HomeMy WebLinkAboutCOUNCIL - AGENDA ITEM - 04/04/2000 - FIRST READING OF ORDINANCE NO. 32, 2000, AUTHORIZI .. i I am . , . rfr7
AGENDA ITEM SUMMARY ITEM NUMBER: 11
DATE: April 4. 2000
0 FORT COLLINS CITY COUNCIL
STAFF: Jim O'Neill
SUBJECT:
First Reading of Ordinance No. 32, 2000. Authorizing the Purchasing Agent to Enter into an
Agreement for the Financing by Lease-Purchase of Vehicles and Equipment.
RECOMMENDATION:
Staff recommends adoption of the Ordinance on First Reading.
FINANCIAL IMPACT:
The cost of the items to be lease-purchased is$573,592. Payments at the 5.85% interest rate will
not exceed $64.866 in 2000. Money for the first year lease-purchase payments is included in the
2000 budget. The effect of the debt position for the purpose of financial rating of the City will
be to raise the total City debt by less than .5 %. This lease is based on a lease placed with Safeco
isCredit Company on May 1. 1998 and carries a lower interest rate than that lease. Staff believes
acceptance of this interest rate is in the City's best interest.
EXECUTIVE SUMMARY:
This Ordinance authorizes the Purchasing Agent to enter into a lease-purchase financing
agreement with Safeco Credit Company at 5.85 percent interest rate. The agreement shall be for
an original term from the execution date of the agreements to the end of the current fiscal year.
The agreement shall provide for renewable one-year terms thereafter. to a total term of seven (7)
years. subject to annual appropriation of funds needed for lease payments. The total lease terms,
including the original and all renewal terms. will not exceed the useful life of the property. This
lease-purchase financing is consistent with the financial policies of the City of Fort Collins.
BACKGROUND:
All equipment has been purchased following the City's purchasing ordinances and procedures to
ensure that the City realizes all cost savings
The vehicles and equipment financed under the agreement will comply with applicable City
policies, and will be in accordance with the goal of optimizing City resources without impacting
service to the community.
An "Equipment Request" ,justifying the replacement of each vehicle or piece of equipment is on
file with Fleet Services. The fleet manager has researched each request, and approved them
DATE: April 4, 2000 2 ITEM NUMBER: 11
based on current and projected maintenance costs, fuel economy. downtime. and relevant safety
factors.
All vehicle and equipment has been purchased following the City's purchasing ordinances and
procedures to ensure that the City realizes all cost savings.
Lease-Purchase:
The City's lease-purchase policy provides that:
The City of Fort Collins uses lease-purchase for the provision of new and replacement
equipment, vehicles and rolling stock in order to ensure the timely replacement of equipment and
vehicles. This method may also be used to acquire real property. Members of the management
staff have developed an equipment needs schedule for rolling stock which encompasses the
demands of operating departments. This schedule is used to project equipment needs for each
budget year.
The type of lease that the City uses is termed a conditional sales lease. With each rental payment
the City builds equity and assumes risk in the asset over the term of the lease. The annual
installments are subject to appropriation by the Council each year.
Advantages of a lease-purchase over a cash purchase are:
* Decreasing the impact of inflation on the purchase of new and replacement
equipment.
* Resolving the problem of capital replacement needs backlog.
* Conserving operating reserves.
* Reducing the initial impact of the cost to user departments by enabling costs to
be spread over the useful life of the equipment.
* Safeguarding the opportunity to use cash assets to earn higher interest than the
interest cost of lease-purchasing.
It should be noted that the Cite is able to discontinue the equipment leases so that future Cite
Councils will have the option to continue or discontinue the policy of lease-purchasing City
equipment.
According to the State of Colorado House Bill 90-1164, local governments are required to
identify as part of their budgets: (1) the total expenditures during the ensuing fiscal year for all
lease purchase agreements involving real and personal property: and (2) the total maximum
payment liabiliry under all lease purchase agreements over the entire terms of the agreements.
including all optional renewal terms.
Staff recognizes that the State does not include lease-purchase in the legal definition of debt:
however. rating agencies include lease-purchases in calculating the City's debt burden.
DATE: April 4, 2000 ITEM NUMBER: 11
• The proposed Ordinance authorizes the lease-purchase financing of the following:
I
Exhibit A
Equipment to be Lease-Purchased:
Line Department Qty. Description Total Cost Term (yrs)
No.
1 Forestry 1 Galion/Hood 8000 1 37,5301 7 1 '
2 Forestry 1 Freightliner Cab/Chassis 1 56,2351 7 1
3 Collinaale Golf 1 Jacobsen HR-5111 Rough Mower 1 43,5201 5 1
4 SouthRidge Golf 1 Toro Workman 3200 Truckster 1 20,1021 5
5 SouthRidge Golf 1 John Deere 1500 Aercore 1 17,3641 5 1
6 PD-Investigations 1 1 12000 Ford Crown Victoria 1 20,9371 5 1
7 PD-Investigations 1 12000 Chevy Astro Van 1 19,6581 5 1
8 Streets 2 1 Tandem axle trucks and equipment 1 260,0001 5 1
9 1 Fleet Services 1 11999 15-passenger van 1 21,9001 5 1
10 Fleet Services 1 2 12000 Dodge Intrepid Staff Cars 1 36,4111 5 1
11 Fleet Services 3 Hot Water Parts Washers 1 17,940 1 5
12 Fleet Services 3 Pro-M Work Stations 1 7,5451 5 1
13 i Fleet Services 5 System One Parts Washers 1 14,4501 3 1
Total Lease Financing S573,592 1
1
i
. ORDINANCE NO. 32, 2000
OF THE COUNCIL OF THE CITY OF FORT COLLINS
AUTHORIZING THE PURCHASING AGENT TO ENTER
INTO AN AGREEMENT FOR THE FINANCING BY
LEASE-PURCHASE OF VEHICLES AND EQUIPMENT
WHEREAS, the City is authorized under the provisions of Title 31, Article 15, Part 8,
C.R.S.. to acquire necessary equipment and other property for its governmental and proprietary
purposes under the provisions of a long-term rental or leasehold agreement with an option to
purchase such equipment or property and to provide for the payment of said property from any
available municipal income; and
WHEREAS, the City has received a proposal from Safeco Credit Company (Safeco) to
lease equipment to the City, consisting of the following:
Equipment to be Lease-Purchased:
Line Department Qty. Description Total Cost Term (yrs)
No.
1 Forestry 1 Galion/Hood 8000 1 37,5301 7 1
2 Forestry 1 Freightliner Cab/Chassis 1 56,2351 7 1
3 Collindale Golf 1 Jacobsen HR-5111 Rough Mower 1 43,5201 5 1
4 SouthRidge Golf 1 Toro Workman 3200 Truckster 1 20,1021 5 1
5 SouthRidge Golf 1 John Deere 1500 Aercore 1 17,3641 5 1
6 1 PD-Investigations 1 1 12000 Ford Crown Victoria 20,9371 5
7 1 PD-Investigations 1 12000 Chevy Astro Van 1 19,6581 5 1
8 1 Streets 2 1 Tandem axle trucks and equipment 1 260,0001 5 1
9 1 Fleet Services 1 11999 15-passenger van ( 21,9001 5 1
10 Fleet Services 1 2 12000 Dodge Intrepid Staff Cars 1 36,4111 5 1
11 Fleet Services 1 3 1 Hot Water Parts Washers 1 17,9401 5 1
12 Fleet Services 3 1 Pro-M Work Stations 1 7,5451 5 1
13 Fleet Services 5 System One Parts Washers 1 14,4501 3 1
Total Lease Financing I $573,592
WHEREAS. the City Council has determined that it is in the best interest of the City to
lease the above-described equipment from Safeco, which is also providing financing for the
Equipment acquisition; and
WHEREAS. the City desires to enter into a lease-purchase agreement with respect to the
leasing and financing of the Equipment; and
WHEREAS. the useful life of the Equipment is longer than the maximum lease-purchase
term of seven (7) years; and
. WHEREAS. the City has determined that the lease payments to result from the proposed
arrangement will require payments by the City in the sum of $32,433 per quarter, and that
payments in that amount are reasonable and proper and represent the fair rental value of the
Equipment: and
WHEREAS, funds are budgeted for lease payments required in 2000 and funds for the
2001 lease payments are included in the 2001 budget; and
WHEREAS, Article V, Section 9, of the Charter of the City of Fort Collins permits the
Council to make supplemental appropriations by ordinance at any time during the fiscal year,
provided that the total amount of such supplemental appropriations, in combination with
previous appropriations for that fiscal year, does not exceed the then current estimate of actual
and anticipated revenues to be received during the fiscal year.
NOW, THEREFORE, BE IT ORDAINED BY THE COUNCIL OF THE CITY OF
FORT COLLINS as follows:
Section 1. That the Purchasing Agent be, and hereby is, authorized to enter into a
lease-purchase agreement for the above-described Equipment with Safeco in accordance with the
following terms and provisions:
a. The agreement shall be for an original term from the execution date of the
agreement through December 31, 2000. The agreement shall provide for
renewable one-year terms thereafter up to a total term of seven (7) years,
subject to annual appropriation of funds needed for lease payments. The
total lease terms, including the original and all renewal terms, shall not
exceed the useful life of the property.
b. The City shall make equal quarterly payments throughout the term of such
agreement but subject to annual appropriation of funds needed for such
payments.
C. If the City leases the Equipment for the original term and all reneNval
terms, the payment to Safeco will total the sum of the principal,
$573,592, plus interest at a fixed rate equal to 5.85% per year. which is a
reasonable amount.
d. The City shall have the option to purchase part or all of the Equipment on
any quarterly payment date of any term. The option to purchase shall be
exercised by paying the quarterly payment due on said date and the unpaid
principal due after said date.
e. If the City renews the agreement for all the renewal terms and makes all
payments during said terms. the City shall be deemed to have exercised
the option to purchase said Equipment.
f. The agreement shall constitute only a current expense of the City and shall
not be construed to be a debt or pledge of the City's credit or revenues.
• Section 2. That the amount of TWO HUNDRED AND THIRTY-TWO
THOUSAND, SIX HUNDRED AND SIX DOLLARS ($232,606) to be provided under the
i hereby appropriated for expenditure in the General Fund from
lease-purchase agreement s y
unanticipated revenue for the acquisition of the Forestry and Police equipment and vehicles
described above. in accordance with the terms and provisions of the lease-purchase agreement,
upon receipt thereof.
Section 3. That the amount of EIGHTY THOUSAND NINE HUNDRED AND
EIGHTY-SIX DOLLARS ($80,986) to be provided under the lease-purchase agreement is
hereby appropriated for expenditure in the Golf Fund from unanticipated revenue for the
acquisition of the Collindale and Southridge vehicles and equipment described above, in
accordance with the terms and provisions of the lease-purchase agreement, upon receipt thereof.
Section 4. That the amount of TWO HUNDRED SIXTY THOUSAND DOLLARS
($260,000) to be provided under the lease-purchase agreement is hereby appropriated for
expenditure in the Transportation Services Fund from unanticipated revenue for the acquisition
of the Streets vehicles and equipment described above. in accordance with the terms and
provisions of the lease-purchase agreement, upon receipt thereof.
Introduced, considered favorably on first reading. and ordered published this 4th day of
April, A.D. 2000. and to be presented for final passage on the 18th day of April, A.D. 2000.
•
Mavor
ATTEST:
City Clerk
Passed and adopted on final reading this 18th day of April, A.D. 2000.
Ma_v or
ATTEST:
City Clerk
•