HomeMy WebLinkAboutCOUNCIL - AGENDA ITEM - 06/03/2008 - FIRST READING OF ORDINANCE NO. 066, 2008, AUTHORIZ ITEM NUMBER: 19
AGENDA ITEM SUMMARY DATE: June 3, Zoos
FORT COLLINS CITY COUNCIL STAFF: Jim O'Neill
SUBJECT
First Reading of Ordinance No. 066,2008,Authorizing the Purchasing Agent to Enter into a Lease-
Purchase Financing Agreement for 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 $ 379,038. Payments at the 3.70%interest rate will
not exceed $ 20,847 in 2008. Money for 2008 lease-purchase payments is included in the 2008
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 0.6%. 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 authorizes the Purchasing Agent to enter into a lease-purchase financing agreement
with Koch Financial Corporation at 3.70%interest rate. The agreement is for an original term from
the execution date of the agreement 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.
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 underthe 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.
BACKGROUND
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
June 3, 2008 -2- Item No. 19
factors. Other equipment purchases have been approved in accordance with departmental
procedures.
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.
June 3, 2008 -3- Item No. 19
The proposed Ordinance authorizes the lease-purchase financing of the following:
Line Department Qty Description Total Cost Term
No. (yrs)
1 SouthRidge Golf 15 Golf Carts $ 37,505 5
2 2 JD 84" slope mowers $ 49,176 5
3 City Park Nine Golf 2 Toro Greens mowers $ 19,412 5
4 1 Toro ProCare 648 $ 23,542 5
5 1 JD Gator 850 Utility $ 15,947 5
6 Collindale Golf 1 Toro ProCore 864 $ 25,318 5
7 1 Toro TriPlex greens mower $ 25,832 5
8 Traffic 1 Ford F550 cab/chassis $ 26,453 5
9 1 Altec AT37-G aerial lift $ 53,293 5
10 1 Ford F550 cab/chassis $ 26,763 5
11 1 Flannegan Western lift $ 50,492 5
12 Police 7 XLT 500 Mobile radios $ 25,305 5
TOTAL 5-year Financing $ 379,038
The Operations Services Director has determined that the following units meet requirements for
replacement of vehicles. Departments have appropriately justified the purchase of additional
vehicles and equipment.
Department Old Unit Age Miles/hours New Units Disposal Notes
of old
unit
SouthRidge 13 Club Car 6 varies 2008 EZ- Trade-in For rental to
golf carts years GO golf per bid the public
carts
SouthRidge John Deere 10 3064 & 4012 JD 2653B Auction
Mowers-2 years hours mowers
City Park new units n/a n/a Toro Flex n/a
Nine 21 mowers
City Park Greens 21 n/a Toro Auction Old unit
Nine aerator years ProCore worn out
648
June 3, 2008 -4- Item No. 19
Department Old Unit Age Miles/hours New Units Disposal Notes
of old
unit
City Park new unit n/a n/a JD Gator n/a
Nine XUV 850D
Collindale new unit n/a n/a Toro n/a Attaches to
ProCore existing
864 tractor
Collindale new unit n/a n/a Toro 3150 n/a
mower
Traffic 1998 van 10 8865 hours 2008 Ford Auction
with bucket years F-550
chassis
Traffic 1998 van 10 8865 hours Altec Auction Attaches to
with bucket years AT37-G F550 chassis
aerial
device
Traffic 1998 utility 10 60,000 miles 2008 Ford Move to
truck years F550 other use
chassis
Traffic 1998 utility 10 60,000 miles Flannegan Move to Attaches to
truck years Western other use F550 chassis
sign shop
body
Police new units n/a n/a Motorola n/a
XTL 5000
radios
Note on usage: Units will accumulate additional miles/hours between now and when replacement
vehicles arrive.
ORDINANCE NO. 066, 2008
OF THE COUNCIL OF THE CITY OF FORT COLLINS
AUTHORIZING THE PURCHASING AGENT TO ENTER
INTO A LEASE-PURCHASE FINANCING AGREEMENT FOR
VEHICLES AND EQUIPMENT
WHEREAS,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 Article XX of the Colorado Constitution, its 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 these agreements may include options to
purchase and acquire title to the 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 Department Qty Description Total Cost Term
No. (yrs)
1 SouthRidge Golf 15 Golf Carts $ 37,505 5
2 2 JD 84" slope mowers $ 49,176 5
3 City Park Nine Golf 2 Toro Greens mowers $ 19,412 5
4 1 Toro ProCare 648 $ 23,542 5
5 1 JD Gator 850 Utility $ 15,947 5
6 Collindale Golf I Toro ProCore 864 $ 25,318 5
7 1 Toro TriPlex greens mower $ 25,832 5
8 Traffic I Ford F550 cab/chassis $ 26,453 5
9 1 Altec AT37-G aerial lift $ 53,293 5
10 1 Ford F550 cab/chassis $ 26,763 5
1 I 1 Flannegan Western lift $ 50,492 5
12 Police 7 XLT 500 Mobile radios $ 25,305 5
TOTAL 5-year Financing $ 379,038
and;
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
financing of the Equipment; and
WHEREAS, the useful life of the Equipment is greater than 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$20,847 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 2008 lease payments are included in the 2008 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)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, 2008. The
agreement shall provide for renewable one-year terms thereafter up
to a total tern 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
-2-
the sum of the principal, $379,038,plus interest at a fixed rate equal
to 3.70%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 that date and the unpaid principal due after that 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 Twenty Five Thousand, Three Hundred Five Dollars
($25,305)to be provided under the lease-purchase agreement is appropriated for expenditure in the
General Fund from unanticipated revenue in the appropriate funds for the acquisition of the Police
radios in accordance with the terms and provisions of the lease-purchase agreement, upon receipt
thereof.
Section 3. That the amount of One Hundred Fifty-seven Thousand One Dollars
($157,001)to be provided under the lease-purchase agreement is appropriated for expenditure in the
Transportation Fund from unanticipated revenue in the appropriate funds for the acquisition of the
Traffic Operations vehicles in accordance with the terms and provisions of the lease-purchase
agreement, upon receipt thereof.
Section 4. That the amount of One Hundred Ninety-six Thousand, Seven Hundred
Thirty-two Dollars ($196,732) to be provided under the lease-purchase agreement is appropriated
for expenditure in the Golf Fund from unanticipated revenue in the appropriate funds for the
acquisition of equipment in accordance with the terms and provisions of the lease-purchase
agreement, upon receipt thereof.
Section 5. 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.
-3-
Introduced,considered favorably on first reading,and ordered published this 3rd day of June,
A.D. 2008, and to be presented for final passage on the 1 st day of July, A.D. 2008.
Mayor
ATTEST:
City Clerk
Passed and adopted on final reading on the 1 st day of July, A.D. 2008.
Mayor
ATTEST:
City Clerk
-4-