HomeMy WebLinkAboutCOUNCIL - AGENDA ITEM - 03/21/2006 - SECOND READING OF ORDINANCE NO 042, 2006, AUTHORIZ ITEM NUMBER: 8
AGENDA ITEM SUMMARY DATE: March 21, 2006
FORT COLLINS CITY COUNCIL STAFF: Jim O'Neill
SUBJECT
Second Reading of Ordinance No. 042, 2006, 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 March 7, 2006, authorizes
the Purchasing Agent to enter into a lease-purchase financing agreement with Koch Financial
Corporation at 4.94 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.
ITEM NUMBER: 21
AGENDA ITEM SUMMARY DATE: March 7, 2006
FORT COLLINS CITY COUNCIL STAFF: Jim O'Neill
SUBJECT
AL
First Reading of Ordinance No. 042, 2006, 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
The cost of the items to be lease-purchased is $ 646,242. Payments at the 4.94% interest rate
will not exceed $ 109,995 in Cdebt
(com)Ptie
e payments is included in the
2006 budget. The effect oftaye
rating of the City will
be to raise the total City debtces was used to select Koch Financial
Corporation for this lease. f 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 4.94 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 purch d to
O!py
ordinances and procedures to
ensure that the City realizes al ost sa
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.
March 7, 2006 -2- Item No. 21
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. Council has requested additional information on specific vehicles being replaced.
This will be provided under sCocedur(
c h t hases have been approved in
accordance with departmental
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 appr nPpu
ye .
Advantages of a lease-purchas veer a ca 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 the City is able to discontinue the equipment leases so that future 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 al 1maximum payment liability
under all lease purchase agr ments er t py
he agreements, including all
optional renewal terms.
Staff recognizes 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.
March 7, 2006 -3- Item No. 21
The proposed Ordinance authorizes the lease-purchase financing of the following:
Line Department QtY Description Total Term
Cost s
1 Traffic 0 or - ss` 23,315 5
2 Traffic R du 8,323 5
3 Traffic e c e lication achine 19,787 5
4 Traffic 1 Line laser, line driver& equipment 9,868 5
5 Collindale Golf 15 EZ-GO Textron carts 34,530 5
6 Collindale Golf 1 Toro Groundsmaster 4700D 60,895 5
7 SouthRid e Golf 1 Verti-drain Aerifier 21,953 5
8 SouthRid e Golf 3 Toro Flex 21 walkingmowers 24,885 5
9 SouthRid e Golf 2 2002 Toro 3500D &2003 Jacobsen LF- 30,850 5
10 CityPark Nine 1 Walker MTSD26 mower 14,860 5
11 Police Lab 1 2006 E250 Ford van 15,242 5
12 Police Lab 1 2006 E350 Ford cutawayvan 17,356 5
13 Police Lab 1 Aluminum van bodyfor E350 8,000 5
14 Police Lab 1 E ui ment for lab van 12,000 5
15 Investigations 1 2006 ChevyTrailblazer 21,326 5
16 Investigations 1 06,DQ&e 22,349 5
17 Investigations Do ar s 19,637 5
18 Investigations 20 Che a StLft ars 85,500 5
19 Police Patrol AZ 4006kChdIFyala patrdtcar 17,065 5
20 Police Patrol 6 2006 Crown Victoria patrol cars 149,802 5
21 Police Patrol 1 Police carequipment 6,000 5
22 Police Admin 1 2006 Dodge Durango 22,699 5
Total 5-year Financing 646,242
ORDINANCE NO. 042, 2006
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(the"Equipment'), consisting of the following:
Line Term
Department Qty. Description Total Cost
No. (yrs)
1 Traffic 1 2007 Ford F-550 cab/chassis 23,315 5
2 Traffic 1 Rugby dump body 8,323 5
3 Traffic 1 Methacrylate application machine 19,787 5
4 Traffic 1 Line laser, line driver&equipment 9,868 5
5 Collindale Golf 15 EZ-GO Textron carts 34,530 5
6 Collindale Golf 1 Toro Groundsmaster 4700D 60,895 5
7 SouthRidge Golf 1 Verti-drain Aerifier 21,953 5
8 SouthRidge Golf 3 Toro Flex 21 walking mowers 24,885 5
9 SouthRidge Golf 2 2002 Toro 3500D&2003 Jacobsen LF-3400 30,850 5
10 City Park Nine 1 Walker MTSD26 mower 14,860 5
11 Police Lab 1 2006 E250 Ford van 15,242 5
12 Police Lab 1 2006 E350 Ford cutaway van 17,356 5
13 Police Lab 1 Aluminum van body for E350 8,000 5
14 Police Lab 1 Equipment for lab van 12,000 5
15 Investigations 1 2006 Chevy Trailblazer 21,326 5
16 Investigations 1 2006 Dodge Durango 22,349 5
17 Investigations 1 2006 Dodge Charger staff car 19,637 5
18 Investigations 5 2006 Chevy Impala staff cars 85,500 5
19 Police Patrol 1 2006 Chevy Impala patrol car 17,065 5
20 Police Patrol 6 2006 Crown Victoria patrol cars 149,802 5
21 Police Patrol 1 Police car equipment 6,000 5
22 Police Admin 1 2006 Dodge Durango 22,699 5
Total 5-year Financin 646,242
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 $ 36,665 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 2006 lease payments are included in the 2006 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, 2006. 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, $ 646,242, plus interest at a fixed rate equal to 4.94% 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 THREE HUNDRED NINETY SIX THOUSAND, NINE
HUNDRED SEVENTY SIX DOLLARS ($ 396,976) 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.
Section3. That the amount of SIXTY ONE THOUSAND,TWO HUNDRED NINETY
THREE DOLLARS ($ 61,293) 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.
Section4. That the amount of ONE HUNDRED EIGHTY SEVEN THOUSAND, NINE
HUNDRED SEVENTY THREE DOLLARS ($ 187,973) 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 5. 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 7th day of
March, A.D. 2006, and to be presented for final passage on the st day of March, A.D. 2006.
/lllJ.a�
May
ATTEST:
City Clerk
Passed and adopted on final reading on the 21st day of March, A.D. 2006.
Mayor
ATTEST:
City Clerk