The Cleveland City Council rescinded its vote from two weeks ago and will re-examine the bids for its banking services from among four qualified bids.
The Council approved an impromptu motion by At-Large Councilman Richard Banks. The measure rescinds the previous vote and reviews the qualifying bids with full information passed by a vote of 5-1-1.
Second District Councilman Bill Estes voted no and 1st District Councilman Charlie McKenzie passed.
During discussion, Estes asked what would be the rationale for rescinding the bid.
“We don’t like something, so you — granted there needs to be two benchmarks: time and the fed rate,” he said.
The Council accepted a bid from BB&T with no discussion at its May 28 meeting.
“The fair thing to do would be to bid the whole thing out again with two hard benchmarks,” he said. “This doesn’t smell right. It doesn’t sound right.”
City Attorney John Kimball suggested the Council exercise the 90-day opt-out clause in the agreement.
“If rates are going up, then utilize the option in your contract and then you rebid it at that time,” Kimball said. “Or, rebid it all out now with benchmarks included so there won’t be any confusion.”
Estes said, “If the Council wants to rebid, then let’s rebid. Let’s not do this ‘pick who we like.’”
He said the city attorney provided two options and Banks provided one.
“Of the three, Richard’s is by far the worst,” he said.
Banks said, “We can’t do anything until we rescind the vote.”
Estes replied, “Rescind it, and then what?”
He suggested using the 90-day opt out. “That way we’re not playing politics with this, we’re not playing games.”
Christy Griffith of Bank of Cleveland said she did have the opportunity to place a bid and the city staff had a very good prebid meeting with the bankers. After passage by the Council, Griffith was notified by email of the staff recommendation and the Council’s decision.
“I just felt like there was some inaccurate information on what was provided to you,” she said.
She said not all banks paid interest on deposits based on the federal fund rate. Also, banks proposed adjusting rates at various intervals during the three years of the contract. BB&T guaranteed the rate for 12 months with no guarantees beyond the first year.
Bank of Cleveland adjusts rates on a quarterly basis and United Community Bank adjusted rates monthly, but it only paid interest on 90 percent of the deposits. The city keeps about $16 million in the account.
“The way I read BB&T’s bid, I assumed they were out. In my mind, it was down to the Bank of Cleveland and United Community Bank,” Griffith said. “I was in shock when I got the email and read that BB&T was awarded the contract.”
BB&T and Bank of Cleveland pay 100 percent of the federal fund rate that is at historic lows. The Federal Reserve Board meets quarterly and will probably raise rates at some point in the future. She said it would be in the best interests of the city to go with a bank that adjusted its rate on a quarterly basis.
BB&T Market President Mike Baker said his bank did not feel comfortable extending its rate beyond 12 months in order to give the city the best rate if the federal fund rate increases.
BB&T Business deposit specialist Kim Hampton said BB&T has had the city account for five years and has never changed the rate.
“We’ve never tried to back out of anything with the city of Cleveland. We feel like it has been a great partnership between BB&T and the city,” Hampton said.
Griffith said the reason she went to the Council meeting was to clarify what she believed was bad information given to the Council.
“I would object to a rebid because I don’t think that’s fair. You have four very good banks that submitted bids and now we all know what each other bid and that just takes up more time and creates more issues,” she said.
The fourth bank is First Tennessee.