The job of handling payroll banking for Minneapolis schools should go to a new banker, but not the one that community activitists have been pushing for, according to a staff recommendation released Friday.
The school district's finance staff Friday recommended shifting the handling of more than $300 million annually in payroll transactions from Wells Fargo to US Bank and its pool of funds deposited by districts around Minnesota.
But community activists have been pressing the district to end banking relationships with both banks, arguing that they made irresponsible home loans that have hurt borrowers and the district's property values.
Although Wells Fargo's proposal offered the district the cheapest fees, other factors pushed the US Bank ahead of Wells in the district's ranking on various criteria. Among them were that US Bank has the only bank in the zip code where the district is opening its new headquarters on W. Broadway Avenue. The firm also was given an edge for its post-tornado North Side relief efforts, and its experience with accounts of school districts
But there were also intangibles that entered the rankings, according to Chief Financial Officer Robert Doty. He said the district's selection committee was skeptical of Wells Fargo's proposal containing a 75 percent cut in transaction fees. He said that bank representatives were unable to explain why they're able to offer such a cut and why they didn't previously.
Plus, Doty added, "Wells Fargo comes across as a bit arrogant." Bank spokeswoman Peggy Gunn said the bank will wait to comment until a final decision is made by the board, which is expected in August.
The recommendation would put the district in the position, as board member Hussein Samatar put it, of going "from big to big" in terms of bank size. Doty said it has been years since the district put the payroll transactions business up for proposals in telling the board last spring that he planned to do so.
The bank favored by a coalition of neighborhood and labor activists, Bremer Bank, finished well behind the two bigger banks on the district's criteria. Neighborhoods Organizing for Change (NOC) and the Service Employees International Union Local 284 had argued that the big banks had bad foreclosure records and that their leaders had opposed state tax increases that could help finance schools. The staff recommendation made no mention of foreclosures. Activists said that Bremer also was a more active lender to small businesses.
Still, activists applauded the shift away from Wells Fargo, which it was disclosed this week has agreed to pay $175 million to settle federal allegations of systematic lending discrimination against black and Latino borrowers. "There is no doubt that Wells Fargo has a long history of turning its back on our communities and it is time that the Minneapolis Public Schools and other such entities stop doing business with them," said NOC Chair Sunday Alabi. NOC Executive Director Steve Fletcher said shifting from one bank giant to another illustrates the consolidation of power in banking.
Local 284 has taken the issue of shifting bank business away from Wells Fargo and US Bank to a half-dozen metro-area school districts. Executive Director Carol Nieters said she found the recommendation encouraging and the local will work further to make sure that public depositories "invest in our communities."
US Bank already has a sizable chunk of district banking transactions by handling accounts payable transactions. It does so as custodial bank for the Minnesota School District Liquid Asset Fund, which is a pool of school deposits that allows a better interest rate. That experience was one factor in why the district rated US Bank over Wells.
Doty said he will be recommending something that amounts to a sort of consolation prize for Bremer. He said he will urge that those holding accounts for school and booster group fundraising consider using Bremer branches when that's convenient. He said Bremer rates would be competitive for such accounts.
Doty also recommended that the account for credit cards used by some district employees for purchases be shifted from Wells Fargo to JP Morgan Chase, which scored far ahead of other banks on district criteria..
