HomeMy WebLinkAboutCOUNCIL - AGENDA ITEM - 04/16/2002 - FIRST READING OF ORDINANCE NO. 061, 2002, AUTHORIZ AGENDA ITEM SUMMARY ITEM NUMBER: 14
FORT COLLINS CITY COUNCIL DATE: April 16, 2002
STAFF:
Jim O'Neill
SUBJECT:
First Reading of Ordinance No. 061, 2002, Authorizing the Purchasing Agent to Enter into an
Agr,-ement for the Financing by Lease-Purchase of Vehicles and Equipment.
RECOMMENDATION:
Staff recommends adoption of the Ordinance on First Reading.
FINANCIAL, IMPACT:
The cost of the items to be lease-purchased is $522,322. Payments at the 5.05% interest rate will
not exceed $60,549 in 2002. Money for the first year lease-purchase payments is included in the
200:! budget. The effect of the debt position for the purpose of financial rating of the City will be
to r�.ise the total City debt by 0.11%. 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 5.05% interest rate. The agreement shall be for an
original term from the execution date of the agreement 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. 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:
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 fii a 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. All
DATE: ITEM NUMBER: 14
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 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 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: 14
The proposed Ordinance authorizes the lease-purchase financing of the following:
Line Department t Description Term
No. p Q y p Total Cost (yrs)
1 Fleet Services 1 2000 Ford E-350 Van 19,700 3
2 Information 1 lot Audio/Video Equipment 330,000 5
Technology
3 Information 1 2002 Dodge 2500 Van 21,182 5
Technology
4 Collindale I Jacobsen LF-3400 Fairway Mower 33,449 5
5 City Park 9 3 Yamaha G-16A Golf Carts 6,664 5
6 Southridge 15 Yamaha G-16A Golf Carts 33,321 5
Golf
7 Southridge 1 Jacobsen LG-3400 Fairway Mower 33,449 5
Golf
8 Police 1 2002 Chevy Tahoe 26,605 5
Investigation
Police
9 Investigation 1 2002 Chevy Impala Staff Car 17,952 5
Total—3-year Financing 19,700
Total—5-year Financing 502,622
Total Lease Financing $522,322
ORDINANCE NO. 061, 2002
OF THE COUNCIL OF THE CITY OF FORT COLLINS
AUTHORING 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
No. (yrs)
1 Fleet Services 1 2000 Ford E-350 Van 19,700 3
2 Information 1 lot AudioNideo Equipment 330,000 5
Technology
3 Information 1 2002 Dodge 2500 Van 21,182 5
Technology
4 Collindale 1 Jacobsen LF-3400 Fairway Mower 33,449 5
5 City Park 9 3 Yamaha G-16A Golf Carts 6,664 5
6 Southridge 15 Yamaha G-16A Golf Carts 33,321 5
Golf
7 Southridge 1 Jacobsen LG-3400 Fairway Mower 33,449 5
Golf
8 Police 1 2002 Chevy Tahoe 26,605 5
Investigation
Police
9 Investigation 1 2002 Chevy Impala Staff Car 17,952 5
Total—3-year Financing 19,700
Total—5-year Financing 502,622
Total Lease Financing $522,322
WHEREAS,the City Council has determined that it is in the best interest of the City to lease
the above-described equipment(the "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$30,275 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 2002 lease payments are included in the 2002 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 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, 2002. 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, $522,322, plus interest at a fixed rate equal to 5.05 % 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 FIVE HUNDRED TWENTY-TWO THOUSAND,
• THREE HUNDRED TWENTY-TWO DOLLARS ($522,322) 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 vehicles and equipment in accordance with
the terms and provisions of the lease-purchase agreement,upon receipt thereof.
Section 3. 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 16th day of
April, A.D. 2002, and to be presented for final passage on the 7th day of May, A.D. 2002.
Mayor
ATTEST:
City Clerk
•
Passed and adopted on final reading this 7th day of May, A.D. 2002.
Mayor
ATTEST:
City Clerk