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Home My WebLink AboutCOUNCIL - AGENDA ITEM - 06/19/2001 - FIRST READING OF ORDINANCE NO. 110, 2001, AUTHORIZ AGENDA ITEM SUMMARY ITEM NUMBER: 20 FORT COLLINS CITY COUNCIL DATE: June 19, 2001 STAFF: Jim O'Neill SUBJECT: First Reading of Ordinance No. 110, 2001, Authorizing the Purchasing Agent to Enter into an Agreement for the Financing by Lease-Purchase of 800 MHz Radio Equipment. RECOMMENDATION: Staff recommends adoption of the Ordinance on First Reading. FINANCIAL IMPACT: The cost of the items to be lease-purchased is $2,318,977. Payments at the 5.77% interest rate will not exceed $294,649.09 in 2001. Money for the first year lease-purchase payments is included in the 2001 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 1.2%. Motorola, Inc. has offered the lease financing a highly competitive rate. Staff believes acceptance of this interest rate is in the City's best interest. EXECUTIVE SUMMARY: This Ordinance authorizes the Purchasing Agent to enter into a lease-purchase financing agreement with Motorola, Inc., at 5.77% interest rate for the lease-purchase financing of 800 MHz radio equipment, including the necessary software, programming, installation and support. 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 ten (10) 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: All equipment will be purchased following the City's purchasing ordinances and procedures to ensure that the City realizes all cost savings. The 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: June 19, 2001 2 ITEM NUMBER: 20 Over the next several years the City will be migrating all radio equipment to 800 MHz technology. Currently, City departments, including Police, use UHF radio frequencies which are incompatible with surrounding agencies. The State of Colorado, Poudre School District, Loveland, and Greeley are using or transitioning to 800 MHz technology using the Motorola infrastructure. In 2000, Council approved Motorola as the sole-source provider of 800 MHz equipment, in order to increase compatibility within the City and with other agencies. 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. City management staff has 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. Upon the payment of all lease payments, the leased property is transferred to the City. 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. I * 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 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. Although under state law, lease-purchases are not included in the legal definition of debt, rating agencies include lease-purchases in calculating the City's debt burden. • ORDINANCE NO. 110, 2001 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 800 MHz RADIO EQUIPMENT WHEREAS, the City is authorized under the provisions of Title 31, Article 15, Part 8, C.R.S., to acquire necessary equipment and other property for its governmental and proprietary purposes under the provisions of a long-term rental or leasehold agreement with an option to purchase such equipment or property and to provide for the payment of said property from any available municipal income; and WHEREAS,the City has received a proposal from Motorola,Inc.,for the lease of equipment (the "Equipment") to the City, consisting of the following: 800 MHz radio equipment, including the necessary software, programming, installation and support. WHEREAS,the City Council has determined that it is in the best interest of the City to lease the above-described Equipment from Motorola, Inc.; and WHEREAS, the City desires to enter into a lease-purchase agreement with respect to the leasing of the Equipment; and WHEREAS, the useful life of the Equipment is longer than the maximum lease-purchase term of ten (10) 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 $294,649.09 per year, and that payments in that amount are reasonable and proper and represent the fair rental value of the Equipment; and WHEREAS, funds for the 2001 lease payments are included in the 2001 budget; 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 Motorola,Inc.,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, 2001. The agreement shall provide for renewable one-year terms thereafter up to a total term of ten (10) 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 annual 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 Motorola,Inc.,will total the sum of the principal,$2,318,977 plus interest at a fixed rate equal to 5.77% per year, which is a reasonable amount for the Equipment. 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 all 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, and the Equipment shall transfer to the City. 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 TWO MILLION THREE HUNDRED EIGHTEEN THOUSAND NINE HUNDRED AND SEVENTY-SEVEN DOLLARS($2,318,977)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 800 MHz radio equipment in accordance with the terms and provisions of the lease-purchase agreement,upon receipt thereof. Introduced, considered favorably on first reading, and ordered published this 19th day of June, A.D. 2001, and to be presented for final passage on the 17th day of July, A.D. 2001. Mayor ATTEST: City Clerk Passed and adopted on final reading this 17th day of July, A.D. 2001. Mayor ATTEST: City Clerk