HomeMy WebLinkAboutCOUNCIL - AGENDA ITEM - 10/16/2001 - FIRST READING OF ORDINANCE NO. 156, 2001, AUTHORIZ AGENDA ITEM SUMMARY ITEM NUMBER: 14
FORT COLLINS CITY COUNCL DATE: October 16, 2001
STAFF: Jim O'Neill
SUBJECT:
First Reading of Ordinance No. 156, 2001, 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 First Reading.
FINANCIAL IMPACT:
The cost of the items to be lease-purchased is$1,321,611.02. Payments at the 4.533% interest rate
will not exceed $296,896 in 2002. No payments are due in 2001. Money for the first year lease-
purchase payments is included in the 2002 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 .32 %. 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 4.533%interest rate. 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 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:
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: October 16, 2001 2 ITEM NUMBER: 14
An"Equipment Request"justifying the replacement of each vehicle or piece of 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.
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-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 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.
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: October 16, 2001 3 ITEM NUMBER: 14
The proposed Ordinance authorizes the lease-purchase financing of the following:
Line De Term
Department Qty Description Total Cost
No. (yrs)
1 Traffic 2 Bucket Trucks $ 147,572.00 5
2 City Park 9 I 5400-D Toro Reelmaster $ 33,589.00 5
3 City Park 9 2 Golf Carts $ 7,246.00 5
4 Collindale Golf 15 Golf Carts $ 36,345.00 5
5 Collindale Golf 1 Jacobsen Greens King IV $ 17,102.00 5
6 Southridge Golf I 455-D Toro rough mower $ 37,470.00 5
7 Southrid e Golf 1 3100 Toro Greensmaster w/thatching
g $ 24,642.00 5
reels
8 Cemetery 1 Toro Workman Truckster $ 23,126.00 5
9 Cemetery 1 Riding mower $ 12,401.00 5
10 Forestry 1 Ford F250 pickup $ 19,514.20 5
11 Forestry 1 Ford F250 extended cab pickup $ 21,494.40 5
12 Forestry 1 Dump bed for pickup $ 1,895.00 5
13 Engineering 1 Staffcaz $ 16,754.86 5
14 Investigation 1 Midsize Staff Car $ 16,754.86 5
15 Police Patrol 27 Patrol vehicles $621,000.00 5
16 Police Patrol lot Patrol vehicle equipment $ 60,000.00 5
17 Police Patrol 27 Laptops& modems $ 97,000.00 5
18 Police Patrol 27 Software for laptops $ 8,500.00 5
19 Police Patrol 1 2001 Jeep Grand Cherokee $ 30,250.00 5
20 Fleet Services 1 2001 Jeep Grand Cherokee $ 30,250.00 5
21 Fleet Services 1 3/4-ton pickup $ 17,979.70 5
22 Fleet Services 1 2001 Astro Van $ 25,725.00 5
23 Fleet Services 1 1999 Chevy Van $ 15,000.00 5
Total Lease Financing $1,321,611.02
ORDINANCE NO. 156,2001
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 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 and its
home rule charter to lease City property; 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. rs
1 Traffic 2 Bucket Trucks $ 147,572.00 5
2 City Park 9 1 5400-D Toro Reelmaster $ 33,589.00 5
3 City Park 9 2 Golf Carts $ 7,246.00 5
4 Collindale Golf 15 Golf Carts $ 36,345.00 5
5 Collindale Golf 1 Jacobsen Greens King IV $ 17,102.00 5
6 Southrid e Golf 1 455-D Toro rough mower $ 37,470.00 5
7 Southrid e Golf 1 3100 Toro Greensmaster w/thatching
g $ 24,642.00 5
reels
8 Cemetery 1 Toro WorkmanTruckster $ 23,126.00 5
9 Cemetery 1 Riding mower $ 12 401.00 5
10 Forestry 1 Ford F250 pickup $ 19,514.20 5
11 Forestry 1 Ford F250 extended cab pickup $ 21,494.40 5
12 Forestry 1 Dump bed for pickup $ 1,895.00 5
13 Engineering 1 Staff car $ 16,754.86 5
14 Investi ation 1 Midsize Staff Car $ 16,754.86 5
15 Police Patrol 27 Patrol vehicles $621,000.00 5
16 Police Patrol lot Patrol vehicle equipment $ 60,000.00 5
17 Police Patrol 27 Laptops& modems $ 97,000.00 5
18 Police Patrol 27 Software for laptops $ 8,500.00 5
19 Police Patrol 1 2001 Jeep Grand Cherokee $ 30,250.00 5
20 Fleet Services l 2001 Jeep Grand Cherokee $ 30,250.00 5
21 Fleet Services 1 3/4-ton pickup $ 17,979.70 5
22 Fleet Services 1 2001 Astro Van $ 25,725.00 5
23 Fleet Services 1 1999 Chevy Van $ 15 000.00 5
Total Lease Financing $1,321,611.02
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$74,224 per quarter,and that payments
in that amount are reasonable and proper and represent the fair rental value of the Equipment; and
WHEREAS, no lease payments will be required in 2001 and 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)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, 2001. 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,
$1,321,611.02, plus interest at a fixed rate equal to 4.533 %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 EIGHT HUNDRED SEVENTY-SIX THOUSAND,
FOUR HUNDRED EIGHT DOLLARS AND FORTY-SIX CENTS ($876,408.46)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 Forestry,Investigation and
Police Patrol vehicles and equipment described above,in accordance with the terms and provisions
of the lease-purchase agreement, upon receipt thereof.
Section 3. That the amount of THIRTY-FIVE THOUSAND, FIVE HUNDRED
TWENTY SEVEN DOLLARS ($35,527) to be provided under the lease-purchase agreement is
hereby appropriated for expenditure in the Cemetery Fund from unanticipated revenue in the
appropriate funds for the acquisition of the Cemetery equipment described above, in accordance
with the terms and provisions of the lease-purchase agreement, upon receipt thereof.
Section 4. That the amount of ONE HUNDRED FIFTY-SIX THOUSAND, THREE
HUNDRED NINETY-FOUR DOLLARS ($156,394) 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 City Park Nine, Collindale and Southridge vehicles
and equipment described above, in accordance with the terms and provisions of the lease-purchase
agreement, upon receipt thereof.
Section5. That the amount of EIGHTY-EIGHT THOUSAND,NINE HUNDRED AND
FIFTY-FOUR DOLLARS AND SEVENTY CENTS ($88,954.70)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 the Fleet Services vehicles
described above,in accordance with the terms and provisions of the lease-purchase agreement,upon
receipt thereof.
Section 6. That the amount ofONE HUNDRED SIXTY-FOUR THOUSAND,THREE
HUNDRED TWENTY-SIX DOLLARS AND EIGHTY-SIX CENTS($164,326.86)to be provided
under the lease-purchase agreement is hereby appropriated for expenditure in the Transportation
Services Fund from unanticipated revenue in the appropriate funds for the acquisition of the Traffic
and Engineering vehicles and equipment described above, in accordance with the terms and
provisions of the lease-purchase agreement, upon receipt thereof.
Section 7. 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
October,A.D.2001,and to be presented for final passage on the 6th day of November, A.D. 2001.
Mayor
ATTEST:
City Clerk
Passed and adopted on final reading this 6th day of November,A.D. 2001.
Mayor
ATTEST:
City Clerk