State banking contracts go out to bid

Thursday, Oct. 30, 1997 | 10:47 a.m.

CARSON CITY -- For the first time, smaller banks in Nevada will have a chance to grab a share of state government's mammoth banking account.

State Treasurer Bob Seale asked Wednesday for bids on a full range of banking services.

Seale estimates that $22 billion is run through the commercial account alone each year and there are more than 100,000 checks processed each month.

Bank of America now has the master contract awarded in 1991. But this year Seale is "unbundling" the contracts. "We've have never done this before ... it's been sole source in the past. We have always had one bank."

This time, Seale is asking for separate bids on the commercial account, custody services, securities safekeeping, lock boxes and a number of other functions banks perform for the state.

These can be profitable accounts for banks. For instance, Seale says the state pays 10 cents for each check cashed on its account and 2 cents for each deposit.

Seale's office handles all the banking business for the state except for the State Industrial Insurance System, the University and Community College System of Nevada and the Colorado River Commission.

Banks will have until Nov. 19 to submit their bids and the treasurer expects to award the contracts by Dec. 3. A bidders conference is set for Nov. 4 in in Carson City to answer questions from those interested in handling the state's business.

When he came into office in 1991, Seale said the state's banking business had never been put out to competitive bid. And he rebid the package again in 1994. Bank of America's contract expires Jan. 1 of next year.

Three years ago when the business was put out to bid, he was concerned there were only two "significant players" -- Bank of America and First Interstate Bank. And since then, there have been bank mergers.

But he said there are far more players this time. "It's a big account and it will now allow the little guy to compete," he said.

Bank of America won the state's contract in 1994 but then sold its custodial service to the Bank of New York and its trust business to First Trust, based in Minnesota. First Trust is now merging with U.S. Bank, which has extensive banking business in Nevada.

While the smaller banks in Nevada may not be able to handle the $22 billion commercial account, they might end up winning the contracts for such things as the trust or custodial business in a four-year contract.

Another part of the bidding contract is for the accounts of the state Employment Security Department, now handled by Wells Fargo. That averages about 40,000 checks a month.

The state uses custodial bank services when it makes an investment. The state sends the money to the custodial bank, which in turn verifies that the ownership has been transferred to the state. Seale said all of these transactions are done on electronic transfers and fewer banks are doing this because of the high expense.

When taxpayers are required to put up bonds or deposit, Seale has a bank which takes care of these documents. "We used to keep them here (in the Capitol Building) in the vault but we have contracted that out," he said.

He explained that lock box services are provided by financial institutions as a central point for receiving tax payments due the various state agencies and then making the deposit. And controlled disbursements involve out-going checks.