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HomeMy WebLinkAboutCOUNCIL - AGENDA ITEM - 03/05/2013 - FIRST READING OF ORDINANCE NO. 036, 2013, AUTHORIZDATE: March 5, 2013 STAFF: Jim O’Neill Ken Mannon AGENDA ITEM SUMMARY FORT COLLINS CITY COUNCIL 12 SUBJECT First Reading of Ordinance No. 036, 2013, Authorizing the Purchasing Agent to Enter into an Agreement for the Financing of Vehicles and Equipment for Various City Departments by Lease-Purchase. EXECUTIVE SUMMARY The City of Fort Collins is lease-purchasing vehicles and equipment for various city departments. The cost of the items to be lease-purchased is $2,543,005. Payments at the 2.23% interest rate will not exceed $269,450 in 2013. Money for 2013 lease-purchase payments is included in the 2013 budget requests. The effect of the debt position for the purpose of financial rating of the City will be to raise the total City debt by 2.0%. 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 2.23 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 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. March 5, 2013 -2- ITEM 12 * 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. The Finance Department performed an analysis of this equipment lease financing arrangement which showed that this lease-purchase is in the best interest of the City given the normal spread between lease rate and reinvestment rate. 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 Golf Golf carts for Collindale 29 79,810.00 Electric Utility vehicle 1 9,970.00 Vibratory Turf Rollers 1 9,150.00 Large Rotary Mower 1 57,730.00 Golf Replacement Vehicle Total: 156,660.00 Golf Fund Total: 156,660.00 Traffic Cable/ Wire Reel Trailer 1 16,800.00 1 ton Flatbed Body - additional Equipment 1 lot 9,500.00 Sign truck - additional equipment / accessories 1 lot 17,000.00 Traffic Replacement Vehicle Total: 43,300.00 Streets Street Sweepers 3 683,295.00 International Snowplow Truck 1 108,800.00 Spreader/Sander, Hydraulics, wing plow and accessories 1 lot 74,250.00 Wausau front snowplow 1 lot 19,200.00 Streets Replacement Vehicle Total: 885,545.00 Transportation Fund Total: 928,845.00 Building Inspection - Replacement Vehicles Small Ford Cargo Van 2 51,000 Building Inspection Replacement Vehicle Total: 51,000 Facilities - Replacement Vehicle Small Cargo Van with shelving 1 25,500 Small Cargo Van 1 24,500 Facilities Replacement Vehicle Total: 50,000 March 5, 2013 -3- ITEM 12 Description Quantity Cost Parks - Replacement Vehicles Large Rotary Mower 1 84,600.00 Medium Rotary Mower 1 46,200.00 Chevy 3/4 ton 4x4 pickup 1 23,900.00 Parks Replacement Vehicles Total: 154,700.00 Forestry - Replacement Vehicle Bucket Truck Chassis & Body 1 163,550.00 Additional equipment on Bucket Truck 1 lot 11,250.00 Forestry Replacement Vehicle Total: 174,800.00 Police Administration - Replacement Vehicles Ford Explorer AWD 1 26,900.00 Investigations Vehicle equipment 1 lot 2,300.00 Police Administration replacement Vehicle Total: 29,200.00 Police Patrol - Replacement Vehicles Ford Utility Police Interceptor - FWD 20 517,000.00 Ford Utility Police Interceptor - AWD 5 134,250.00 Patrol vehicle equipment 1 lot 244,000.00 Patrol Replacement Vehicles Total: 895,250.00 Investigations - Replacement Vehicles Dodge Journey FWD 1 21,000.00 Ford Explorer AWD 1 26,900.00 Investigations vehicle equip. 1 lot 4,600.00 Investigations Replacement Vehicles Total: 52,500.00 Equipment Fund Total: 1,407,450.00 General Fund Total: 1,597,705.00 Information Technology Dell Precision T3600 Desktop 15 22,430.00 Dell Latitude E6430 Laptops 12 14,300.00 Dell OptiPlex 7010 Minitower Desktop 15 13,320.00 Data & Communications Fund Total: 50,050.00 Lease Total: 2,543,005.00 Departments have appropriately justified the purchase of all new and replacement vehicles and equipment. Information on replacement units is given below. 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: Disposa l of old unit: Notes: Golf Various 8-9 Yamaha electric carts Trade-in Replacing gasoline carts at the end of their normal service life with electric carts Golf 2816 10 Club Car electric carryall Auction Due for replacement March 5, 2013 -4- ITEM 12 Department Old unit: Age: Miles / hours: New unit: Disposa l of old unit: Notes: Golf 35226 12 3900 hours Toro 4500-D Groundmaste r Auction Due for replacement Streets 22004 11 10077 hours Elgin Eagle Sweeper Trade-in Due for replacement Streets 22009 11 10207 hours Elgin Eagle Sweeper Trade-in Due for replacement Streets 22010 11 10996 hours Elgin Eagle Sweeper Trade-in Due for replacement Streets 2230 20 117580 miles International 7600 SFA 6x4 Trade-in Due for replacement Streets 2219 18 130024 miles Trade-in Due for replacement Streets 2221 20 617511 miles Trade-in Due for replacement Building Inspection 26701 10 90273 miles Ford small cargo van Auction Due for replacement Building Inspection 26702 10 95958 miles Ford small cargo van Auction Due for replacement Forestry 2467 15 9974 hours Altec LRV60- E70RM Auction Due for replacement Parks 34009 10 4681 hours Toro 5900-D mower Auction Due for replacement Parks 34002 12 4007 hours Toro 360 Quad-Steer mower Auction Due for replacement Parks 2082 17 113,983 miles Chevy ¾ ton pick up Auction Due for replacement Police - Administration 1017 13 92,620 miles Ford Explorer Auction Due for replacement Police - Patrol Various 8-12 All over 90,000+ Utility Interceptor – AWD & FWD Auction Due for replacement Police - ORDINANCE NO. 036, 2013 OF THE COUNCIL OF THE CITY OF FORT COLLINS AUTHORIZING THE PURCHASING AGENT TO ENTER INTO AN AGREEMENT FOR THE FINANCING OF VEHICLES AND EQUIPMENT FOR VARIOUS CITY DEPARTMENTS WHEREAS, the City has a need for 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 Pinnacle Public Finance to lease equipment to the City, consisting of the following: Description Quantity Cost Golf Golf carts for Collindale 29 79,810.00 Electric Utility vehicle 1 9,970.00 Vibratory Turf Rollers 1 9,150.00 Large Rotary Mower 1 57,730.00 Golf Replacement Vehicle Total: 156,660.00 Golf Fund Total: 156,660.00 Traffic Cable/ Wire Reel Trailer 1 16,800.00 1 ton Flatbed Body - additional Equipment 1 lot 9,500.00 Sign truck - additional equipment / accessories 1 lot 17,000.00 Traffic Replacement Vehicle Total: 43,300.00 Streets Street Sweepers 3 683,295.00 International Snowplow Truck 1 108,800.00 Spreader/Sander, Hydraulics, wing plow and accessories 1 lot 74,250.00 Wausau front snowplow 1 lot 19,200.00 Streets Replacement Vehicle Total: 885,545.00 Transportation Fund Total: 928,845.00 Building Inspection - Replacement Vehicles Small Ford Cargo Van 2 51,000 Building Inspection Replacement Vehicle Total: 51,000 Facilities - Replacement Vehicle Small Cargo Van with shelving 1 25,500 Small Cargo Van 1 24,500 Facilities Replacement Vehicle Total: 50,000 Parks - Replacement Vehicles Large Rotary Mower 1 84,600.00 Medium Rotary Mower 1 46,200.00 Chevy 3/4 ton 4x4 pickup 1 23,900.00 Parks Replacement Vehicles Total: 154,700.00 Forestry - Replacement Vehicle Bucket Truck Chassis & Body 1 163,550.00 Additional equipment on Bucket Truck 1 lot 11,250.00 Forestry Vehicle Total: 174,800.00 Police Administration - Replacement Vehicles Ford Explorer AWD 1 26,900.00 Investigations Vehicle equipment 1 lot 2,300.00 Patrol New Officer Vehicle Total: 29,200.00 Police Patrol - Replacement Vehicles Ford Utility Police Interceptor - FWD 20 517,000.00 Ford Utility Police Interceptor - AWD 5 134,250.00 Patrol vehicle equipment 1 lot 244,000.00 Patrol Replacement Vehicles Total: 895,250.00 Investigations - Replacement Vehicles Dodge Journey FWD 1 21,000.00 Ford Explorer AWD 1 26,900.00 Investigations vehicle equip. 1 lot 4,600.00 Investigations Replacement Vehicles Total: 52,500.00 Equipment Fund Total: 1,407,450.00 General Fund Total: 1,597,705.00 Information Technology Dell Precision T3600 Desktop 15 22,430.00 Dell Latitude E6430 Laptops 12 14,300.00 Dell OptiPlex 7010 Minitower Desktop 15 13,320.00 Data & Communications Fund Total: 50,050.00 Lease Total: 2,543,005.00 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 -2- WHEREAS, the City Council wishes 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 that will result from the proposed arrangement will require payments by the City in the sum of $ 134,724.32 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 2013 lease payments are included in the 2013 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 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: 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, 2013. 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, $ 2,543,005.00, plus interest at a fixed rate equal to 2.23% per year, which is a reasonable amount. -3- 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 ONE HUNDRED AND FIFTY-SIX THOUSAND, SIX HUNDRED AND SIXTY DOLLARS ($156,660.00) 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 vehicles and equipment in accordance with the terms and provisions of the lease-purchase agreement, upon receipt thereof. Section 3. That the amount of NINE HUNDRED TWENTY-EIGHT THOUSAND, EIGHT HUNDRED AND FORTY-FIVE DOLLARS ($928,845.00) 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 4. That the amount of ONE MILLION, FOUR HUNDRED AND SEVEN THOUSAND, FOUR HUNDRED AND FIFTY DOLLARS ($1,407,450.00) 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 for Parks, Operation Services and Police, in accordance with the terms and provisions of the lease-purchase agreement, upon receipt thereof. Section 5. That the amount of FIFTY THOUSAND AND FIFTY DOLLARS ($50,050.00) 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 home rule charter of the City and shall supersede, to the extent permitted by law, the conflicting provisions of the Act. -4- Introduced, considered favorably on first reading, and ordered published this 5th day of March, A.D. 2013, and to be presented for final passage on the 19th day of March, A.D. 2013. _________________________________ Mayor ATTEST: _____________________________ City Clerk Passed and adopted on final reading on the 19th day of March, A.D. 2013. _________________________________ Mayor ATTEST: _____________________________ City Clerk -5- Investigations 21614 8 91,927 miles Ford Explorer Auction Due for replacement Police - Investigations 21025 9 91,906 miles Dodge Journey Auction Due for replacement 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.