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HomeMy WebLinkAboutCOUNCIL - AGENDA ITEM - 10/18/2011 - FIRST READING OF ORDINANCE NO. 132, 2011, AUTHORIZDATE: October 18, 2011 STAFF: Jim O’Neill AGENDA ITEM SUMMARY FORT COLLINS CITY COUNCIL 11 SUBJECT First Reading of Ordinance No. 132, 2011, Authorizing the Purchasing Agent to Enter into an Agreement for the Financing by Lease-Purchase of Vehicles and Equipment and Appropriating the Amount Needed for Such Purpose. EXECUTIVE SUMMARY This Ordinance authorizes the Purchasing Agent to enter into a lease-purchase agreement with Pinnacle Public Finance for the lease-purchase of vehicles and equipment. The cost of the items to be lease-purchased is $1,495,000. Payments at the 2.35% interest rate will not exceed $ 317,787 in 2012. Money for 2012 lease-purchase payments is included in the 2012 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 0.8%. A competitive process was used to select Pinnacle Public Finance for this lease. Staff believes acceptance of this lease rate is in the City's best interest. BACKGROUND / DISCUSSION This Ordinance authorizes the Purchasing Agent to enter into a lease-purchase financing agreement with Pinnacle Public Finance at 2.35 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. FINANCIAL / ECONOMIC IMPACTS 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. October 18, 2011 -2- ITEM 11 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 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. The proposed Ordinance authorizes the lease-purchase financing of the following: Description Quantity Cost Traffic - Replacement Vehicle Ford F-150 half-ton pickup 1 24,736 Topper and equipment 1 lot 3,151 Transportation Fund Total: $ 27,887 Parks - Replacement Vehicle Chevy 1-ton flatbed truck 1 23,000 Forestry - Replacement Vehicle Chipper chassis - International 4300 Truck 1 70,736 Chipper body - Southco 1 22,870 Forestry Total: 93,606 Building Inspection Chevy Colorado pickup 1 18,275 Operations Services - Replacement Vehicles Chevy Express Facilities technician vans 2 43,918 Equipment for Facilities vehicles 1 lot 12,000 Ops Services Total: 55,918 Police Patrol - Replacement Vehicles & Radios Chevy Caprice patrol cars 5 140,000 Chevy Tahoe Patrol SUV 1 33,000 Patrol vehicle equipment 1 lot 36,000 Motorola police mobile radios 1 lot 83,188 Patrol Replacement Vehicles Total: 292,188 Investigations - Replacement Vehicles Chevy Impala, Chevy pickup, Dodge Journey 3 70,000 Investigations vehicle equip. 1 lot 12,872 Investigations Replacement Vehicles Total: 82,872 Police Information Services Ford Fusion hybrid staff car 1 28,000 Equipment Fund Total: $ 593,859 October 18, 2011 -3- ITEM 11 Police Patrol - New Officer Vehicles Chevy Caprice patrol cars 5 140,000 Patrol Vehicle equipment 1 lot 30,000 Patrol New Officer Vehicle Total: 170,000 General Fund Total: $ 170,000 MIS Replacement desktops, workstations, laptops 1 lot 126,124 Replacement Police laptops 148 577,130 Data & Communications Fund Total: $ 703,254 Lease Total: $ 1,495,000 Departments have appropriately justified the purchase of all new and replacement vehicles and equipment. Information on replacement units is given below. See Attachment 1 for a list of vehicle and equipment purchases organized by department. The Operations Services Director has determined that the following units meet requirements for replacement. These units are included in the financing list, above. Department Old unit: Age: Miles / hours: New unit: Disposal of old unit: Notes: Traffic Ops 2270 14 119,497 Pickup Auction Unit beyond useful life Parks 2452 11 101,119 1-ton flatbed Auction Unit beyond useful life Forestry 2449 17 4888 Chipper truck Auction Unit beyond useful life Building Insp. 26700 9 100,673 Small pickup Auction Unit beyond useful life Ops Services 2653, 26300 13 94,870 & 90,539 HVAC & Electrician vans Auction Units beyond useful life Patrol 1167, 11033, 11020, 11008, 11055 9-10 > 90,000 Patrol cars Auction Units beyond useful life Investigations 11608, 21602, 21620 5-10 >90,000 Inv. cars Auction Units beyond useful life Note on usage: Units will accumulate additional miles/hours between now and when replacement vehicles arrive. ENVIRONMENTAL IMPACTS Due to improvements in emissions and engine technology, new vehicles and equipment will use less fuel and produce fewer emissions than the units being replaced. Police vehicles are replacements except for those needed for newly-authorized positions. This represents an increase in fleet size, with a corresponding increase in fuel usage and emissions. The new officers to be added by Police were approved by Council and vehicles must be added to accommodate the increase in staffing levels. Those vehicles are as fuel efficient as can be provided pursuant to the needs of patrol and investigation officers. STAFF RECOMMENDATION Staff recommends adoption of the Ordinance on First Reading. October 18, 2011 -4- ITEM 11 ATTACHMENTS 1. Vehicle and Equipment Purchases by Department ATTACHMENT 1 Vehicle and Equipment Purchases by Department Description Quantity Cost Traffic - Replacement Vehicle Ford F-150 half-ton pickup 1 24,736 Topper and equipment 1 lot 3,151 Traffic Total: 27,887 Parks - Replacement Vehicle Chevy 1-ton flatbed truck 1 23,000 Forestry - Replacement Vehicle Chipper chassis - International 4300 Truck 1 70,736 Chipper body - Southco 1 22,870 Forestry Total: 93,606 Building Inspection Chevy Colorado pickup 1 18,275 Operations Services - Replacement Vehicles Chevy Express Facilities technician vans 2 43,918 Equipment for Facilities vehicles 1 lot 12,000 Ops Services Total: 55,918 Police Patrol - New & Replacement Vehicles & Radios Chevy Caprice patrol cars 10 280,000 Chevy Tahoe Patrol SUV 1 33,000 Patrol vehicle equipment 1 lot 66,000 Motorola police mobile radios 1 lot 83,188 Patrol Replacement Vehicles Total: 462,188 Investigations - Replacement Vehicles Chevy Impala, Chevy pickup, Dodge Journey 3 70,000 Investigations vehicle equip. 1 lot 12,872 Investigations Replacement Vehicles Total: 82,872 Police Information Services Ford Fusion hybrid staff car 1 28,000 MIS Replacement desktops, workstations, laptops 1 lot 126,124 Replacement Police laptops 148 577,130 MIS Total: 703,254 Lease Total: $ 1,495,000 ORDINANCE NO. 132, 2011 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 AND APPROPRIATING THE AMOUNT NEEDED FOR SUCH PURPOSE WHEREAS, 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, the City Charter, and Section 31-15-801, C.R.S. (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 Pinnacle Public Finance to lease equipment to the City, consisting of the following: Description Quantity Cost Traffic - Replacement Vehicle Ford F-150 half-ton pickup 1 24,736 Topper and equipment 1 lot 3,151 Transportation Fund Total: $ 27,887 Parks - Replacement Vehicle Chevy 1-ton flatbed truck 1 23,000 Forestry - Replacement Vehicle Chipper chassis - International 4300 Truck 1 70,736 Chipper body - Southco 1 22,870 Forestry Total: 93,606 Building Inspection Chevy Colorado pickup 1 18,275 Operations Services - Replacement Vehicles Chevy Express Facilities technician vans 2 43,918 Equipment for Facilities vehicles 1 lot 12,000 Ops Services Total: 55,918 Police Patrol - Replacement Vehicles & Radios Chevy Caprice patrol cars 5 140,000 Chevy Tahoe Patrol SUV 1 33,000 Patrol vehicle equipment 1 lot 36,000 Motorola police mobile radios 1 lot 83,188 Patrol Replacement Vehicles Total: 292,188 Investigations - Replacement Vehicles Chevy Impala, Chevy pickup, Dodge Journey 3 70,000 Investigations vehicle equip. 1 lot 12,872 Investigations Replacement Vehicles Total: 82,872 Police Information Services Ford Fusion hybrid staff car 1 28,000 Equipment Fund Total: $ 593,859 Police Patrol - New Officer Vehicles Chevy Caprice patrol cars 5 140,000 Patrol Vehicle equipment 1 lot 30,000 Patrol New Officer Vehicle Total: 170,000 General Fund Total: $ 170,000 MIS Replacement desktops, workstations, laptops 1 lot 126,124 Replacement Police laptops 148 577,130 Data & Communications Fund Total: $ 703,254 Lease Total: $ 1,495,000 and; WHEREAS, the City Council has determined that it is in the best interest of the City to lease the above-described equipment from Pinnacle Public Finance, 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 $79,447 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 2012 lease payments are included in the 2012 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) of the Colorado Constitution and may therefore be entered into without voter approval; and WHEREAS, Article V, Section 9, of the City Charter 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: -2- Section 1. That the Purchasing Agent is hereby authorized to enter into a lease-purchase agreement for the above-described Equipment with Pinnacle Public Finance 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, 2011. 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 Pinnacle Public Finance will total the sum of the principal, $1,495,000, plus interest at a fixed rate equal to 2.35% 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 TWENTY SEVEN THOUSAND, EIGHT HUNDRED EIGHTY SEVEN DOLLARS ($27,887) 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 vehicles and equipment in accordance with the terms and provisions of the lease-purchase agreement, upon receipt thereof. Section 3. That the amount of FIVE HUNDRED NINETY THREE THOUSAND, EIGHT HUNDRED FIFTY NINE DOLLARS ($593,859) to be provided under the lease-purchase agreement is hereby appropriated for expenditure in the Equipment Fund from unanticipated revenue in the appropriate funds for the acquisition of vehicles and equipment for Parks, Forestry, Building Inspection, Operations Services, and Police, in accordance with the terms and provisions of the lease-purchase agreement, upon receipt thereof. -3- Section 4. That the amount of ONE HUNDRED SEVENTY THOUSAND DOLLARS ($170,000) 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 vehicles for Police, in accordance with the terms and provisions of the lease-purchase agreement, upon receipt thereof. Section 5. That the amount of SEVEN HUNDRED THREE THOUSAND, TWO HUNDRED FIFTY FOUR DOLLARS ($703,254) to be provided under the lease-purchase agreement is hereby appropriated for expenditure in the Data & Communications 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 6. 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 City Charter 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 18th day of October, A.D. 2011, and to be presented for final passage on the 1st day of November, A.D. 2011. _________________________________ Mayor ATTEST: _____________________________ City Clerk Passed and adopted on final reading this 1st day of November, A.D. 2011. _________________________________ Mayor ATTEST: _____________________________ City Clerk -4-