Banking change could save county $1 million, but officials delay
Wednesday, October 22, 2008
by Rob Olmstead
For three months now, the administration of Cook County Board President Todd Stroger has had in its hands an offer from a bank that would save taxpayers about $1 million annually, but has failed to take advantage of it.
Cook County Commissioner Forrest Claypool says it's just another example of the Stroger administration squandering taxpayers' hard-earned money, but Stroger's chief financial officer says it's nothing more than the county taking the time to do its due diligence.
The controversy stems from a cost-saving initiative undertaken by Cook County Treasurer Maria Pappas early in the year. Around April, she put out a request for proposals from banks to find who could give the county the best interest rates and lowest fees. Bank of America has handled the county's money for a decade, and Pappas thought she might be able to do better if the county shopped around.
She was right. The county received seven offers, and her office determined that three banks could provide the online banking services and other unique needs the county has. Harris Bank offered an interest rate of 2.2%, Bank of America 1.744% and JPMorgan Chase 1.70%. In addition, Harris quoted service fees of $176,323, far lower than Bank of America's current $542,284 and even lower than their bid of $201,595. JPMorgan Chase quoted fees of $114,877. In the end, Pappas recommended on July 9 that the county take Harris' offer, which would provide a savings of $954,111 over Bank of America's bid.
But more than three months later, Cook County Comptroller John R. Morales and Chief Financial Officer Donna Dunnings have not acted, declining to put the recommendation before the board. Pappas again sent them a letter Oct. 3, pointing out that since her initial July recommendation "we estimate we have lost approximately $50,000 with our existing banking relationship."
Morales replied, noting that "changing banking services from the Bank of America to the Harris Bank would be a very difficult and time-consuming endeavor to complete."
It would cost money to retrain county staff to work with a new system, he said, and federal, state and local agencies the county works with would have to be notified and relationships adjusted, he said. Additionally, because Bank of America has West Coast operations, the county gets two extra hours of banking each day, he said.
Claypool laughed when told of the excuses.
"If there were any county employees around after 4:30 to deposit the money, maybe" that would make sense, he said.
Such banking transitions are done all the time in other governments, he said.
"This is a very straightforward, competitive bid to save the taxpayers a ton of money and the Stroger administration's reluctance to accept it tells me that either politics is at play or it's just some of the managerial incompetence that we've seen over and over," said Claypool.
It's neither, said Dunnings, who said Morales was simply worried about unexpected costs and possible losses if certain banking operations couldn't be completed on time during the transition. She and Morales had suggested staying with Bank of America, but just accepting their new bid, which would still lower county expenses.
Doing that and still losing $1 million a year, said Claypool, would make a mockery of the initial request for proposals the county sent out.
"You give the impression that it's essentially an inside game, so don't bother with your playing it straight," he said.While Dunnings did not promise to go with the lowest bidder, Harris, she said she had instructed Morales this week to sit down with Pappas to examine if the deal could be done. That change in attitude comes not from media inquiries, she said, but because Pappas only informed them Friday that Harris Bank representatives were willing to come in and train county employees on the new system for free.