Locals concerned that the City of Salem does business with US Bank, which, despite statements that it no longer funds pipeline construction, still provides hundreds of millions to pipeline companies for general use, according to its 2017 Environmental Responsibility Policy – will have to wait for the City to part ways with the bank the way Seattle left Wells Fargo for similar reasons in February.
U.S. Bank’s 2017 Environmental Responsibility Policy states its commitment to stop “project financing.” but it still provides corporate financing, including pipeline construction, to companies like Phillips 66, Energy Transfer Partners Cabot Oil and Gas and National Fuel Gas, among others.
The difficulty for the City of Salem, says David Lacy, Staff Liaison for the City of Salem’s Finance Department, is that the contract with U.S. Bank runs for 7 years, not expiring until 2021, and the termination for cause language would require a serious event such as liquidation or insolvency.
“While there is not a specific monetary penalty for termination established within the contract,” Lacy says, “terminating without cause would subject the City to potential legal action and damages. It is also important to note that setting up a banking services contract is a very complex and time consuming processes for the City to undertake, as there is an organization-wide impact.”
Significant lead time has already been invested for the City’s Finance and Information Technology staff to work with any bank to support “the multiple and customized system interfaces for receipting and payments,” Lacy says.
Banks the City works with are required by law to have the ability to hold more than $250,000 in deposits and must have applied to become an Oregon Qualified Public Depository. Many local banks fit these criteria, including Bank of the Cascades, MAPS Credit Union, Oregon Community Credit Union and Oregon State Credit Union.
“The City must maintain compliance with ORS Chapter 295,” Lacy says, “and has business needs to work with a bank or credit union that can handle larger amounts of funds on deposit.” He notes that the City can have on hand more than $50 million dollars in November, when property taxes are received.
“As a rough example, if the City elected to use multiple institutions to hold the average balance of $8 million while staying within the $250,000 FDIC protection cap, the City would need to use 32 separate banks or credit unions.”