HomeMy WebLinkAboutCOUNCIL - AGENDA ITEM - 07/06/2004 - SECOND READING OF ORDINANCE NO. 095, 2004, AUTHORIAGENDA ITEM SUMMARY
FORT COLLINS CITY COUNCIL
ITEM NUMBER: 9
DATE: July 6, 2004
STAFF: Jim O’Neill
SUBJECT
Second Reading of Ordinance No. 095, 2004, 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 Second Reading.
EXECUTIVE SUMMARY
This Ordinance, which was unanimously adopted on First Reading on June 15, 2004, authorizes the
Purchasing Agent to enter into a lease-purchase financing agreement with Koch Financial
Corporation at 4.19 percent interest rate. The agreement is for an original term from the execution
date of the agreements to the end of the current fiscal year. The agreement provides for renewable
one-year terms thereafter, to a total term of five (5) 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.
After First Reading of Ordinance No. 095, 2004, staff realized that some line items were
inadvertently omitted, changing the total 5-year financing from $800,000 to $885,000. Payments
at the 4.19% interest rate have changed from $44,545 to $49,278 and raise the total City debt from
.18% to .21%.
Line
No. Department Qty Description Total Cost
Term
(yrs)
1 Police Patrol 18 2004 Ford Crown Victoria patrol cars 443,250.00 5
2 Police Patrol 4 2004 Chevrolet Impala patrol cars 74,720.00 5
3 Police Patrol 5 2004 Chevrolet Astro van patrol cars 90,230.00 5
4 Police Patrol 1 lot Patrol car & motorcycle equipment 31,589.28 5
5 Police Patrol 26 Patrol car radar units 52,000.00 5
6 Police Patrol 1 lot Patrol car laptop computers and equipment 46,840.00 5
7 Fleet 1 2004 Jeep Cherokee 26,715.72 5
8 Golf 16 Golf carts for SouthRidge 37,690.00 5
9 Cemetery 1 John Deere 315SG backhoe loader 55,700.00 5
10 Forestry 1 Morbark Model 13 chipper 26,265.00 5
Total 5-year Financing $885,000.00
ORDINANCE NO. 095, 2004
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 of Fort Collins, Colorado (the “City”) has a need for and desires to
provide certain real and personal property for City purposes; and
WHEREAS, the City is authorized by the Colorado Constitution, Article XX, §6, its
home rule charter and Part 8 of Article 15 of Title 31, Colorado Revised Statutes, as amended
(the “Act”), to enter into rental or leasehold agreements in order to provide necessary land,
buildings, equipment and other property for governmental or proprietary purposes, and such
agreements may include options to purchase and acquire title to such leased or rented property;
and
WHEREAS, the City has received a proposal from Koch Financial Corporation to lease
equipment to the City, consisting of the following:
Line
No. Department Qty Description Total Cost
Term
(yrs)
1 Police Patrol 18 2004 Ford Crown Victoria patrol cars 443,250.00 5
2 Police Patrol 4 2004 Chevrolet Impala patrol cars 78,820.00 5
2 Police Patrol 4 2004 Chevrolet Impala patrol cars 74,720.00 5
3 Police Patrol 5 2004 Chevrolet Astro van patrol cars 89,205.00 5
3 Police Patrol 5 2004 Chevrolet Astro van patrol cars 90,230.00 5
4 Police Patrol 1 Patrol car equipment 24,839.28 5
4 Police Patrol 1 Patrol car and motorcycle equipment 31,589.28 5
5 Police Patrol 26 Radar Units for Patrol Cars 52,000.00 5
5 Police Patrol 1 Patrol car laptop computers and equipment 43,780.00 5
6 Police Patrol 1 Patrol car laptop computers and equipment 46,840.00
7 Fleet 1 2004 Jeep Cherokee 26,715.72 5
8 Golf Division 16 Golf carts for SouthRidge 37,690.00 5
9 Cemetery 1 John Deere 315SG backhoe loader 55,700.00 5
10 Forestry 1 Morbark Chipper 26,265.00 5
Total 5-year Financing $885,000.00
WHEREAS, the City Council has determined that it is in the best interest of the City to
lease the above-described equipment from Koch Financial Corporation, 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 five (5) 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 $49,27844,545 per quarter, and that
payments in that amount are reasonable and proper and represent the fair rental value of the
Equipment; and
WHEREAS, funds for the 2004 lease payments are included in the 2004 budget; and
WHEREAS, the lease of the Equipment will not constitute a “multiple-fiscal year direct
or indirect debt or other financial obligation” of the City within the meaning of Article X
§20(4)(b) of the Colorado constitution and may therefore be entered into without voter approval;
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 is hereby authorized to enter into a lease-
purchase agreement for the above-described Equipment with Koch Financial Corporation 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, 2004. The agreement shall provide for
renewable one-year terms thereafter up to a total term of five (5) 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 renewal
terms, the payment to Koch Financial Corporation will total the sum of the
principal, $885,000800,000, plus interest at a fixed rate equal to 4.19%
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 FIFTY-FIVE THOUSAND, SEVEN HUNDRED
DOLLARS ($55,700) to be provided under the lease-purchase agreement is hereby appropriated
for expenditure in the Cemetery Fund from unanticipated revenue in the appropriate funds for
the acquisition of the Cemetery vehicles in accordance with the terms and provisions of the
lease-purchase agreement, upon receipt thereof.
Section 3. That the amount of SEVENSIX HUNDRED SIXTY FOURSEVENTY
NINE THOUSAND, EIGHT HUNDRED NINETY FOUR DOLLARS AND TWENTY EIGHT
CENTS ($764,894.28679,894.28) to be provided under the lease-purchase agreement is hereby
appropriated for expenditure in the General Fund from unanticipated revenue in the appropriate
funds for the acquisition of the patrol vehicles and equipment in accordance with the terms and
provisions of the lease-purchase agreement, upon receipt thereof.
Section 4. That the amount of TWENTY SIX THOUSAND, SEVEN HUNDRED
FIFTEEN DOLLARS AND SEVENTY TWO CENTS ($26,715.72) to be provided under the
lease-purchase agreement is hereby appropriated for expenditure in the Fleet Fund from
unanticipated revenue in the appropriate funds for the acquisition of a staff vehicle in accordance
with the terms and provisions of the lease-purchase agreement, upon receipt thereof.
Section 5. That the amount of THIRTY SEVEN THOUSAND, SIX HUNDRED
NINETY DOLLARS ($37,690) to be provided under the lease-purchase agreement is hereby
appropriated for expenditure in the Golf Fund from unanticipated revenue in the appropriate
funds for the acquisition of the grounds equipment in accordance with the terms and provisions
of the lease-purchase agreement, upon receipt thereof.
Section 6. Any inconsistency between the provisions of this Ordinance and those of
the Act is intended by the Council. To the extent of any such inconsistency the provisions of this
Ordinance shall be deemed made pursuant to the home rule charter of the City and shall
supersede, to the extent permitted by law, the conflicting provisions of the Act.
Introduced, considered favorably on first reading, and ordered published this 15th day of
June, A.D. 2004, and to be presented for final passage on the 6th day of July, A.D. 2004.
_________________________________
Mayor
ATTEST:
_____________________________
City Clerk
Passed and adopted on final reading this 6th day of July, A.D. 2004.
_________________________________
Mayor
ATTEST:
_____________________________
City Clerk
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AGENDA ITEM SUMMARY
FORT COLLINS CITY COUNCIL
ITEM NUMBER: 11
DATE: June 15, 2004
STAFF: Jim O’Neill
SUBJECT
First Reading of Ordinance No. 095, 2004, 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 $800,000. Payments at the 4.19% interest rate will
not exceed $44,545 in 2004. Money for the first year lease-purchase payments is included in the
2004 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 .18%. A competitive process was used to select Koch Financial
Corporation for this lease. Staff believes acceptance of this lease rate is in the City's best interest.
EXECUTIVE SUMMARY
This Ordinance will authorize the Purchasing Agent to enter into a lease-purchase financing
agreement with Koch Financial Corporation at 4.19 percent interest rate. The agreement is for an
original term from the execution date of the agreements to the end of the current fiscal year. The
agreement provides for renewable one-year terms thereafter, to a total term of five (5) 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 shall be 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.
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June 15, 2004 -2- Item No. 11
An "Equipment Request" justifying the replacement of each vehicle or piece of fleet equipment is
on file with Fleet Services. The fleet manager has researched each request, and approved them
based on current and projected maintenance costs, fuel economy, downtime, and relevant safety
factors. Other equipment purchases have been approved in accordance with departmental
procedures. All vehicles and equipment have 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 City is able to discontinue the equipment leases so that future City
Councils will have the option to continue or discontinue the policy of lease-purchasing City
equipment.
According to Section 29-1-103 C.R.S., 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 liability 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.
The proposed Ordinance authorizes the lease-purchase financing of the following:
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June 15, 2004 -3- Item No. 11
Line
No. Department Qty Description Total Cost
Term
(yrs)
1 Police Patrol 18 2004 Ford Crown Victoria patrol cars 443,250.00 5
2 Police Patrol 4 2004 Chevrolet Impala patrol cars 78,820.00 5
3 Police Patrol 5 2004 Chevrolet Astro van patrol cars 89,205.00 5
4 Police Patrol 1 Patrol car equipment 24,839.28 5
5 Police Patrol 1 Patrol car laptop computers and equipment 43,780.00 5
6 Fleet 1 2004 Jeep Cherokee 26,715.72 5
7 Golf Division 16 Golf carts for SouthRidge 37,690.00 5
8 Cemetery 1 John Deere 315SG backhoe loader 55,700.00 5
Total 5-year Financing $800,000.00