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|Santa Monica Government Takes Financial Hit with Wells Fargo Divestment|
By Jonathan Friedman
February 24, 2017 -- It won’t send the City into bankruptcy, but the local government will lose money because of the City Council’s decision to sever Santa Monica’s ties with Wells Fargo, according to a report released this week by Finance Director Gigi Decavalles-Hughes.
The $120,000 loss comes from the City selling its two Wells Fargo bonds with a total book value of $4.6 million prior to their maturity in 2020 and 2021.
“Staff has begun the process of selling the two Wells Fargo bonds in the City’s portfolio,” Decavalles-Hughes wrote.
She added, “No new Wells Fargo securities will be purchased for a minimum period of five years.”
The council voted 5-0 last week to divest from Wells Fargo because it is one of 17 banks reported to be funding the controversial Dakota Access Pipeline (“City Council Votes for Santa Monica to Sever Ties with Wells Fargo,” February 16, 2017).
The measure was proposed by Councilmember Terry O’Day, who called the protests in North Dakota against the pipeline project “one of the most substantive and symbolic fights for our future.”
He added that divestment “would take us into the next generation of implementing our values with our business relationships and the way that we invest our dollars.”
But those hoping the City’s Wells Fargo relationship would end immediately are going to be disappointed. Decavalles-Hughes estimated the “complex” divorce would take more than a year to complete.
“While some divestments are immediate, others require a transition that includes competitive bidding for new services and complicated operational changes,” she wrote.
The City has a contract with Wells Fargo for general banking services (covering seven accounts) through March 2018.
City staff has begun working on a request for proposals (RFP) for banking services and is expected to issue it next month, Decavalles-Hughes wrote.
She wrote that converting the accounts to the new bank would take more than a year.
“Changing banks providing general banking services is a very complex undertaking, requiring not just the movement of funds, but also changes to all the electronic payments to vendors, payroll direct deposits to staff, and purchasing card activities,” Decavalles-Hughes wrote.
She added, “It also includes changes related to deposits being made by checks, cash, credit cards, electronic payments from State, County and federal agencies, other on-line deposits that require new software integrations and deposits from lockbox facilities.”
Other City connections with Wells Fargo, such as the contract for investment portfolio custodial services, can be terminated much more quickly.
The council will consider Decavalles-Hughes’ report and begin the process toward divestment at its meeting on Tuesday.
Santa Monica is not alone in this war on Wells Fargo. The city councils in Seattle and Davis voted for divestment prior to Santa Monica taking action. The Alameda City Council joined the fight earlier this week.
In what should be a surprise to nobody, Wells Fargo has disagreed with these actions.
Company spokesman Paul A. Gomez told The Lookout last week that Santa Monica’s decision “doesn’t take into consideration Wells Fargo’s record as a responsible corporate citizen and taxpayer.”
He also said the bank’s involvement in the pipeline project was minimal, and that the council’s move “may garner some symbolic news coverage, but it’s highly unlikely to stop construction.”
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