HomeMy WebLinkAboutCOUNCIL - AGENDA ITEM - 04/07/1998 - FIRST READING OF ORDINANCE NO. 54, 1998, AUTHORIZI AGENDA ITEM SUMMARY ITEM NUMBER: 18
DATE: April 7, 1998
FORT COLLINS CITY COUNCIL
STAFF: Jim O'Neill
SUBJECT:
First Reading of Ordinance No. 54, 1998, Authorizing the Purchasing Agent to Enter into an
Agreement for the Lease-Purchase Financing of Equipment.
RECOMMENDATION: i
Staff recommends adoption of the Ordinance on First Reading.
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FINANCIAL IMPACT:
The amount to be lease-purchased is$438,537. Payments at the 5.14%interest rate will not exceed
$50,010 in 1998. Money for the first year lease-purchase payments is included in the City Manager's
1998 recommended budget or are separately appropriated. The effect of the debt position for the
purpose of financial rating of the City will be to raise the total City debt by 0.4%.With City Council
approval, a lease agreement was entered into with Safeco Credit Company on November 28, 1997.
The City has need of additional lease financing in the amount of$438,517. Safeco has offered the
City a rate of 5.14%over a seven year term. Staff believes acceptance of this interest rate is in the
City's best interest.
EXECUTIVE SUMMARY:
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This Ordinance will authorize the Purchasing Agent to enter into a lease-purchase financing
agreement with Safeco Credit Company at 5.14%interest rate. The agreement will be 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 seven 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 City's financial policies.
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BACKGROUND:
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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 under the agreement will comply with the City's "Vehicle and
Equipment Acquisition Policy", as set forth in the Administrative Services Policies, and will be in
accordance with the goal of optimizing City resources without impacting service to the community.
DATE: April 7, 1998 2 ITEM NUMBER: 18
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
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 Cin 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 State of Colorado House Bill 90-1164, 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.
While lease-purchases are not included in the legal definition of debt,rating agencies include lease-
purchases in calculating the City's debt burden, therefore that calculation is provided here for
Council's information.
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DATE: April 7, 1998 3 ITEM NUMBER: 18
The proposed Ordinance authorizes the lease-purchase financing of the following vehicles and
equipment:
Equipment to be lease- urchased:
Line Dept. Qty. Description Total Cost Term
No. ( rs)
I Transportation I Equipment for Parking Garage 106,133 5
2 Golf 14 Golf Cars 31.300 5
3 Cemetery I Cab/Chassis and dump Body 25,000 5
4 City Park 9 Golf 1 Greens mower 20,000 5
5 Southridee Golf 1 84"Tri-Plex mower 19,000 5
6 Southrid e Golf 3 Trucksters 16,000 5
7 Collindale Golf I Toro Workman truckster 15,097 5
8 Collindale Golf I Toro Reelmaster 4000-D 40,903 5
9 Collindale Golf I Toro Reelmaster 5200-D 28,469 5
10 Police Investigation 2 Midsize Staff Cars 30,034 5
11 Fleet Services 1 Full-size 1/2-ton 4x4 pickup 20,415 5
12 Traffic 1 Cab/Chassis.Utility Bodv,Post Puller&Rock Drill 31,186 5
Total: Five ear financing $383,537
Line Dept. Qty. Description Total Cost Term
No. vrs)
13 1 Traffic I Bucket Truck 55,0001 7
Total: Seven year financing $55,000
Total Financing Required $438,537
ORDINANCE NO. 54, 1998.
OF THE COUNCIL OF THE CITY OF FORT COLLINS
AUTHORIZING THE PURCHASING AGENT TO ENTER INTO AN AGREEMENT
FOR THE LEASE-PURCHASE FINANCING OF 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:
Equipment to be lease- urchased:
Line Dept. Qty. Description Total Cost Tenn
No. rs
1 Transportation 1 Equipment for Parking Garage 106,133 5
2 Golf 14 Golf Cars 31,300 5
3 Cemetery 1 Cab/Chassis and dump Body 25,000 5
4 City Park 9 Golf 1 Greens mower 20,000 5
• 5 Southridee Golf 1 84"Tri-Plex mower 19.0001 5
6 Southridee Golf 3 Trucksters 16,000 5
7 Collindale Golf 1 Toro Workman truckster 15,097 5
8 Collindale Golf 1 Toro Reelmaster 4000-D 40,903 5
9 Collindale Golf 1 Toro Reelmaster 5200-D 28,469 5
10 Police Investigation 2 Midsize Staff Cars 30.034 5
11 Fleet Services 1 Full-size %x-ton 4x4 pickup 20,415 5
12 Traffic 1 Cab/Chassis,Utility Body,Post Puller& Rock Drill 31,186 5
11 Total: Five vear financing $383.537 ( —
Line Dept. Qty. Description Total Cost Term
No. s
13 Traffic 1 Bucket Truck 55.000 7
Total: Seven vear financing $55,000
Total Fnnancin Required 1 $438,537
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 seven 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$25,005 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 1998 are included in the City
Manager's 1998 recommended budget or appropriated in Ordinance No. 51, 1998, approved this
same date by the Council.
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:
The agreement shall be for an original term from the execution date of the agreement
through December 31, 1998. The agreement shall provide for renewable one-year
terms thereafter up to a total term of eight 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.
The City shall make equal quarterly payments throughout the term of such agreement
but subject to annual appropriation of funds needed for such payments.
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,$580,769.00,
plus interest at a fixed rate equal to 5.14%per year,which is a reasonable amount.
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.
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.
This 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 Four-Hundred, Thirty-Eight Thousand, Five Hundred,
Thirty-Seven Dollars ($438,537) to be provided to the City under the lease-purchase agreement is
hereby appropriated for the fiscal year 1998 as unanticipated revenue in the appropriate funds for the
acquisition of the Finance System 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 7th day of April,
A.D. 1998, and to be presented for final passage on the 21st day of April, A.D. 1998.
Mayor
ATTEST:
City Clerk
Passed and adopted on final reading this 21st day of April, A.D. 1998.
Mayor
ATTEST:
City Clerk
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Exhibit A
Equipment to be lease-purchased:
Line Dept. Qty. Description Total Cost Term
No. rs
1 Smart Trips 8 Vans for commuter pool 216,000 4
2 4
Total: Four year financing $216.000
Line Dept. Qty. Description Total Cost Term
No. rs)
3 Transportation 1 Equipment for Parking Garage 109,000 5
4 Golf 14 Golf Cars 31,300 5
5 Cemetery 1 Cab/Chassis and dump Body 30,000 5
6 City Park 9 Golf I Greens mower 20,000 5
7 Southrid a Golf 1 84"Tri-Plea mower 19,000 5
8 Southri a Golf 3 Trucksters 16,000 5
9 Collindale Golf 1 Toro Workman truckster 15.097 5
10 Collindale Golf 1 Toro Reelmaster 4000-D 40,903 5
11 Collindale Golf 1 Toro Reelmaster 5200-D 28,469 5
Total: Five year financing $309,769 1
Line Dept. Qty. Description Total Cost Term
No. rs
11 I Traffic 1 Bucket Truck 55,0001 7
Total: Seven vear financing $55.000
Total Financing Required $580.769
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