HomeMy WebLinkAboutCOUNCIL - AGENDA ITEM - 11/17/2015 - RESOLUTION 2015-099 AUTHORIZING THE PURCHASING AGEAgenda Item 12
Item # 12 Page 1
AGENDA ITEM SUMMARY November 17, 2015
City Council
STAFF
Gerry Paul, Director of Purchasing & Risk Management
Ken Mannon, Operations Services Director
SUBJECT
Resolution 2015-099 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.
10.
EXECUTIVE SUMMARY
The purpose of this item is to request approval of the lease-purchase of vehicles and equipment for the cost of
$1,388,000 under the City’s Master Lease Agreement with Pinnacle Public Finance and the “First Amendment”
to that Agreement (jointly, the “Agreement”). Quarterly payments of $73,383.24 at the 2.15% interest rate will
not exceed $293,532.96 in 2016. Money for 2016 lease-purchase payments is included and will be
appropriated as part of the 2016 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 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
projected maintenance costs, fuel economy, downtime, and relevant safety factors. Other equipment
purchases have been approved in accordance with departmental procedures.
Agenda Item 12
Item # 12 Page 2
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 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.
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:
Description Quantity Cost ($)
Streets
CNG- Cab/Chassis for snowplow dump truck 4 580,000
Dump body and snow accessories 4 552,000
Liquid de-ice spray system 4 92,000
Cab/Chassis for Traffic Control truck 1 42,000
Body for Traffic Control truck 1 22,000
½ ton pick-up truck 1 27,000
Code Compliance
Small SUV 3 73,000
Lease Total 1,388,000
The Streets Department has appropriately justified the purchase of all replacement vehicles and equipment.
RESOLUTION 2015-099
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. 10
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
WHEREAS, the Purchasing Agent has negotiated with Pinnacle the lease of additional
Equipment under the Agreement as described in the “Schedule of Equipment No. 10” dated
November 24, 2015, attached as Exhibit “A” and incorporated by reference (“Schedule of
Equipment No. 10”); and
WHEREAS, each piece of equipment listed in Schedule of Equipment No. 10 has a
useful life of five years or longer; and
WHEREAS, the Purchasing Agent has also negotiated with Pinnacle quarterly lease
payments of Seventy Three Thousand Three Hundred Eight Three Dollars and Twenty Four
Cents ($73,383.24) for five years for the Equipment being leased in Schedule of Equipment No.
10 as set forth in the parties’ “Payment Schedule, Equipment Schedule #10” dated November 24,
2015, 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. 10, have been
budgeted and appropriated in the City’s 2016 annual budget that is expected to be 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. 10 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. 10 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 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. 10 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. 10 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. 10 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. 10 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
17th day of November, A.D. 2015.
_________________________________
Mayor
ATTEST:
_____________________________
City Clerk
EXHIBIT A
EXHBIT B