HomeMy WebLinkAboutCOUNCIL - AGENDA ITEM - 03/17/2015 - RESOLUTION 2015-034 AUTHORIZING THE PURCHASING AGEAgenda Item 8
Item # 8 Page 1
AGENDA ITEM SUMMARY March 17, 2015
City Council
STAFF
Gerry Paul, Director of Purchasing & Risk Management
SUBJECT
Resolution 2015-034 Authorizing the Purchasing Agent to Lease Additional Vehicles and Equipment Under the
City's Standard Master Lease Agreement with Pinnacle Public Financing, Inc.
EXECUTIVE SUMMARY
The purpose of this item is to request approval of the lease-purchase of vehicles and equipment for the cost of
$2,239,424 under the City’s Master Lease Agreement with Pinnacle Public Finance and the “First Amendment”
to that Agreement (jointly, the “Agreement”). Quarterly Payments of $118,398 at the 2.15% interest rate will
not exceed $236,796 in 2015. Money for 2015 lease-purchase payments is included and appropriated in the
2015 budget. A competitive process was used to select Pinnacle Public Finance for this Agreement. A 2015
Finance Department analysis of current and historical equipment lease financing arrangements showed that
lease-purchase is in the best interest of the City given the interest rate offered for the lease. Staff believes
acceptance of this lease rate is in the City's best interest.
STAFF RECOMMENDATION
Staff recommends adoption of the Resolution.
BACKGROUND / DISCUSSION
This Resolution authorizes the Purchasing Agent to enter into a lease-purchase transaction with Pinnacle
Public Finance (“Pinnacle”) at 2.15% interest rate under a new “Schedule of Equipment”. The Agreement is for
an original term from the execution date of the Agreement to the end of fiscal year 2015. The Agreement
provides for renewable one-year terms thereafter, to a total term of five 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. Each of the items acquired through this transaction has a useful life
longer than five years. This lease-purchase financing is consistent with the financial policies of the City of Fort
Collins.
All equipment shall be leased-purchased following the City's purchasing ordinances and procedures to ensure
that the cost to the City is fair and reasonable as determined by a competitive purchasing process.
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.
CITY FINANCIAL IMPACTS
Lease-Purchase: The City's lease-purchase policy provides that:
Agenda Item 8
Item # 8 Page 2
The City of Fort Collins uses lease-purchases 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 lease-purchase agreement. 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.
A 2015 Finance Department analysis of current and historical equipment lease financing arrangements
showed that lease-purchase is in the best interest of the City given the interest rate offered for the lease and
projected investment rate.
According to C.R.S. Section 29-1-103, 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 Resolution authorizes the lease-purchase financing of the following under the Agreement.
Description Quantity Cost
Golf - New and Replacements
Toro tee mower 1 28,689.00
Club Carryall electric 1 9,048.00
Toro Top Dresser 1 11,719.00
Toro Workman HDX-D Utility Vehicle 1 21,260.00
Branson tractor 1 24,500.00
Toro Fairway mower 1 54,481.00
Golf Fund Total: 149,697.00
Traffic - Replacements
Small SUV 1 19,800.00
Cab/Chassis for Bucket Truck 1 37,000.00
Body for Bucket Truck 1 82,000.00
Skid Steer Loader 1 45,100.00
Trailer - 12,000lb 1 11,000.00
Traffic Total: 194,900.00
Transportation Fund Total: 194,900.00
Agenda Item 8
Item # 8 Page 3
Parks - Replacement Vehicles
Small Pick-up truck - 4x2 3 60,000.00
Small Pick-up truck - 4x4 1 27,000.00
3/4 ton Pickup Truck 2 52,000.00
small snowplow 2 10,000.00
Gang Mower 1 85,500.00
Trim Mower 3 118,500.00
Zero Turn Mower with decks 1 14,000.00
Trailers 4 22,500.00
Parks Total: 389,500.00
Forestry - Replacement Vehicle
1/2 ton Pick-up truck - 2WD 1 21,700.00
Cab/chassis 1 85,000.00
Grapple & body 1 78,800.00
Chipper 1 68,827.00
Stump Grinder 1 16,700.00
Forestry Total: 271,027.00
Operation Services - Replacement Vehicle
3/4 ton Cargo Van 1 40,000.00
Small Pickup 1 20,000.00
equipment package 1 lot 5,000.00
Operations Services Total: 65,000.00
Police Patrol - Replacement Vehicles
Ford Utility Police Interceptor AWD 20 548,000.00
Patrol vehicle equipment 20 173,000.00
Patrol vehicle equip. - Vinyl wrap 19 12,500.00
Ram 1500 SSV K9 1 28,200.00
Patrol vehicle equipment 1 12,900.00
1 ton Crew Cab 4x4 truck 1 36,800.00
Patrol vehicle equipment 1 lot 18,000.00
Large size SUV 1 37,500.00
Patrol vehicle equipment 1 lot 4,500.00
Medium size SUV 1 25,700.00
Patrol vehicle equipment 1 lot 4,500.00
Patrol Vehicle Total: 901,600.00
Investigations - Replacement Vehicle
Small Pickup truck 4x2 1 21,700.00
Hybrid sedan 1 24,000.00
Medium size SUV 1 37,000.00
Investigation vehicle equipment 1 lot 5,000.00
1/2 ton Pick-up truck 4wd 1 32,300.00
Investigation vehicle equipment 1 lot 7,500.00
1/2 ton Pick-up truck 4wd 1 33,100.00
Investigation vehicle equipment 1 lot 7,500.00
Electric vehicle 1 25,000.00
Commuter Van 1 30,800.00
Investigation Vehicle Total: 223,900.00
Equipment Fund Total: 1,851,027.00
Police Patrol - Traffic - Replacement Vehicle
Ford Utility Police Interceptor AWD 1 30,300.00
Patrol vehicle equipment 1 13,500.00
Patrol - Traffic Vehicle Total: 43,800.00
Agenda Item 8
Item # 8 Page 4
General Fund Total: 1,894,827.00
Lease Total: 2,239,424.00
Departments have appropriately justified the purchase of all new and replacement vehicles and equipment.
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. These vehicles are as fuel efficient as can be
provided pursuant to the needs of patrol.
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RESOLUTION 2015-034
OF THE COUNCIL OF THE CITY OF FORT COLLINS
AUTHORIZING THE PURCHASING AGENT TO LEASE ADDITIONAL
VEHICLES AND EQUIPMENT UNDER THE CITY’S STANDARD
MASTER LEASE AGREEMENT WITH PINNACLE PUBLIC FINANCING, INC.
WHEREAS, the City of Fort Collins (the “City”) and Pinnacle Public Finance, Inc.
(“Pinnacle”) have previously entered into that certain “Standard Master Lease Agreement” dated
February 15, 2011, (the “Agreement”); and
WHEREAS, the Agreement provides that Pinnacle will lease to the City certain
“Equipment” as generally described in Section 1.1 of the Agreement and as specifically
described in each “Schedule of Equipment” that is agreed to in the future and added to the
Agreement as Exhibit A by the City and Pinnacle (collectively, the “Equipment”); and
WHEREAS, the Agreement contemplates an initial term of one year, with up to four
additional one-year terms, not to exceed a total of five years; and
WHEREAS, Article V of the Agreement grants the City the option to purchase any or all
of the Equipment in accordance with the provisions of Article V of the Agreement; and
WHEREAS, the Agreement also expressly provides that all of the City’s obligations
under the Agreement are subject to the City Council’s annual appropriation of each year’s lease
payments and, if such appropriation does not occur, Pinnacle’s sole remedy is to repossess the
Equipment; and
WHEREAS, the Purchasing Agent and Pinnacle have previously entered into that certain
“First Amendment to Master Lease Agreement” approved by City Council on December 2, 2014,
in Resolution 2014-108 (the “First Amendment”); and
WHEREAS, the purpose of the First Amendment was to amend certain language in
Section 1.2 of the Agreement to clarify the City’s and Pinnacle’s original (and current) intent
with respect to the language in Section 1.2 that provides that the City is to be listed as the owner
on the titles of motor vehicles included in the Equipment leased under Schedule of Equipment
No. 8 and that had been leased under the previous seven schedules of equipment; and
WHEREAS, that such original (and current) intent of this motor-vehicle-title language
was and is not to change the lease-purchase nature of the Agreement, but solely for the purposes
of establishing ownership of the leased motor vehicles for federal tax purposes, reducing
Pinnacle’s liability for any civil claims arising from the City’s use of the motor vehicles, and for
the City’s administrative convenience in establishing clear title to vehicles when the City
exercises its option to purchase any of them; and
WHEREAS, the Purchasing Agent has negotiated with Pinnacle the lease of additional
Equipment under the Agreement as described in the “Schedule of Equipment No. 9” dated April
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6, 2015, attached hereto as Exhibit “A” and incorporated herein by reference (“Schedule of
Equipment No. 9”); and
WHEREAS, each piece of equipment listed in Schedule of Equipment No. 9 has a useful
life of five years or longer; and
WHEREAS, the Purchasing Agent has also negotiated with Pinnacle quarterly lease
payments of One Hundred Eighteen Thousand Three Hundred Ninety Seven Dollars and Eighty
Three Cents ($118,397.83) for five years for the Equipment being leased in Schedule of
Equipment No. 9 as set forth in the parties’ “Payment Schedule, Equipment Schedule #9” dated
April 6, 2015, (the “Payment Schedule”); and
WHEREAS, the funds needed for the City’s quarterly lease payments that will be owed
to Pinnacle in 2015 for the Equipment being leased in Schedule of Equipment No. 9, have been
budgeted and appropriated in the City’s 2015 annual budget that was adopted by Council on
November 18, 2014; and
WHEREAS, the City is authorized in Section 8(c) of Article V of the City Charter,
Article IV in Chapter 8 of the City Code, and in C.R.S. Section 31-15-801 to enter into multiple-
year lease-purchase agreements provided each year’s lease payments are subject to annual
appropriation; and
WHEREAS, the lease of the Equipment in Schedule of Equipment No. 9 under the Lease
will not constitute a “multiple fiscal year direct or indirect debt or other obligation” of the City
within the meaning of Section 20(4)(b) of Article X of the Colorado Constitution and, therefore,
this lease of Equipment under Schedule of Equipment No. 9 can be entered into without voter
approval; and
WHEREAS, the City Council has determined that it is in the City’s best interests to lease
from Pinnacle all of the Equipment described in the Schedule of Equipment No. 9 in accordance
with the terms and conditions of the Agreement; and
NOW, THEREFORE, BE IT RESOLVED BY THE COUNCIL OF THE CITY OF
FORT COLLINS as follows:
Section 1. That all of the recitals set forth above in this Resolution are hereby
adopted as the City Council’s findings in support of this Resolution.
Section 2. That the lease of the Equipment in Schedule of Equipment No. 9 under the
Agreement (as amended in the First Amendment) and the Payment Schedule are hereby
approved, and the Purchasing Agent is hereby authorized to enter into the Schedule of
Equipment No. 9 and the Payment Schedule on the City’s behalf. The Purchasing Agent may
agree, in consultation with the City Attorney, to modifications and amendments to Schedule of
Equipment No. 9 and the Payment Schedule as may be needed to protect the City’s interests and
that are consistent with the stated purposes of this Resolution.
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Passed and adopted at a regular meeting of the Council of the City of Fort Collins this
17th day of March, A.D. 2015.
_________________________________
Mayor
ATTEST:
_____________________________
City Clerk
EXHIBIT A