Financial staff at the city of Santa Fe are set to recommend Wells Fargo Bank for the contract to handle more than $200 million in city cash and investments, SFR has learned. They are currently negotiating the terms of the contract with Wells Fargo.
The decision, which must be approved by the City Council, is sure to spark what one local bank chairman called "righteous indignation" after the city's choice earlier this year to put the four-year contract up for competition.
Councilors and Mayor Javier Gonzales said at the time that they were concerned about Wells Fargo's financial support for the controversial Dakota Access Pipeline. In addition, a recent push to explore the possibility of starting a public bank for city accounts and community-based loans created a political environment that was ripe for reexamining the city's banking needs. Santa Fe pays more than $350,000 each year to its primary bank, technically known as its fiscal agent.
In April, Gonzales said the city needed a bank that had "a social responsibility policy that matches the values of Santa Fe, and a history investing in our community and economy."
SFR asked city spokesman Matt Ross for comment on the selection process. Ross said city staff did not plan to make a recommendation on the contract until August. The city's Finance Committee is scheduled to meet on Monday. Ross was not able to provide an immediate response about the selection committee's choice of Wells Fargo.
"We want to respect the city's process and we really can't comment while that is ongoing," Wells Fargo spokesman Mike English tells SFR in an email.
The formal request for proposals (RFP) issued by the city in April was unique in that it allowed banks to respond to all of the city's banking needs or just a part. Local banking advocates hoped that structure would encourage smaller financial institutions to try for city business.
Three sources familiar with the process tell SFR that portion of the RFP was successful, at least in part, because the city interviewed multiple financial institutions—including local banks—for various parts of the contract. In the end, though, staff appears ready to recommend Wells Fargo for the entire award.
The suggestion by city financial staff would first be presented first to the city's Finance Committee, which votes on the proposal before forwarding the matter to the City Council. While the council can vote against the recommendation of either staff or the Finance Committee, it can't completely ignore the scoring process used by the city, which has to comply with both local and state procurement codes.
The evaluation criteria the city used included a 10 percent preference boost for local banks and a section that weighed a bank's Community Reinvestment Act score. That rating is based on a federal law and measures how much lending a bank does relative to the deposits it takes in from a local community.
The criteria also asked banks to explain the extent of their outreach efforts in both hiring and financial education. In addition, the city also wanted to know about plans for expanding community-based banking from each institution that responded.
One source familiar with the RFP process told SFR the city's continued relationship with Wells Fargo may be a tough one for local banks to handle because those kinds of questions should favor community banks, where executives often sit on the board of directors for local nonprofit groups and dole out hundreds of thousands of dollars in donations to local causes.
"It's not always about the quantitative measure," the source said. "Sometimes it's about doing the right thing. Dance with the one who brought you."
The signal sent to local banks when the city decided to allow a bid on just a portion of the RFP was that it would be a boon for local financial institutions, the source said.
Chip Chippeaux, chairman of Santa Fe-based Century Bank, told SFR he was disappointed his bank didn't win the city contract for custody services, which his bank could have handled through its trust services department.
But, he wasn't surprised.
"You would prefer to have a singular relationship rather than different ones," Chippeaux told SFR of his view of city priorities. "With the business size of the city, a place like Wells Fargo has a whole separate business unit to handle that."
"Especially if they knew that their business was in play, I would expect them to really sharpen their pencils and bring those resources to bear," Chippeaux said.
He noted that city staff had made marked progress in its cash-management practices in the last year and felt the RFP process, as he understood it, had been fair.
Chippeaux told SFR any criticism he had of Wells Fargo would be the same issue he sees with other large banks: Their business model supports a tendency to amass a lot of deposits relative to the number of local loans they make.
Century Bank and other community banks are generally willing to make those loans, Chippeaux said, but the math is undeniable. If he had more deposits, he could make more loans.
Wells Fargo said it extended nearly $15 million in small business loans to 416 Santa Fe businesses in 2015. Its 94 Santa Fe employees volunteered more than 1,000 hours of their time in Santa Fe last year, the bank said.
Its most recent Community Reinvestment Act review for New Mexico, which was based on numbers from 2009-2012, showed "outstanding" ratings from the federal government for both lending and investment.
Details of the Wells Fargo response to the RFP, as well as proposals from other banks, are not currently available.