HomeMy WebLinkAboutCOUNCIL - AGENDA ITEM - 06/07/2005 - SECOND READING OF ORDINANCE NO. 055, 2005, AUTHORI ITEM NUMBER: 9
AGENDA ITEM SUMMARY DATE: June 7, Zoos
FORT COLLINS CITY COUNCIL STAFF: Jim O'Neill
SUBJECT
Second Reading of Ordinance No. 055, 2005, 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 May 17,2005,authorizes the
Purchasing Agent to enter into a lease-purchase financing agreement with Koch Financial
Corporation at 4.96 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 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 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 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.
ORDINANCE NO. 055, 2005
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:
Lin Department Qty Description Total Cost Term
1 Police Patrol 1 2005 Chevy Tahoe 28,192 5
2 Police SWAT 1 2005 Chevy Tahoe 27,351 5
3 Traffic 1 2005 Chevy Colorado 4wd extended cab 17,217 5
4 Traffic 1 2005 Chevy 1500 4wd extended cab 19,304 5
5 Collindale Golf 14 2005 Golf Carts 28,900 5
6 Collindale Golf 1 2005 ADA Golf Cart 6,124 5
7 SouthRidge Golf 1 2005 ADA Golf Cart 6,124 5
8 City Park Nine 1 2005 ADA Golf Cart 6,124 5
9 SouthRidge Golf 1 Massey Ferguson 431 Tractor 9,750 5
10 City Park Nine 1 John Deere tractor& equipment 25,013 5
11 Police Special 1 2006 Ford F250 Crewcab pickup & shell 23,790 5
12 Police Special 1 Staff car 13,976 5
13 Engineering 1 2005 Jeep Liberty 16,872 5
14 Streets 1 2005 Chevy Colorado Y2-ton pickup 15,593 5
Total 5-year Financing 244,330
("Equipment") and;
WHEREAS, the City Council has determined that it is in the best interest of the City to
lease the 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 $13,870 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 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, 2005. 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 terns, 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, $244,330, plus interest at a fixed rate equal to 4.96% 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 NINETY THREE THOUSAND, THREE HUNDRED
NINE DOLLARS ($93,309) 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 THIRTY SIX THOUSAND, FIVE HUNDRED
TWENTY ONE DOLLARS ($36,521) 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 SIXTEEN THOUSAND, EIGHT HUNDRED
SEVENTY TWO DOLLARS ($16,872) 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 a staff vehicle for Engineering in accordance with the
terms and provisions of the lease-purchase agreement, upon receipt thereof.
Section 5. That the amount of FIFTEEN THOUSAND, FIVE HUNDRED NINETY
THREE DOLLARS ($15,593) 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 a staff vehicle for Streets in accordance with the terms
and provisions of the lease-purchase agreement, upon receipt thereof.
Section 6. That the amount of EIGHTY TWO THOUSAND, THIRTY FIVE
DOLLARS ($82,035) 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 equipment in accordance with the terms and provisions of the lease-purchase
agreement, upon receipt thereof.
Section 7. 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.9rdered published this 17th day of
May, A.D. 2005, and to be presented for final passage on e 7 h day o une D. 2 5.
ayor
ATTEST:
�" )D�
City Clerk
Passed and adopted on final reading this 7th day of June, A.D. 2005.
Mayor
ATTEST:
City Clerk
ITEM NUMBER: 12
AGENDA ITEM SUMMARY DATE: May 17, 2005
FORT COLLINS CITY COUNCIL STAFF: Jim O'Neill
SUBJECT np ,
First Reading of Ordinance No. 055, 2005, 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 $244,330. Payments at the 4.96% interest rate will
not exceed $27,739 in 2005. fmpe
one fqr"2005 le e-pc se phyments is included in the 2005
budget. The effect of the debtrtion fTIT the p d e o' flna al rating of the City will be to raise
the total City debt by .0 A �� � tiVe pro ss; as used t select Koch Financial Corporation
for this lease. Staff believes acceptance of thi lea"se rate is ih he 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 4.96 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
consistent with the financial policies of the City of Fort Collins.
All equipment shall be purcha ow'ng the Crty's pu J-asi�ng"ordinances and procedures to
ensure that the City realizes 1 cost s' ings the vehicle equipment financed under the
agreement will comply with a livable ity pOci and w in accordance with the goal of
optimizing City resources without i pacting servicetothecunity.
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.
May 17, 2005 -2- Item No. 12
BACKGROUND
Lease-Purchase: ,,
The City's lease-purchase poli,yy providUat
_P
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 pr`blem"o apita e c en ee`d backlog.
• Conserving op ting re es.
• Reducing the ini l.impac c o 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 do of include lease,pu - ase in the legal definition of debt;
however, rating agencies incline lease g1 rchasg" i 4oulat he City's debt burden.
May 17, 2005 -3- Item No. 12
The proposed Ordinance authorizes the lease-purchase financing of the following:
—1114
Line Department Q Des iptio � Total Cost Term
No. ' (yrs)
1 Police Patrol 00 he T oe 28,192 5
2 Police SWAT 1 2005 Chevy Tahoe 27,351 5
3 Traffic 1 2005 Chevy Colorado 4wd extended cab 17,217 5
4 Traffic 1 2005 Chevy 1500 4wd extended cab 19,304 5
5 Collindale Golf 14 2005 Golf Carts 28,900 5
6 Collindale Golf 1 2005 ADA Golf Cart 6,124 5
7 SouthRidge Golf 1 2005 ADA Golf Cart 6,124 5
8 City Park Nine 1 2005 ADA Golf Cart 6,124 5
9 SouthRid e Golf 1 Massey Ferguson 431 Tractor 9,750 5
10 City Park Nine 1 John Deere tractor& equipment 25,013 5
11 Police Special 1 2006 Ford F250 Crewcab pickup & shell 23,790 5
12 Police Special I Staff car 13,976 5
13 Engineering 1 2005 Jeep Liberty 16,872 5
14 Streets 1 005CqW%d2j on4#ckup 15,593 5
A tal ear Financing 244,330