HomeMy WebLinkAboutCOUNCIL - AGENDA ITEM - 11/06/2001 - SECOND READING OF ORDINANCE NO. 156, 2001, AUTHORI AGENDA ITEM SUMMARY ITEM NUMBER: 10
DATE: November 6,2001
FORT COLLINS CITY COUNCIL STAFF: Jim O'Neill
SUBJECT:
Second Reading of Ordinance No. 156, 2001, 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:
Ordinance No. 156, 2001,which was unanimously adopted on First Reading on October 16,2001,
authorizes the Purchasing Agent to enter into a lease-purchase financing agreement with Koch
Financial Corporation at 4.533%interest rate. The agreement shall be for an original term from the
execution date of the agreements 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.
AGENDA ITEM SUMMARY ITEM NUMBER: 14
FORT COLLINS CITY COUNCIL DATE: October 16,COUNCIL2001
STAFF:
Jim O'Neill
SUBJECT:
First Reading of Ordinance No. 156, 2001, 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.
p•i p yi,
FINANCIAL IMPACT: -
The cost of the items to be lease-purchased is$1,321,611.02. Payments at the 4.533%interest rate
will not exceed $296,896 in 2002. No payments are due in 2001. Money for the first year lease-
purchase payments is included in the 2002 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 32 %. 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 will authorize the Purchasing Agent to enter into a lease-purchase financing
agreement with Koch Financial Corporation at 4.533% interest rate. The agreement shall be for an
original term from the execution date of the agreements 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 offimds 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 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.
DATE: October 16, 2001 2 ITEM NUMBER: 14
An"Equipment Request"justifying the replacement of each vehicle or piece of equipment is on file
with Fleet Services. The fleet manager has;esearched each request, and approved them based on
current and projected maintenance costs, fuel economy, downtime, and relevant safety factors.
All vehicles and equipment have 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 b ear.
Qffl
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 shM&be noted that the City is able to discontinue the equipment leases so that future City
Couneiis"N1411 have the option to continue or discontinue the policy of lease-purchasing City
equipmenue v. Y
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.
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: October 16, 2001 3 ITEM NUMBER: 14
The proposed Ordinance authorizes the lease-purchase financing of the following:
Line De Term
Department Qty Description Total Cost
No. (yrs)
1 Traffic 2 Bucket Trucks $ 147,572.00 5
2 City Park 9 1 5400-D Toro Reelmaster $ 33,589.00 5
3 City Park 9 2 Golf Carts $ 7,246.00 5
4 1 Collindale Golf 15 1 Golf Carts $ 36,345.00 5
5 Collindale Golf 1 Jacobsen Greens King IV $ 17102.00 5
6 Southridge Golf I 455-D Toro rough mower $ 37,470.00 5
7 Southrid e Golf 1 3100 Toro Greensmaster w/thatching
g $ 24>642.00 5
reels
8 Cemetery I Toro Workman Truckster $ 23,126.00 5
9 Cemetery 1 Riding mower $ 12,401.00 5
10 Forestry 1 Ford F250 pickup $ 19,514 20 : 5
11 Forestry 1 Ford F250 extended cabpicktp $ 21,494.40'� 5
12 Forestry 1 Dump bed for pickup" S 1,895.00 5
13 Engineering l Staff car $ 16,754.86 5
14 Investigation I Midsize Staff Car $ 16.754.86 5
15 Police Patrol 27 Patrol vehicles $ 621,000.00 5
16 Police Patrol lot Patrol vehicle equipment $ 60,000.00 5
17 Police Patrol 27 Laptops&modems $ 97,000.00 5
18 Police Patrol 27 Software for laptops $ 8500.00 5
19 Police Patrol 1 2001 Jeep Grand Cherokee $ 30,250.00 5
20 Fleet Services 1 2001 Jeep Grand Cherokee $ 30,250.00 5
21 Fleet Services 1 3/4-ton pickup $ 17,979.70 5
22 Fleet Services 1 2001 Astro Van $ 25,725.00 5
23 Fleet Services 1 1999 Chevy Van $ 15,000.00 5
Total Lease Financing $1,321,611.02