A New Jersey town plans to sever its longtime relationship with a local bank that is paying no interest on the city's accounts.

The North Brunswick City Council, which went from Democratic to Republican control in the November elections, is expected to vote today on the matter.

The plan is to move the city's $9 million of deposits from $102 million- asset Brunswick Bank and Trust Co. to First Union National Bank. The city has done business with the local bank, based in neighboring New Brunswick, since 1978.

David D. Spaulding, the new council president, estimates the city has been missing out on $40,000 of interest a year. He criticized an agreement under which the bank pays no interest on city deposits but charges the city no fees.

Republicans learned of the arrangement during a post-election transition meeting, Mr. Spaulding said. It was instituted in 1994 by Mayor Paul Matacera, who still holds the office. (The mayoral election will take place this November.)

Mr. Spaulding said the relationship with Brunswick Bank is unacceptable and must end, even if that means giving the city's business to an out-of- state bank.

"Our objective has to be to maximize the investment for taxpayers," he said. "This is simple mismanagement, from a financial standpoint."

The loss for the bank would be substantial. As of Sept. 30, Brunswick had $85 million of deposits, according to the Federal Deposit Insurance Corp. The bank has six branches, all in northeastern New Jersey.

No comment was available from the bank. A vice president said that only Carmen J. Gumina, its chairman, president, and chief executive officer, could make public comments for it. Mr. Gumina did not return phone calls.

Mayor Matacera also did not return calls seeking comment. But in an interview with the Newark (N.J.) Star-Ledger, he defended the relationship, saying the city has gotten some benefits in return.

For example, the bank sends a courier to municipal buildings to pick up deposits.

"It was a trade-off," Mr. Matacera explained.

But Mr. Spaulding said the trade-off was "silly."

"They were giving up $40,000 in interest so someone would come pick up their checks?"

The relationship apparently also violates state law. New Jersey requires all municipalities to deposit their money in interest-bearing bank accounts.

Exemptions can be granted by a division of the state's Department of Community Affairs, but the bank never asked for one, Mr. Spaulding said. Nor, he said, would an exemption have been approved in this situation.

"When I went to the department and described the situation, they could not believe it," he said.

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