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Home My WebLink About11 FinanceCITY OF SAN BERNARDINO - REQUEST FOR COUNCIL ACTION From: BARBARA PACHON Subject: Lease - Purchase Agreement with GE DIRECTOR OF FINANCE Capital to finance Fire Apparatus. Dept: FINANC'E DEPARTMENT Date: October 8, 1998 ORIGINAL Synopsis of Previous Council action: February 16, 1998 - The Mayor and Common council approved and adopted Resolution 98 -69, authorizing the execution of a Memorandum of Undestanding between the City and EDA for the lease - purchase of an All Wheel Star Aerial Ladder Truck and other equipment (CDBG project 98- 219) . April 6, 1998 - Mayor and Common Council approved and adopted Resolution 98 -93 authorizing the execution of a first amendment to the Memorandum of Understanding between the City and EDA for the lease -- purchase of fire apparatus (CDBG project 97 -229). Recommended motions: That the Mayor and Common Council adopt the Resolution approving the lease - purchase financing agreement with GE Capital Public Finance; and, That the Mayor and Common Council authorize the Director of Finance to amend the FY 1998 -99 Budget to reflect the annual lease payment of $384,791.75 to be made for the financing of fire apparatus and to reflect the corresponding revenue reimbursement to be received from EDA. Signature Contact person: Barbara Pachon, Director of Finance Phone: x - 5242 Supporting data attached: yes Ward: FUNDING REQUIREMENTS: Amount: $384,791.75 for FY 1998 -1999 to be charged to Fire Department budget. Source: General Fund to be reimbursed by CDBG funds. No net impact to Council Notes: Agenda Item No. _ 11 STAFF REPORT SUBJECT: Approval of lease- purchase agreement with GE Capital for the financing of one (1) Pierce 105' Heavy -Duty Ladder truck and seven (7) Pierce 1,500 GPM triple combination pumpers. BACKGROUND: The Fire Department was recently granted CDBG funding for two projects. The first project (98 -219), approved by the Mayor and Common Council on February 16, 1998 (resolution 98 -69) authorizes the lease- purchase of an All Wheel Steer Aerial Ladder Truck. The second project (97 -229) approved by the Mayor and Common Council on April 6, 1998 (resolution 98 -93) approved the lease- purchase of major fire apparatus. Because the funding from CDBG will come in annual allotments of approximately $449,650 over an eleven year period, the Fire Department is requesting to enter into a lease- purchase agreement so that items needed immediately can be purchased up front and financed. The items to be purchased immediately and financed are (1) Pierce 105' Heavy Duty Ladder Truck, and (7) Pierce 1,500 GPM triple combination pumpers. BID RESULTS The Purchasing Department requested rate quotes to finance the fire equipment from the City's approved master leaseholders. Five lenders responded. After an analysis of the responses, it was determined that GE Capital Public Finance had the most advantageous financing. Originally, GE Capital's bid submittal was for annual payments of $388,570.38 over a period of eight years. A Treasury Note - Interest Rate Index was established to protect the City and share market -rate change risks with the Lessor until the agreement is finalized and closed (attachment A). In accordance with this index, the Purchasing Manager negotiated with GE Capital to reduce the interest rate from 4.78% to 4.54% as interest rates decreased before this agreement could be finalized. This lowered the annual payment amount to $384,791.75 (schedule B). Proceeds of the financing, as required by the lessor, will be deposited into an escrow account to be established by the City. Due to the nature of construction for this type of specialized fire equipment, progress payments to the equipment manufacturer will be made from this escrow account. Full payment to the equipment manufacturer will be made from the escrow account upon delivery of the equipment. FINANCIAL IMPACT: The proposed lease- purchase agreement is for a term of eight years. Total cost of the lease is; $2,533,900 plus 4.54% interest. Annual payments will be in the amount of $384,791.75. The City and the Economic Development Agency have Memorandum of Understandings in place that authorize CDBG funding for the purchase of fire vehicles and various fire apparatus. A portion of this CDBG funding will be used to reimburse the City for the annual lease payments. page 1 of 2 Fire equipment lease- purchase page 2 of 2 The City's FY 1998 -99 Budget will be amended to reflect the annual lease payment of $384,791 and to reflect the corresponding reimbursement revenue to be received from EDA. There will be no net impact to the General Fund as revenue and expenditures are being increased equally. The Fire Department is currently in the process of finalizing plans for the remainder of the available CDBG funding. A request for approval to use the remaining CDGB funds designated for the lease- purchase of fire apparatus will be brought to the Mayor and Common Council at a later date. Note: The Mayor and Council should note that if CDBG funding were to be eliminated, the City would still be responsible for the annual lease payments and would have to find alternative funding sources to meet this obligation. RECOMMENDATION: 1. That the Mayor and Common Council adopt the resolution approving the Lease - Purchase financing agreement with GE Capital Public Finance; and, 2. That the Mayor and Common Council authorize the Director of Finance to amend the FY 1998 -99 Budget to reflect the annual lease payment of $384,791.75 to be made for the financing of fire equipment and vehicles and to reflect the corresponding revenue reimbursement to be received from EDA. COPY Exhibit GE CAPITAL PUBLIC FINANCE, INC. TREASURY NOTE - INTEREST RATE INDEX THE PROGRAM: GECPF adjusts the interest rate to market conditions at the time of funding the Escrow. When all documents have been received and approved by GECPF; the applicable interest rate is set based upon 50% of the change in the weekly average of Treasury rates as published in the H.15 report. Sample attached. DEFINITIONS: Financing Terms* 7 annual arrear Base Financing Rates % (Quoted Rate) 4.78 8 annual arrear 4.78 9 annual arrear 4.82 *First payment due July 15, 1998. September 11, 1998 H,1 5 Term Base H.15 Rate % 5 year 4.72 5 year 4.72 5 year 4.72 Current H.15 Rate: The applicable interest rate will be the weekly average interest rate published in the H.15 5 working days immediately preceding the day funding occurs. HOW IT WORKS: When GECPF receives all the completed documentation, we will identify the Treasury H.15 interest rate corresponding to the H.15 Term. This interest rate is the Current H.15 Rate and is subtracted from the Base H.15 Rate which was current at the time of Base Financing Rate calculation. The difference between the Current H.15 Rate and the Base H.15 Rate will be multiplied by 0.50 and then added to the Base Financing Rate to determine the Final Fixed Interest Rate. INDEX CALCULATION: [(Current H.15 Rate - Base H.15 Rate) x .50] + Base Financing Rate = Fixed Rate EXPIRATION DATE: This index is valid through November 15, 1998, unless extended in writing by GECPF. This will only be used for the Escrow funding anticipated by November 15, 1998. OCT 7'98 07:50 FR GE CAPITAL 612 897 5601 TO 919093845043 P.03 CF. Capital Public Fissace. Inc_ Ps Towe 0 t 5 eb od a I a Fmding DM ....... ......... - - - - - - - - ................. NOV-01-99 CA3Ww Raft ............................................... ....... 4-5400% Payment TOW Principal bnereft Prquy-mt dace Nwnba PZYMM coavomw Compoo-t Prime Not -0I -99 1 394;791.75 269.752.69 115,039.06 2.393.75157 N&V-01-W 2 344,791.73 281,999.46 102,7" 2.011,729.36 N&v-01-01 3 3844791.75 294J82_24 84.989-51 1.760=70 N&v-01-02 4 334.791.75 308,196.26 76.605A9 1,428$41.72 Nov-01-03 5 384,791.75 322,1 TI-92 62,613.93 1,097$99.90 NOV-41-04 6 394,791.75 33004.79 47,986.96 735,860.78 Nov-01.05 7 384,791.75 352,093.73 32A96.02 373,439.20 Now-01-06 8 384.791.75 368A80.91 16,710.34 0.00 TOTAL 3,078 ,334.00 2433.900.00 544,434.00 .......... *AftWpaymcatof - pWMWt due od sots date 1 2 3 4 5 sl 9 10 111 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 RESOLUTION NO. RESOLUTION OF THE MAYOR AND COMMON COUNCIL OF THE CITY OF SAN BERNARDINO APPROVING LEASE - PURCHASE FINANCING OF FIRE APPARATUS FROM GE CAPITAL. NOW, THEREFORE, BE IT RESOLVED BY THE MAYOR AND COMMON COUNCIL OF THE CITY OF SAN BERNARDINO AS FOLLOWS: SECTION 1. That the Director of Finance is hereby authorized and directed to issue an addendum to the Master Lease Agreement between GE Capital Public Finance, Inc. and the City of San Bernardino for the financing of one (1) Pierce 105' Heavy Duty Ladder Truck and seven (7) Pierce 1,500 GPM triple combination pumpers at a cost of $2,553,900 plus 4.54% interest. The Treasury Note - Interest Rate Index established to protect the City and share market -rate change risks with lessor shall be attached hereto and incorporated herein as Exhibit A. Payment schedule as modified from original bid in accordance with Treasury Note - Interest Rate Index shall be attached hereto and incorporated herein as Exhibit B. SECTION 2. The authorization to execute the above referenced Financing Contract is rescinded if the parties to the Agreement fail to execute it within ninety (90) days of the passage of the Resolution. 1 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 RESOLUTION OF THE MAYOR AND COMMON COUNCIL OF THE CITY OF SAN BERNARDINO APPROVING LEASE - PURCHASE FINANCING OF FIRE APPARATUS FROM GE CAPITAL. I HEREBY CERTIFY that the foregoing resolution was duly adopted by the Mayor and Common Council of the City of San Bernardino at a meeting thereof, held on the day of , 19 , by the following vote, to I wit: COUNCIL MEMBERS ESTRADA LIEN ARIAS SCHNETZ DEVLIN ANDERSON MILLER AYES NAYS ABSTAIN ABSENT Rachel Clark, City Clerk The foregoing resolution is hereby approved this day of , 1998. Approved as to form and legal content: JAMES F. PENMAN City Attor ey By: ,i � Judith Valles, Mayor City of San Bernardino