped facilitate the process.
“Procurement is not involved with the decision of when to make the switch,” Wilcox added, meaning that no requests for proposals or bidding processes were used to select U.S. Bank, though this does not mean such tools will not prove useful in two years when the current contract ends.
Relatedly, another hiccup to making the transition involved updating the three signatories authorized to sign for the city’s related bank accounts, which include Brock, Mayor Ken Moore and City Administrator Eric Stuckey. Brock having married in recent years and, therefore, having changed her legal name necessitated that update.
City officials declined to comment on the volume of assets transferred to new custody, but Fifth Third’s custodial fee schedule at the time of the original contract’s signing began with a fee of 0.0004 percent for the first $5 million in assets. The fees steadily decreased from there for increments of the next $25 million, another $25 million and the next $50 million respectively.