HomeMy WebLinkAboutCOUNCIL - AGENDA ITEM - 12/02/2014 - RESOLUTION 2014-108 AUTHORIZING THE PURCHASING AGEAgenda Item 14
Item # 14 Page 1
AGENDA ITEM SUMMARY December 2, 2014
City Council
STAFF
Gerry Paul, Director of Purchasing & Risk Management
SUBJECT
Resolution 2014-108 Authorizing the Purchasing Agent to Lease Additional Equipment Under the City's
Standard Master Lease Agreement with Pinnacle Public Financing, Inc. and to Enter Into a First Amendment
to that Standard Master Lease Agreement.
EXECUTIVE SUMMARY
The purpose of this item is to request approval of the lease-purchase of vehicles and equipment for the cost of
$1,255,550 under the City’s Master Lease Agreement with Pinnacle Public Finance (the “Agreement”) and to
approve a “First Amendment” to that Agreement. Quarterly Payments of $66,551.14 at the 2.25% interest rate
will not exceed $266,205 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
2014 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 2.25 % interest rate under a new “Schedule of Equipment” and to enter into a
First Amendment to the Agreement with Pinnacle. 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 (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. 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.
The First Amendment to the Lease amends 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 City being listed as the owner on the
certificates of title for the leased motor vehicles. Specifically, the 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 the vehicles when the City exercise its option to purchase any of them.
The First Amendment also adds a new Section 1.4 to the Agreement to establish a process by which the State
of Colorado certificates of title for the leased motor vehicles will be kept in the possession of a third-party
escrow agent until either of the following occurs: (1) the City exercises its option to purchase a leased motor
vehicle, in which event the escrow agent will deliver the title to the City; or (2) the Agreement terminates as the
result of the City’s nonappropriation, because the City is in default under the Agreement, or upon reaching the
Agenda Item 14
Item # 14 Page 2
end of a lease term, in which events the title will be delivered to Pinnacle.
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.
FINANCIAL / ECONOMIC 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 2014 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, as
amended by the First Amendment:
Agenda Item 14
Item # 14 Page 3
Description Quantity Cost
Pavement Milling Machine 1 660,000.00
Sidewalk Tractor with accessories 1 93,200.00
Dump Body for Plow truck 1 61,000.00
Streets Total: 814,200.00
814,200.00
Ford Utility Police Interceptor AWD 1 26,700.00
Patrol vehicle equipment & vinyl wrap 1 7,800.00
34,500.00
Ford Utility Police Interceptor AWD 4 106,800.00
Patrol vehicle equipment & vinyl wrap 4 49,500.00
156,300.00
190,800.00
Information Technology
Dell OptiPlex 9020 Minitower 25 22,000.00
Dell OptiPlex 9020 Small Form Factor 50 44,100.00
Dell Latitude E6440 CTO & case 91 126,100.00
Dell Venue 11 Tablets 10 13,500.00
Dell Latitude E6430 ATG 10 24,000.00
E Porte Plus 95 8,300.00
Dell 22 Monitor - P2214H 20 3,300.00
Dell 24 Monitor - P2414H 10 2,500.00
Computer accessories 1 lot 6,750.00
250,550.00
1,255,550.00
Streets - Replacements
MIS Fund:
Lease Total:
Patrol - Officer Vehicle
Patrol Officer Vehicle Total:
General Fund Total:
Transportation Fund Total:
Patrol - Officer Vehicle (KFCG)
Patrol Officer Vehicle Total:
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 2014-108
OF THE COUNCIL OF THE CITY OF FORT COLLINS
AUTHORIZING THE PURCHASING AGENT TO LEASE ADDITIONAL EQUIPMENT
UNDER THE CITY’S STANDARD MASTER LEASE AGREEMENT WITH
PINNACLE PUBLIC FINANCING, INC. AND TO ENTER INTO A FIRST
AMENDMENT TO THAT STANDARD MASTER LEASE AGREEMENT
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, since entering into the Agreement, the City’s Purchasing Agent has, after
approval by the City Council, leased Equipment on the City’s behalf from Pinnacle under seven
separate schedules of equipment and corresponding payment schedules; 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. 8” dated
December 9, 2014, attached hereto as Exhibit “A” and incorporated herein by reference
(“Schedule of Equipment No. 8”); and
WHEREAS, the Purchasing Agent has also negotiated with Pinnacle quarterly lease
payments of Sixty Six Thousand Five Hundred Fifty One Dollars and Fourteen Cents
($66,551.14) for five years for the Equipment being leased in Schedule of Equipment No. 8 as
set forth in the parties’ “Payment Schedule, Equipment Schedule #8” dated December 9, 2014,
(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. 8, have been
budgeted and appropriated in the City’s 2015 annual budget that was adopted by Council on
November 18, 2014; and
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WHEREAS, the Purchasing Agent and Pinnacle have also negotiated the “First
Amendment to Master Lease Agreement” attached hereto as Exhibit “B” and incorporated herein
by reference (the “First Amendment”); and
WHEREAS, the purpose of the First Amendment is 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 have 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, this intent is further supported in the First Amendment by the addition of a
new Section 1.4 to the Agreement to establish a process by which the originals of the State of
Colorado certificates of title for the leased motor vehicles will be kept in the possession of a
third-party escrow agent until the City either exercises its option under the Agreement to
purchase a leased motor vehicle, in which event the vehicle’s title will be delivered to the City,
or the Agreement terminates as a result of nonappropriation, as a result of a default under the
Agreement by the City, or upon reaching the end of the lease term, in which events the
certificates of title will be delivered to Pinnacle; 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. 8 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. 8 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. 8 in accordance
with the terms and conditions of the Agreement; and
WHEREAS, the City Council has also determined that it is in the City’s best interests for
the City to enter into the First Amendment.
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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 First Amendment is hereby approved and the Purchasing Agent is
authorized to enter into it on the City’s behalf. The Purchasing Agent, in consultation with the
City Attorney, may agree to modifications and amendments to the First Amendment as may be
needed to protect the City’s interests and that are consistent with the stated purposes of this
Resolution.
Section 3. That the lease of the Equipment in Schedule of Equipment No. 8 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. 8 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. 8 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.
Passed and adopted at a regular meeting of the Council of the City of Fort Collins this
2nd day of December, A.D. 2014.
_________________________________
Mayor
ATTEST:
_____________________________
City Clerk
EXHIBIT A
FIRST AMENDMENT TO STANDARD MASTER LEASE AGREEMENT
This First Amendment to Standard Master Lease Agreement (this “Amendment”) is
entered into this _____ day of ____________, 2014, by and between Pinnacle Public Finance,
Inc. (“Lessor”) and the City of Fort Collins, Colorado, a home rule municipal corporation
(“Lessee”). The Lessor and Lessee are hereafter sometimes jointly referred to as the “Parties”.
RECITALS
WHEREAS, the Lessor and Lessee have previously entered into that certain “Standard
Master Lease Agreement” dated February 15, 2011 (the “Agreement”); and
WHEREAS, each “Schedule of Equipment” attached as Exhibit “A” to the Agreement and each
corresponding “Payment Schedule” attached as Exhibit “B” to the Agreement, together constitute a
“Schedule”; and
WHEREAS, each Schedule and the terms and provisions of the Agreement,together with
all exhibits attached thereto and any amendments and modifications to the Agreement, are
incorporated by reference into each such Schedule and constitute under the Agreement a separate
and independent lease and installment purchase of the Equipment therein described and are
referred to as a “Lease” in the Agreement; and
WHEREAS, under each Lease, the Lessor leases to the Lessee certain “Equipment” as
identified in Section 1.1 of the Agreement, which Equipment includes motor vehicles; and
WHEREAS, Article V of the Agreement also grants the Lessee the option to purchase
any or all of the Equipment in accordance with the provisions of Article V of the Agreement; and
WHEREAS, Sections 1.3, 2.4, and 3.3 of the Agreement expressly provide that all of the
Lessee’s obligations under each Lease are subject to annual appropriation by the Lessee’s City
Council (the “Council”) for the funds needed to meet those obligations, which appropriation is
entirely within the Council’s sole discretion; and
WHEREAS, Section 3.3 of the Agreement provides that if the Council has not
appropriated the needed funds and the Lessee has not otherwise exercised its option to purchase
the Equipment, the Lessor is entitled to take possession of such Equipment; and
WHEREAS, consistent with the lease-purchase nature of each Lease, Section 1.2 of the
Agreement provides that during the term of each Lease, title to the Equipment will be in the
Lessor subject to any transfer of that title upon the Lessee’s exercise of its option to purchase any
or all of the Equipment as provided in Article V of the Agreement; and
WHEREAS, notwithstanding this statement in Section 1.2 of the Agreement that the
Lessor holds title to the Equipment, Section 1.2 also states: “Lessor and Lessee agree that the
Lessee shall be listed as owner on vehicle titles and shall be treated as the owner for all purposes
and it will not be necessary for Lessor to be listed as lienholder on vehicle titles”; and
WHEREAS, the Lessee and Lessor now wish to clarify in this Amendment, that their
original (and current) intent in the Agreement for this motor-vehicle-title language in Section 1.2
was agreed to by the Parties solely for the purposes of: (1) establishing ownership of the
Equipment for federal tax purposes; (2) reducing the likelihood of the Lessor’s liability for any
civil claims that might arise from the Lessee’s use of the leased motor vehicles under the Lease;
and (3) for the Lessee’s administrative convenience in establishing clear title to such motor
vehicles when the Lessee does exercise its option under the Agreement to purchase any or all
such motor vehicles; and
WHEREAS, it is also not the Parties’ intention by entering into this Amendment to now
modify, change or in any way diminish the lease-purchase nature of the the Agreement and each
Lease with respect to the motor vehicles leased under a Lease or to do so with respect to the
contingent nature of the Lessee’s obligations under each Lease being subject to Council’s annual
appropriation or to do so with respect the Lessee’s fully vested title ownership of the motor
vehicles being complete when the Lessee has exercised its option to purchase them under the
Agreement; and
WHEREAS, the capitalized words and terms used herein shall have the same meaning
given to them in the Agreement, except as expressly provided herein.
NOW, THEREFORE, in consideration of the mutual covenants and promises of the
Parties contained in this Amendment and other good and valuable consideration, the receipt and
adequacy of which are acknowledged, the Parties agree to the following terms and conditions of
this Amendment.
AGREEMENT
Section 1. That all of the recitals set forth above in this Amendment are hereby
incorporated into this Amendment and the Agreement, as amended by this Amendment, as
though fully set forth in the body hereof.
Section 2. That Section 1.2 of the Agreement is hereby amended to read in full as
follows:
1.2 Title
During the term of each Lease, title to the Equipment will be in Lessor subject to the
transfer to Lessee upon Lessee’s purchase of the Equipment as provided herein. Upon the
termination of the Lease for any reason other than Lessee’s purchase of the Equipment, title to
any Equipment not purchased by Lessee at the time of termination shall remain in Lessor.
Lessor at all times will have access to the Equipment for the purpose of inspection, alteration and
repair. Notwithstanding that Lessor holds naked legal title under each Lease until title has fully
vested in Lessee, Lessee and Lessor agree Lessee shall be the owner of the Equipment for federal
tax purposes and that during the Lease Term, Lessee shall have all the beneficial and equitable
rights of ownership and the associated obligations and liabilities including but not limited to
insurance, taxes, and maintenance associated with the Equipment. Lessee and Lessor further
agree that Lessee shall be listed as “Owner” on the vehicle titles and shall be treated as the owner
for all the purposes stated herein. It will not be necessary for Lessor to be listed as lienholder on
vehicle titles. Upon the payment of all rent payable pursuant to Section 4.1 for the original term
and all renewal terms, or exercise of the option to purchase as specified herein, Lessor shall
immediately transfer title to any Equipment so purchased to Lessee, and Lessor’s interest in such
Equipment shall terminate. Following a non-appropriation of funds by Lessee or an event of
default by the Lessee under any Lease, the Lessee will, at the Lessee’s expense, execute and
deliver such additional instruments, certificates or documents, and will take all such actions as
the Lessor may reasonably request for the purposes of implementing or effectuating the
provisions of such Lease with respect to title in the Equipment vesting in Lessor or for the
purpose of more fully completing, perfecting, continuing, preserving or renewing the rights of
the Lessor with respect to the Equipment.
Section 3. That a new Section 1.4 is hereby added to the Agreement to read in full as
follows:
1.4 Title to Leased Motor Vehicles.
Notwithstanding the provision in Section 1.2 of the Agreement that the titles of the motor
vehicles leased by the Lessee under the Agreement will list the Lessee as the owner, the
Lessee and Lessor acknowledge that naked legal title of each such motor vehicle shall
remain in the Lessor unless and until the Lessee exercises its option to purchase the
motor vehicles in accordance with Article V of the Agreement. To further clarify that
this is the intent of the Parties, the Lessee agrees to promptly deposit with First National
Wealth Management, a division of First National Bank of Omaha, the “Escrow Agent”
identified in Exhibit “D” (“Escrow Agent”), the original of all of the State of Colorado
motor vehicle certificates of title now in the Lessee’s possession for the motor vehicles
leased under the Agreement and all original certificates of title the Lessee receives in the
future for motor vehicles it hereafter leases under the Agreement. Lessor and Lessee
shall also enter into an escrow agreement with the Escrow Agent which shall instruct the
Escrow Agent to safely keep and maintain all of the motor vehicle certificates of title
delivered into its possession. The escrow agreement shall also provide the following: (1)
in the event the Lessee notifies the Lessor under Section 3.3 of the Agreement of a non-
appropriation by the Lessee’s City Council of funds needed for any or all of the motor
vehicles leased under the Agreement, that the Escrow Agent shall have the Lessee’s
power-of-attorney to execute on behalf of the Lessee the assignments of title for each of
the certificates of title of the motor vehicles leased hereunder for which funds have not
been so appropriated; or (2) in the event that the Lessee has exercised its option to
purchase any or all of the motor vehicles leased under the Agreement, the Escrow Agent
shall return the original certificates of title for those motor vehicles to the Lessee and the
Lessee’s original power of attorney for each such motor vehicle. Lessee agrees to be
responsible for all costs incurred with the Escrow Agent with respect to the escrow
agreement.
Section 4. That except as expressly amended in this Amendment, the Parties
agree that all of the other terms, conditions and provisions of the Agreement shall remain
unchanged and in full force and effect.
IN WITNESS WHEREOF, this Amendment has been executed by the Parties as of the
date and year first stated above.
PINNACLE PUBLIC FINANCE, INC.
By: ______________________________
Cathy Jimenez, Managing Director/SVP
ATTEST:
___________________________
(Corporate Seal)
THE CITY OF FORT COLLINS, COLORADO
By: __________________________________
Gerry Paul
Director of Purchasing & Risk Management
ATTEST:
Lessee:
_____________________________
Wanda Nelson, City Clerk
APPROVED AS TO FORM:
_____________________________
John R. Duval
Senior Assistant City Attorney