Investment Custodian Services Selection Copyrig hted
October 19, 2020
City of Dubuque Consent Items # 13.
City Council Meeting
ITEM TITLE: Investment Custodian Services Selection
SUMMARY: City Manager recommending approval of Investment Custodian Services
to MidWestOne Bank.
SUGGESTED Suggested Disposition: Receive and File;Approve
DISPOSITION:
ATTACHMENTS:
Description Type
MVM Memo City Manager Memo
Staff Memo Staff Memo
Dubuque
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TO: The Honorable Mayor and City Council Members
FROM: Michael C. Van Milligen, City Manager
SUBJECT: Investment Custodian Services Selection
DATE: October 13, 2020
Director of Finance and Budget Jennifer Larson and the Investment Oversight Advisory
Commission are recommending approval of Investment Custodian Services to
MidWestOne Bank.
Investment Custodian Services are currently provided by MidWestOne Bank. The total
portfolio held by MidWestOne Bank as of August 2020 is $28.2 million. The custodian
currently oversees four investment managers (U.S. Bank, First Community Trust,
Dubuque Bank and Trust, and Dana Investment Advisors). Investment Managers are
recommended to change to three managers (Dubuque Bank and Trust, Dana
Investment Advisors, and BTC Capital Management).
Investment custodian services provided include custodian administrative services,
review and certification that all investments are in compliance with the City's investment
policy, safekeeping of assets, collection of all income due or payable, collection of
investment instruments that have matured, been called or retired, execution of any
necessary declarations or certificates of ownership under the federal income tax laws or
the laws or regulations of any other taxing authority, preparation and distribution of
monthly and annual statements, and ongoing communications with City staff.
The City of Dubuque released a Request for Proposals (RFP) for Investment Custodian
Services on August 17, 2020. Proposals were evaluated by Finance staff and the
Investment Oversight Advisory Commission. Insurance policy review assistance was
provided by Barry Lindahl, Senior Counsel, Tony Breitbach, Purchasing and Contracts
Coordinator, and Sue Miller, O'Connor and English Insurance (City's insurance agent)
in conjunction with a financial institution insurance specialist.
Six firms submitted proposals:
1. MidWestOne Bank
2. AmeriTrade
3. Bankers Trust
4. UMB Bank
5. Wells Fargo
6. Zions Bank
Proposals were evaluated based on municipal government experience, number of lowa
clients, ability to meet insurance requirements, and fees.
Proposals were then narrowed down to investment custodians with lowa municipal
government experience:
1. MidWestOne
2. Bankers Trust
3. UMB Bank
4. Wells Fargo
It was determined that Bankers Trust is an affiliate of BTC Capital Management. BTC
Capital Management is being recommended as an Investment Manager for the City and
an Investment Manager cannot also be associated with an Investment Custodian. Due
to the affiliation of Bankers Trust with BTC Capital Management, Bankers Trust cannot
be considered for Investment Custodian.
The Investment Oversight Advisory Commission's recommendation for investment
custodian is MidWestOne Bank. The City of Dubuque has had a positive relationship
with MidWestOne Bank as Investment Custodian, the proposal submitted reduced fees
by 50% (5 basis points on all assets), and the account is serviced out of the local office
on Main Street in Dubuque, lowa.
The minimum insurance requirements set by the insurance review committee included
$10 million financial institution bond, $10 million professional liability, and $5 million
cyber liability.
MidWestOne Bank carries $5 million in Cyber Liability, $9 million in Professional
Liability, and $9 million in Financial Institution Bond.
A review of MidWestOne determined total assets of$4.6 billion. Six months of
investment transactions were: August 2020 $4.9 million; July 2020 $2.0 million; June
2020 $2.0 million; May 2020 $4.9 million; April 2020 $2.1 million; March 2020 $3.5
million. Average monthly investment transactions were $3.2 million. The consensus of
the insurance review committee was that MidWestOne would have enough insurance
coverage to apply to each City of Dubuque transaction along with $4.6 billion in assets
to cover any additional risk exposures if necessary.
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The fees proposed by MidWestOne Bank are 5 basis points of total assets, or
approximately $14,000.
The City is currently paying an annual fee of$400 for each account ($1,600) plus 20
basis points on the first $1 million of assets, 15 basis points on the next $1 million of
assets, 10 basis points on the next $1 million, and 5 basis points on the remaining
assets or approximately $27,600 annually. This recommendation would save
approximately $13,600 in fees annually.
I concur with the recommendation and respectfully request Mayor and City Council
approval.
�J�/'+�'� �Gv�r
Michael C. Van Milligen
MCVM/jml
Attachment
cc: Barry Lindahl, Senior Counsel
Cori Burbach, Assistant City Manager
Jennifer Larson, Director of Finance and Budget
Cassie Ross, Assistant Director of Finance
Tony Breitbach, Purchasing and Contracts Coordinator
Paul Lassance, Investment Oversight Advisory Commission Chair
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Dubuque
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TO: Michael C. Van Milligen, City Manager
FROM: Jennifer Larson, Director of Finance and Budget
SUBJECT: Investment Custodian Services Selection
DATE: October 8, 2020
INTRODUCTION
The City of Dubuque released a Request for Proposals (RFP) for Investment Custodian
Services. Proposals were evaluated by Finance staff and the Investment Oversight Advisory
Commission. Insurance policy review assistance was provided by Barry Lindahl, Senior
Counsel, Tony Breitbach, Purchasing and Contracts Coordinator, and Sue Miller, O'Connor
and English Insurance (City's insurance agent) in conjunction with a financial institution
insurance specialist.
BACKGROUND
Investment Custodian Services are currently provided by MidWestOne Bank. The total
portfolio held by MidWestOne Bank as of August 2020 is $28.2 million. The custodian currently
oversees four investment managers (U.S. Bank, First Community Trust, Dubuque Bank and
Trust, and Dana Investment Advisors). Investment Managers are recommended to change to
three managers (Dubuque Bank and Trust, Dana Investment Advisors, and BTC Capital
Management).
Investment custodian services provided include custodian administrative services, review and
certification that all investments are in compliance with the City's investment policy,
safekeeping of assets, collection of all income due or payable, collection of investment
instruments that have matured, been called or retired, execution of any necessary declarations
or certificates of ownership under the federal income tax laws or the laws or regulations of any
other taxing authority, preparation and distribution of monthly and annual statements, and
ongoing communications with City staff.
DISCUSSION
The City solicited proposals from financial institutions with municipal investment management
experience.
Six firms submitted proposals:
1. MidWestOne Bank
2. AmeriTrade
3. Bankers Trust
4. UMB Bank
5. Wells Fargo
6. Zions Bank
Proposals were evaluated based on municipal government experience, number of lowa
clients, ability to meet insurance requirements, and fees.
Proposals were then narrowed down to investment custodians with lowa municipal
government experience:
1. MidWestOne
2. Bankers Trust
3. UMB Bank
4. Wells Fargo
It was determined that Bankers Trust is an affiliate of BTC Capital Management. BTC Capital
Management is being recommended as an Investment Manager for the City and an
Investment Manager cannot also be associated with an Investment Custodian. Due to the
affiliation of Bankers Trust with BTC Capital Management, Bankers Trust cannot be
considered for Investment Custodian.
The Investment Oversight Advisory Commission's recommendation for investment custodian is
MidWestOne Bank. The City of Dubuque has had a positive relationship with MidWestOne
Bank as Investment Custodian, the proposal submitted reduced fees by 50% (5 basis points
on all assets), and the account is serviced out of the local office on Main Street in Dubuque,
lowa. The Investment Oversight Advisory Commission indicated that their second choice
would be Wells Fargo, however there are past customer service issues and the fees proposed
are highly variable (2 basis points of market value, $1,500 per managed account, and $5 per
holding with a $10,000 minimum fee).
The City had initially requested $28 million in insurance coverages (professional liability, cyber
liability, financial institution bond, and wire transfer liability) in the RFP to address the amount
of funds held and risk involved with the services. The insurance review committee felt that
given the exposures this would be an amount that protects the City's interest while keeping in
consideration all other factors (market coverage availability, best practices, and rates). In the
first addendum of the RFP, it was noted that if a firm could not meet the minimum insurance
limits, the firm could still submit an RFP for consideration but the City reserved the right to
reject such proposal for not meeting the minimum requirements. This was done to allow more
firms to participate and allow potential flexibility if deemed warranted by the insurance review
committee.
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After obtaining insurance documentation from the two finalists (MidWestOne Bank and Wells
Fargo), the summary of insurance coverage held is as follows:
Financial Institution Cyber Liability D&O Bonds
MidWestOne $5 million $9 Million $9 Million
Wells Fargo $100 Million $100 Million $100 Million
A review of MidWestOne determined total assets of$4.6 billion. Six months of investment
transactions were: August 2020 $4.9 million; July 2020 $2.0 million; June 2020 $2.0 million;
May 2020 $4.9 million; April 2020 $2.1 million; March 2020 $3.5 million. Average monthly
investment transactions were $3.2 million. The consensus of the insurance review committee
was that MidWestOne would have enough insurance coverage to apply to each City of
Dubuque transaction along with $4.6 billion in assets to cover any additional risk exposures if
necessary.
The fees proposed by MidWestOne bank are as follows:
Estimated Estimated
Financial Institution Fee Balance Annual Fee
MidWestOne Bank 5 basis points of total assets $28 Million $14,000
The City is currently paying an annual fee of$400 for each account ($1,600) plus 20 basis
points on the first $1 million of assets, 15 basis points on the next $1 million of assets, 10
basis points on the next $1 million, and 5 basis points on the remaining assets or
approximately $27,600 annually. This recommendation would save approximately $13,600 in
fees annually.
RECOMMENDATION
I recommend awarding the Investment Custodian Services contract to MidWestOne Bank,
the current Investment Custodian. This would result in an annual savings of approximately
$13,600.
ACTION REQUESTED
I respectfully request your approval to award the Investment Custodian Services to
MidWestOne Bank.
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