HomeMy WebLinkAboutCOUNCIL - AGENDA ITEM - 01/21/2003 - SECOND READING OF ORDINANCE NO. 007, 2003, AUTHORI AGENDA ITEM SUMMARY ITEM NUMBER: 14
FORT COLLINS CITY COUNCIL DATE: January 21, 2003FROM
Jim O'Neill
SUBJECT:
Second Reading of Ordinance No. 007, 2003, 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 by a 5-0 vote (Councilmembers Bertschy and
Tharp absent) on First Reading on January 7, 2003, authorizes the Purchasing Agent to enter into
a lease-purchase financing agreement with Koch Financial Corporation at 3.98% interest rate.
ORDINANCE NO. 007, 2003
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 (yrs)
1 Engineering 3 Ford'/rton 4wd pickups 55,298 5
2 Police Patrol 35 Patrol vehicles 848,077 5
3 Police Patrol 1 Patrol vehicle equipment 241,045 5
4 Investigations 9 Staff cars 139,000 5
5 Investigations 1 Vehicle equipment 11,835 5
6 City Park 9 Golf 12 Golf Carts 31,000 5
7 City Park 9 Golf 1 Dedicated spray unit 24,000 5
8 City Park 9 Golf 2 Walking Greens mowers 16,000 5
9 Collindale Golf 1 Tractor 24,700 5
10 SouthRid e Golf 1 Toro Rough mower 37,000 5
11 SouthRid e Golf 3 Toro Walking Greens mowers 22,0001 !5q
12 SouthRid e Golf 1 Reel nder 18,000
Totals- ear Financing $1,467.955
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$81,307 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 2003 lease payments are included in the 2003 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 be,and hereby is,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, 2003. 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, $1,467,955, plus interest at a fixed rate equal to 3.98 % 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.
Section2. That the amount of FIFTY-FIVE THOUSAND TWO HUNDRED NINETY-
EIGHT DOLLARS ($55,298) 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 Engineering vehicles in accordance with the terms and
provisions of the lease-purchase agreement, upon receipt thereof.
Section 3. That the amount of ONE MILLION TWO HUNDRED THIRTY-NINE
THOUSAND,NINE HUNDRED FIFTY SEVEN DOLLARS($1,239,957)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 patrol vehicles and
equipment in accordance with the terms and provisions of the lease-purchase agreement, upon
receipt thereof.
Section 4. That the amount of ONE HUNDRED SEVENTY-TWO THOUSAND
SEVEN HUNDRED DOLLARS ($172,700)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 the grounds 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
January, A.D. 2003, and to be presented for final passage on the 21st day of January, A.D. 2003.
Mayor
ATTEST:
City Clerk
Passed and adopted on final reading this 21st day of January, A.D. 2003.
Mayor
ATTEST:
City Clerk
AGENDA ITEM SUMMARY ITEM NUMBER: 18
FORT COLLINS CITY COUNCIL DATE: January 7, 2003
STAFF: Jim O'Neill
SUBJECT:
First Reading of Ordinance No. 007, 2003, Authorizing the Purchasing Agent to Enter into an
Agreement for the Financing by Lease-Purchase of Vehicles and Equipment.
RECOMMENDATION:
`c
Staff recommends adoption of the Ordinance on Fipt Reading.
FINANCIAL IMPACT:
The cost of the items to be lease-purchased is$1,467,955. Payments at the 3.98% interest rate will
not exceed$243,921 in 2003. Money for the first year lease-purchase payments is included in the
2003 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 .30%. A competitive processawas used to select Koch Financial
110 Corporation for this lease. Staff believe s.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 3.98% interest rate. The agreement shall be for an
original term from the executio dat ofJded
e n t` en, if the current fiscal year. The
agreement shall provide for renewable a erea to a total term of five (5) years,
subject to annual appropriationf funds ` r 1 se payme s. The total lease terms,including
the original and all renewal terms wi not exceed the useful li e o he 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: ITEM NUMBER: 16
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 accord with departmental procedures. 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- ur'ckLe for the provision' ,n and replacement equipment,
vehicles and rolling stock in order to ensue the timel replacement of equipment and vehicles. This
method may also be used to acquire er al prop erfy 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 thery',impact of infla6i n the purchase of new and replacement
equipment , � _ w
* 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 tt ppdrtets earn higher interest than the
interest cost of ase-purL)counPe
It should be noted that the Cit is-ab'lhe e ' ment 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 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: ITEM NUMBER: 18
The proposed Ordinance authorizes the lease-purchase financing of the following:
Line Department Qty. Description Total Cost Term (yrs)
1 ... .Engineering 3 Ford 1/2-ton 4wd pickups 55,298 5
2 Police Patrol 35 Patrol vehicles 848,077 5
3 Police Patrol 1 Patrol vehicle equipment 241,045 5
4 Investigations 9 Staff cars 139,000 5
5 Investigations 1 Vehicle equipment 11,835 5
6 City Park 9 Golf 12 Golf Carts_ __.. ._. 31,000 5
7 City Park 9 Golf 1 Dedicated sra .unit" 24,000 5
8 City Park 9 Golf 2 Walking GreenS!�aoWers 'V 16,000 5
9 Collindale Golf F Tractotv.._W _ _ = 24,700 5
10 SouthRid e Golf 1 Toro Rough Mower 37,000 5
11 ISouthRidgeGolf 3 Toro Walking Greens mowers 22,000 5
12 SouthRid e Golf 1 Reel grinder 18,000 5
Total 5-year Financin $1,467.955
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