HomeMy WebLinkAboutCOUNCIL - AGENDA ITEM - 12/07/2004 - SECOND READING OF ORDINANCE NO. 181, 2004, AUTHORI ITEM NUMBER: 11
AGENDA ITEM SUMMARY DATE: December7, 2004
FORT COLLINS CITY COUNCIL STAFF: Jim O'Neill
SUBJECT
Second Reading of Ordinance No. 181, 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
The cost of the items to be lease-purchased is $406,132. No payments are due in 2004. Payments
at the 4.43%interest rate will not exceed$91,002 in 2005. Money for the first year lease-purchase
payments is included in the 2005 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 .09%. 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.
Ordinance No. 181, 2004, was unanimously adopted on First Reading on November 16, 2004.
ORDINANCE NO. 181, 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
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 Department Qty. Description Total Cost Term
1 Police Patrol 1 2004 Ford Explorer 26,711 5
2 Police Patrol 1 2004 Ford F250 pickup 22,241 5
3 Police Invest. 1 2004 Police Tahoe 29,158 5
4 Police Invest. 1 2004 Astro Van 18,096 5
5 Police Training 1 2004 Astro Van 18,309 5
6 Traffic Operations 1 2005 Chevy Colorado pickup 15,371 5
7 Traffic Operations 1 2005 Ford F450 cab/chassis &body 32,147 5
8 Traffic Operations 1 2005 Ford F250 crewcab pickup 17,690 5
9 Streets 1 Cedar Rapids 5048 HSI Crusher 148,409 5
10 Fleet 2 2005 Astro Vans 42,000 5
11 Police Patrol 1 2005 Tahoe Patrol vehicle &equipment 36,000 5
Total 5-year Financin $406,132
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
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$22,751 per quarter,and that payments
in that amount are reasonable and proper and represent the fair rental value of the Equipment; and
WHEREAS, no payments are due in 2004 and funds for the 2005 lease payments are
included in the 2005 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, 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, $406,132, plus interest at a fixed rate equal to 4.43% 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 ONE HUNDRED FIFTY THOUSAND, FIVE
HUNDRED FIFTEEN DOLLARS ($150,515) 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 Police vehicles in accordance with the terms and
provisions of the lease-purchase agreement, upon receipt thereof.
Section 3. That the amount of SIXTY FIVE THOUSAND TWO HUNDRED EIGHT
DOLLARS ($65,208)to be provided under the lease-purchase agreement is hereby 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 FORTY TWO THOUSAND DOLLARS ($42,000)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 ONE HUNDRED FORTY EIGHT THOUSAND,FOUR
HUNDRED NINE DOLLARS ($148,409) to be provided under the lease-purchase agreement is
hereby appropriated for expenditure in the Streets 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 16th day of
November,A.D.2004,and to be presented for final passage on the 7t December, A.D.2004.
Mayor
ATTEST:
%LLI� ��'
City Clerk
Passed and adopted on final reading this 7th day of December, A.D. 2004.
Mayor
ATTEST:
City Clerk
ITEM NUMBER: 18
AGENDA ITEM SUMMARY DATE: November 16, 2004
FORT COLLINS CITY COUNCIL
FF: Jim O'Neill
&I' , ,*
SUBJECT .....
WU Ir—i
First Reading of Ordinance No. 181, 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.
EXECUTIVE SUMMARY
q�i n
The cost of the items to beC ase " s 40 Y002200pa
yments are due in 2004.
Payments at the 4.43% intere note e . Money for the first year
lease-purchase payments is in et. ct of the debt position for the
purpose of financial rating of the City will be to raise the total City debt by .09%. 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.
BACKGROUND
This Ordinance authorizes the Purchasing Agent to enter into a lease-purchase financing
agreement with Koch Financial Corporation at 4.43 percent 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 co ten the 'na is oyesthe City of Fort Collins.
All equipment shall be purcha d fol ng t y's paordinances and procedures to
ensure that the City realizes all cos 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.
November 16, 2004 -2- Item No. 18
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. OP-11Lease-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 er"Ic 1,�
* Decreasing th 'mpacto on the rchase of new and replacement
equipment. P'`
* 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 andEmentIs
I y, e 1 maximum payment liability
under all lease purchase agr er th e r e f 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.
November 16, 2004 -3- Item No. 18
The proposed Ordinance authorizes the lease-purchase financing of the following:
LinNoe Department Qty Description Total Cost (enn
1 Police Patrol 1 2004 d Exp e 26,711 5
2 Police Patrol 1 2004 F F25Aiclup 9 22,241 5
3 Police Invest. 1 Polic shod` 29,158 5
4 Police Invest. 1 2004 Astro Van 18,096 5
5 Police Training 1 2004 Astro Van 18,309 5
6 Traffic Operations 1 2005 Chevy Colorado pickup 15,371 5
7 Traffic Operations 1 2005 Ford F450 cab/chassis &body 32,147 5
8 Traffic Operations 1 2005 Ford F250 crewcab pickup 17,690 5
9 Streets 1 Cedar Rapids 5048 HSI Crusher 148,409 5
10 Fleet 2 2005 Astro Vans 42,000 5
11 Police Patrol 1 2005 Tahoe Patrol vehicle&equipment 36,000 5
Total 5-year Financin $406,132
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