HomeMy WebLinkAboutCOUNCIL - AGENDA ITEM - 03/02/1999 - FIRST READING OF ORDINANCE NO. 36, 1999, AUTHORIZI AGENDA ITEM SUMMARY ITEM NUMBER: 20
DATE: March 2, 1999
FORT COLLINS CITY COUNCIL STAFF: Jim 0,Neill
SUBJECT:
First Reading of Ordinance No. 36, 1999, 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 $580,851. Payments at the 4.61% interest rate will
not exceed$100,662 in 1999. Money for the first year lease-purchase payments is included in the
City Managers 1999 recommended 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 29%. This lease is based on a lease
placed with Safeco Credit 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 will authorize the Purchasing Agent to enter into a lease-purchase financing
agreement with Safeco Credit Company at a 4.61 percent interest rate. The agreement shall be for
an original term from the execution date of the agreement to the end of the current fiscal year. The
agreement shall provide 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 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 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.
DATE: March 2, 1999 2 ITEM NUMBER: 20
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 based on i
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 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 the C.R.S. 29-1-103(3)(a), 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.
DATE: March2, 1999 3 ITEM NUMBER: 20
The proposed Ordinance authorizes the lease-purchase financing of the following:
i Line Department Qty, Description Total Cost Term
No. (yrs)
1 Forestry 1 Ford'/4-ton pickup with dump body 19,392 5
2 Forestry 1 Ford %z-ton extracab pickup with radio 23,049 5
3 Southridge Golf 1 John Deere 2653A Triplex Mower 19,360 5
4 Southridge Golf 1 Toro 3200 Workman Truckster 14,884 5
5 Collindale Golf 12 Yamaha G16A Golf Cars 26,304 5
6 Collindale Golf 1 Jacobsen Greens King IV Mower 15,952 5
7 Collindale Golf 1 Jacobsen LF-3400 Triplex Mower 31,082 5
8 Collindale Golf 1 Toro 72" Mower 17,301 5
9 City Park Nine 1 Toro 455D Mower 30,311 5
10 Police Patrol 5 Ford Crown Victoria Patrol Cars 108,014 5
11 Police Patrol 1 lot Patrol Car Equipment 48,535 5
12 Police Invest. 2 Ford Taurus Staff Cars 29,698 5
13 Police Invest. 1 Dodge Intrepid Staff Car 15,032
14 Police Invest. 2 Chevy Lumina Staff Cars 30,762 5
15 Police Invest. 1 Dodge Durango 26,854 5
16 Engineering 1 Ford 4x4, extracab pickup 25,155 5
17 Cemetery 1 Toro 325D, 72" Mower 17,430 5
18 Cemetery 2 Toro 3200 Workman Trucksters 36,354 5
19 Fleet Services 1 7-passenger Minivan 19,382 5
20 Fleet Services I GEMS 2000 Software Conversion 26,000 3
Total Financing $580,851
ORDINANCE NO. 36, 1999
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:
Line Department Qty. Description Total Cost Term
No. (yrs)
1 Forestry 1 Ford'/.-ton pickup with dump body 19,392 5
2 Forestry 1 Ford 1/2-ton extracab pickup with radio 23,049 5
3 Southridge Golf 1 John Deere 2653A Triplex Mower 19,360 5
4 Southridge Golf 1 Toro 3200 Workman Truckster 14,884 5
5 Collindale Golf 12 Yamaha G16A Golf Cars 26,304 5
6 Collindale Golf 1 Jacobsen Greens King IV Mower 15,952 5
7 Collindale Golf 1 Jacobsen LF-3400 Triplex Mower 31,082 5
8 Collindale Golf 1 Toro 72" Mower 17,301 5
9 City Park Nine 1 Toro 455D Mower 30,311 5
10 Police Patrol 5 Ford Crown Victoria Patrol Cars 108,014 5
11 Police Patrol 1 lot Patrol Car Equipment 48,535 5
12 Police Invest. 2 Ford Taurus Staff Cars 29,698 5
13 Police Invest. 1 Dodge Intrepid Staff Car 15,032 5
14 Police Invest. 2 Chevy Lumina Staff Cars 30,762 5
15 Police Invest. 1 Dodge Durango 26,854 5
16 Engineering 1 Ford 4x4, extracab pickup 25,155 5
17 Cemetery 1 Toro 325D, 72" Mower 17,430 5
18 Cemetery 2 Toro 3200 Workman Trucksters 36,354 5
19 Fleet Services 1 7-passenger Minivan 19,382 5
20 Fleet Services 1 GEMS 2000 Software Conversion 26,000 3
Total Financing $580,851
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 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$33,554 per quarter,and that payments
in that amount are reasonable and proper and represent the fair rental value of the Equipment; and
WHEREAS, sufficient funds to make the lease payments for 1999 are included in the City
Managers 1999 recommended budget.
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 Credit Company 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, 1999. The agreement shall provide for
renewable one-year terms thereafter up to a total term of five (5) years,
subj ect 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 Safeco.Credit Company will total the sum of the principal,
$580,851, plus interest at a fixed rate equal to 4.61% 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 FIVE HUNDRED EIGHTY THOUSAND EIGHT
HUNDRED FIFTY-ONE DOLLARS($580,851)to be provided to the City under the lease-purchase
agreement is hereby appropriated for the fiscal year 1999 as unanticipated revenue in the appropriate
funds for the acquisition of the Vehicles and Equipment 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 2nd day of
March, A.D. 1999, and to be presented for final passage on the 16th day of March, A.D. 1999.
Mayor
ATTEST:
City Clerk
Passed and adopted on final reading this 16th day of March, A.D. 1999.
i
Mayor
ATTEST:
City Clerk