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Home My WebLink AboutCOUNCIL - AGENDA ITEM - 04/19/2016 - RESOLUTION 2016-037 AUTHORIZING THE PURCHASING AGEAgenda Item 10 Item # 10 Page 1 AGENDA ITEM SUMMARY April 19, 2016 City Council STAFF Gerry Paul, Director of Purchasing & Risk Management Ken Mannon, Operations Services Director SUBJECT Resolution 2016-037 Authorizing the Purchasing Agent to Lease Additional Vehicles and Equipment Under the City's Standard Master Lease Agreement with Pinnacle Public Financing, Inc. For Schedule of Equipment No. 11. EXECUTIVE SUMMARY The purpose of this item is to request approval of the lease-purchase of vehicles and equipment for the cost of $2,781,629 under the City’s Master Lease Agreement with Pinnacle Public Finance and the “First Amendment” to that Agreement (jointly, the “Agreement”). Quarterly payments of $146,687 at the 2.05% interest rate will not exceed $293,374 in 2016. Money for 2016 lease-purchase payments is included and appropriated as part of the 2016 budget. A competitive process was used to select Pinnacle Public Finance for this Agreement. A 2016 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 2.05% 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 2016. 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 equipment. 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 Agenda Item 10 Item # 10 Page 2 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: 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 personal 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 2016 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. Although state law does not consider lease-purchase transactions that are subject to annual appropriation to be multi-year debt requiring voter approval under TABOR, rating agencies nevertheless include the total amount owed under such lease-purchases in calculating the City's debt burden. The proposed Resolution authorizes the lease-purchase financing of the following under the Agreement: Department/ Fund Description Qty Cost Golf Toro MultiPro 1750 spray vehicle 1 39,600 Golf Toro Eflex Greensmower 2 30,829 Golf Toro Groundsmaster rotary mower 1 64,000 Golf Tow behind turf aerator 1 6,750 Golf Toro Workman HDX-D 1 23,400 Golf Toro Versa Vac 1 26,100 Golf Toro Pro Sweep 1 11,800 Golf Sweep-n-Fill turf brush 1 5,350 Streets Impactor & magnets 1 510,000 Streets Street Sweeper 1 280,000 Streets Small pick up 1 26,000 Agenda Item 10 Item # 10 Page 3 Department/ Fund Description Qty Cost Streets CNG tank packages 1 55,000 Streets Snow blower attachment for Loader 1 127,000 Parks/ General Hybrid sedan 1 23,600 Parks/ General ¾ ton Cab/Chassis CNG & utility body 1 41,200 Parks/ General 1 ton Cab/Chassis & flatbed body 1 38,600 Parks/ General Hybrid SUV 1 28,000 Parks/ General Small pick-up 4x2 1 21,700 Parks/ General Small pick-up 4x4 1 26,000 Parks/ General Large mower with cab & broom 3 115,200 Parks/ General Utility vehicle - large 1 25,800 Parks/ General Electric utility vehicle 1 15,650 Parks/ General Turf sweeper 2 58,000 Parks/ General Propane mower 1 16,800 Operations/ General Small pickup Truck 1 45,200 Police/ General ½ ton pick-up with long bed 1 41,850 Police/ General Ford Police Interceptor AWD 13 369,200 Police/ General Police Vehicle Equipment 1 lot 126,500 Police/ General Hybrid sedan 1 26,400 Police/ General Ford Police Interceptor AWD - no spot 1 28,100 Police/ General Hybrid SUV 2 57,200 Police/ General ½ ton pick-up - K9 pkg. 1 30,500 Police/ General Police Vehicle Equipment 1 lot 38,600 Police Investigations/ General ½ ton pick-up with long bed 1 38,900 Police Investigations/ General Ford Police Interceptor AWD - no spot 1 28,100 Police Investigations/ General Investigation Vehicle Equipment 1 lot 10,800 Police Investigations/ General Small Pickup Truck 1 26,100 Police Investigations/ General Hybrid Sedan 4 98,600 Police Investigations/ General Hybrid SUV 2 57,200 Police Investigations/ General Investigation Vehicle Equipment 1 lot 22,000 Utility Administration Generator 1 120,000 Total: 2,781,629 Each department has appropriately justified the purchase of all replacement vehicles and equipment. -1- RESOLUTION 2016-037 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. FOR SCHEDULE OF EQUIPMENT NO. 11 WHEREAS, 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 -2- WHEREAS, the Purchasing Agent has negotiated with Pinnacle the lease of additional Equipment under the Agreement as described in the “Schedule of Equipment No. 11” dated April 27, 2016, attached as Exhibit “A” and incorporated by reference (“Schedule of Equipment No. 11”); and WHEREAS, each piece of equipment listed in Schedule of Equipment No. 11 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 Forty Six Thousand Six Hundred Eighty Six Dollars and Ninety Cents ($146,686.90) for five years for the Equipment being leased in Schedule of Equipment No.11 as set forth in the parties’ “Payment Schedule, Equipment Schedule #11” dated April 27, 2016, attached as Exhibit “B” and incorporated by reference (the “Payment Schedule”); and WHEREAS, the funds needed for the City’s quarterly lease payments that will be owed to Pinnacle in 2016 for the Equipment being leased in Schedule of Equipment No. 11, have been budgeted and appropriated in the City’s 2016 annual budget that was adopted by Council on November 17, 2015; 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. 10 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. 11 can be entered into without voter approval; and WHEREAS, the titles for any Motor Vehicles listed in Exhibit “A” will be held by an escrow agent and delivered to the City in the event the City exercises its option to purchase any of the motor vehicles; 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. 11 in accordance with the terms and conditions of the Agreement. NOW, THEREFORE, BE IT RESOLVED BY THE COUNCIL OF THE CITY OF FORT COLLINS as follows: Section 1. That the City Council hereby makes and adopts the determinations and findings contained in the recitals set forth above. -3- Section 2. That the lease of the Equipment in Schedule of Equipment No. 11 under the Agreement (as amended by the First Amendment) and the Payment Schedule, attached hereto as Exhibit “A” and Exhibit “B”, respectively, are hereby approved, and the Purchasing Agent is hereby authorized to enter into the Schedule of Equipment No. 11 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. 11 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. Section 3. That City Council’s approval in this Resolution of the Schedule of Equipment No. 11 and the Payment Schedule are subject to the Council budgeting and appropriating in the City’s 2016 annual budget the funds necessary for the 2016 payments under the Payment Schedule. Passed and adopted at a regular meeting of the Council of the City of Fort Collins this 19th day of April, A.D. 2016. _________________________________ Mayor ATTEST: _____________________________ City Clerk EXHIBIT A Schedule of Equipment No. 11 April 27, 2016 RE: STANDARD MASTER LEASE AGREEMENT entered into as of February 15, 2011, ("Agreement"), between Pinnacle Public Finance ("Lessor") and the City of Fort Collins, Colorado ("Lessee"). All terms used and not otherwise defined herein have the meanings ascribed to them in the Agreement. The following items of Equipment are hereby included under this Schedule to the Agreement: Item Department/ Fund Description Qty Cost Term Golf Toro MultiPro 1750 spray vehicle 1 39,600.00 5 yrs Golf Toro Eflex Greensmower 2 30,829.00 5 yrs Golf Toro Groundsmaster rotary mower 1 64,000.00 5 yrs Golf Tow behind turf aerator 1 6,750.00 5 yrs Golf Toro Workman HDX-D 1 23,400.00 5 yrs Golf Toro Versa Vac 1 26,100.00 5 yrs Golf Toro Pro Sweep 1 11,800.00 5 yrs Golf Sweep-n-Fill turf brush 1 5,350.00 5 yrs Streets Impactor & magnets 1 510,000.00 5 yrs Streets Street Sweeper 1 280,000.00 5 yrs Streets Small pick up 1 26,000.00 5 yrs Streets CNG tank packages 1 55,000.00 5 yrs Streets Snow blower attachment for Loader 1 127,000.00 5 yrs Parks/ General Hybrid sedan 1 23,600.00 5 yrs Parks/ General ¾ ton Cab/Chassis CNG & utility body 1 41,200.00 5 yrs Parks/ General 1 ton Cab/Chassis & flatbed body 1 38,600.00 5 yrs Parks/ General Hybrid SUV 1 28,000.00 5 yrs Parks/ General Small pick-up 4x2 1 21,700.00 5 yrs Parks/ General Small pick-up 4x4 1 26,000.00 5 yrs Parks/ General Large mower with cab & broom 3 115,200.00 5 yrs Parks/ General Utility vehicle - large 1 25,800.00 5 yrs Parks/ General Electric utility vehicle 1 15,650.00 5 yrs Parks/ General Turf sweeper 2 58,000.00 5 yrs Parks/ General Propane mower 1 16,800.00 5 yrs Operations/ General Small pickup Truck 1 45,200.00 5 yrs Police/ General ½ ton pick-up with long bed 1 41,850.00 5 yrs Police/ General Ford Police Interceptor AWD 13 369,200.00 5 yrs Police/ General Police Vehicle Equipment 1 lot 126,500.00 5 yrs Police/ General Hybrid sedan 1 26,400.00 5 yrs Police/ General Ford Police Interceptor AWD – no spot 1 28,100.00 5 yrs Police/ General Hybrid SUV 2 57,200.00 5 yrs Police/ General ½ ton pick-up – K9 pkg. 1 30,500.00 5 yrs Police/ General Police Vehicle Equipment 1 lot 38,600.00 5 yrs Police Investigations/ General ½ ton pick-up with long bed 1 38,900.00 5 yrs Police Investigations/ General Ford Police Interceptor AWD – no spot 1 28,100.00 5 yrs Police Investigations/ General Investigation Vehicle Equipment 1 lot 10,800.00 5 yrs Police Investigations/ General Small Pickup Truck 1 26,100.00 5 yrs Police Investigations/ General Hybrid Sedan 4 98,600.00 5 yrs Police Investigations/ General Hybrid SUV 2 57,200.00 5 yrs Police Investigations/ General Investigation Vehicle Equipment 1 lot 22,000.00 5 yrs Utility Administration Generator 1 120,000.00 5 yrs Total: 2,781,629.00 5 yrs Exhibit B Payment Schedule, Equipment Schedule #11 Totals: $2,933,738.07 $152,109.07 $2,781,629.00 Rate 2.0500% Payment Payment Purchase Outstanding Pmt # Date Amount Interest Principal Price Balance 4/27/2016 $2,781,629.00 1 7/27/2016 $146,686.90 $14,255.85 $132,431.05 $2,649,197.95 $2,649,197.95 2 10/27/2016 $146,686.90 $13,577.14 $133,109.76 $2,516,088.18 $2,516,088.18 3 1/27/2017 $146,686.90 $12,894.95 $133,791.95 $2,382,296.23 $2,382,296.23 4 4/27/2017 $146,686.90 $12,209.27 $134,477.64 $2,247,818.59 $2,247,818.59 5 7/27/2017 $146,686.90 $11,520.07 $135,166.83 $2,112,651.76 $2,112,651.76 6 10/27/2017 $146,686.90 $10,827.34 $135,859.56 $1,976,792.20 $1,976,792.20 7 1/27/2018 $146,686.90 $10,131.06 $136,555.84 $1,840,236.35 $1,840,236.35 8 4/27/2018 $146,686.90 $9,431.21 $137,255.69 $1,702,980.66 $1,702,980.66 9 7/27/2018 $146,686.90 $8,727.78 $137,959.13 $1,565,021.53 $1,565,021.53 10 10/27/2018 $146,686.90 $8,020.74 $138,666.17 $1,426,355.37 $1,426,355.37 11 1/27/2019 $146,686.90 $7,310.07 $139,376.83 $1,286,978.53 $1,286,978.53 12 4/27/2019 $146,686.90 $6,595.76 $140,091.14 $1,146,887.40 $1,146,887.40 13 7/27/2019 $146,686.90 $5,877.80 $140,809.11 $1,006,078.29 $1,006,078.29 14 10/27/2019 $146,686.90 $5,156.15 $141,530.75 $864,547.54 $864,547.54 15 1/27/2020 $146,686.90 $4,430.81 $142,256.10 $722,291.44 $722,291.44 16 4/27/2020 $146,686.90 $3,701.74 $142,985.16 $579,306.28 $579,306.28 17 7/27/2020 $146,686.90 $2,968.94 $143,717.96 $435,588.32 $435,588.32 18 10/27/2020 $146,686.90 $2,232.39 $144,454.51 $291,133.81 $291,133.81 19 1/27/2021 $146,686.90 $1,492.06 $145,194.84 $145,938.97 $145,938.97 20 4/27/2021 $146,686.90 $747.94 $145,938.97 -$0.00 -$0.00 Commencement date: April 27, 2016