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,
. ClcY OF SAN BERNARDOO - REQUOT FOR COUNCIL ACQON
From:
Raymond D. Schweitzer
Acting City Administrator
September 30. 1986
Subject:
Amendment to Lease Agreement with
Assignment between the City of San
Bernardino and GTE Leasino CorDoration
Oept:
Olh:
Synopsis of Previous Council action:
September 22. 1986 -- Mayor and Council approved the lease agreement with GTE for
the purchase of the telephone system and directed staff to make certain
amendments.
Recommended moti.on:
Adopt resolution.
JUSTIFICATION FOR PLACEMENT ON SUPPLEMENTAL AGENDA
The amendment to the lease agreement to include a "no pre-payment penalty"
section and other specified items was directed by the Mayor and Council at
the meeting of September 22, 1986, to be brought back on October 6, 1986.
~;j~
Signature
Contact person: Susan Chow
Supporting data atteched: yes
Phone: 5122
Ward:
FUNDING REQUIREMENTS: Amount:
Source:
Finance:
Council Notal:
75-0262
Agendl Item No
oS-S"
CIPt OF SAN BERNARDQO - REQU.Qr FOR COUNCIL AC~N
STAFF REPORT
At the September 23, 1986 meeting, Mayor and Council approved
the lease agreement with GTE as an interim financing mechan-
ism while waiting for the approval of the Certificate of
Participation. This will allow GTEL to go ahead with the
ordering of the equipment at the price bidded. Further delay
may subject the City to a price increase.
Mayor and Council also directed staff to amend the Lease
Agreement to include a "no-prepayment penalty" section. Along
with this addition, the City Attorney's Office also amended
five other sections to ensure more protection to the City.
The following summarizes the content of the amendments:
section 4
Late payments - City will be granted 30 days after the due
date before a late charge is imposed.
section 12
Insurance - The entire section was deleted. GTE was notified
that City is self insured.
Section 9
Lessee Certification and section 13 (bl Indemnity - section
103 of the Internal Revenue Code allows GTE to exempt the
interest portion of the rental payment from Federal income
taxes when a lease is entered into with a state or political
subdivision.
Due to the uncertainty of the recent tax reform measure and
its potential impact on this type of exemption, the City
Attorney's Office limited the City'S obligation to the
Internal Revenue Code as enacted on the effective date of
September 22, 1986.
Reasonable assurance was given by GTE that as long as the
City remains a political subdivision and payment for the
telephone equipment and systems remains a City obligation,
GTE will qualify for the exemption and enjoy the tax savings
benefit. Several cities including Banning, Pomona, San Dimas
and Upland have entered into a similar agreement with GTE.
section 25
Non-cancellable - City can repay the obligation at any time
without penalty.
Section 28
Additional terms - A Certificate of Acceptance form is
attached and will be used to indicate City's acceptance of
the telephone system and initiate the requirements for rental
payments.
75-0264
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RESOLUTION NO.
RESOLUTION OF THE CITY OF SAN BERNARDINO AUTHORIZING AND
DIRECTING THE EXECUTION OF A FIRST AMENDMENT TO LEASE AGREEMENT
WITH ASSIGNMENT BETWEEN THE CITY OF SAN BERNARDINO AND GTE
LEASING CORPORATION FOR THE INSTALLATION OF A NEW TELEPHONE
SYSTEM.
BE IT RESOLVED BY THE MAYOR AND COMMON COUNCIL OF THE CITY
OF SAN BERNARDINO AS FOLLOWS:
SECTION 1. The Mayor of the City of San Bernardino is
hereby authorized and directed to execute for and on behalf of
the said City a First Amendment to Lease Agreement with
Assignment between the City of San Bernardino and GTE Leasing
Corporation for the installation of a new telephone systelll.'~"
copy of which is attached hereto as Exhibit "A" and incorporaf~d
herein by reference as though fully set forth at length.
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
, 1986, by the
following vote, to wit:
AYES:
NAYS:
ABSENT:
City Clerk
The foregoing resolution is hereby approved this
day
of
, 1986.
Mayor of the City of San Bernardino
Approved as to form:
/~~~
Ci ty Aorney
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AMENDMENT TO LEASE AGREEMENT WITH ASSIGNMENT
BETWEEN THE CITY OF SAN BERNARDINO AND GTE LEASING CORPORATION
This First Amendment to the lease for 2 GTE 2400 Telephone
Communication Systems is made and entered into this day
of , 1986, by and between the City of San
Bernardino, a municipal corporation, hereinafter referred to as
"Lessee", and GTEL, hereinafter referred to as "Lessor" and GTE
Leasing Corporation, hereinafter referred to as "Assignee".
SECTION 2. Amendments
4. Late Payments. If Lessee fails to make any rental
payment or to pay any part of any sum required to be paid by
Lessee to Lessor within 30 days after the date said payment is
due, Lessee shall pay interest at the rate of 2% per month on the
amount overdue. However, said rate shall not exceed the maximum
annual rate, if any, allowable for such payments. The delinquent
payment period shall run from the expiration of said 30 days
until the amount is paid in full. If any amount remains unpaid
for a portion of any month, the interest shall be prorated and
paid for such period.
B. Section 9 is amended to read as follows:
"9. Lessee Certification. Lessee warrants that it is a
state or political subdivision thereof or that Lessee's
obligation under this Lease constitutes an obligation issued on
behalf of a state or political subdivision thereof, such that the
interest portion of the rental payments derived under this Lease
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will qualify for exemption from Federal income taxes under
Section 103 of the Internal Revenue Code as enacted on the
effective date, September 22, 1986, of this agreement. Lessee
further warrants that this lease represents a valid deferred
payment obligation for the amount herein set forth of a bona fide
Lessee, having legal capacity to enter into the same and is not
made in contravention of any town, city, district, county or
state, statute, rule, regulation or other governmental
provisions. Nothing herein shall constitute a pledge by Lessee
of any funds other than funds lawfully appropriated from time to
time for Lessee in its budget."
C. Section 12 "Insurance" is deleted in its entirety
because Lessee is self-insured.
D. Subsection 13 (b) is amended to read as follows:
"(b) Lessor or Assignee and the affiliated groups of which
Lessor or Assignee, for United States corporate income tax
purposes, are members intend, with respect to the Equipment or
any item thereof, to treat the interest income portion of the
rental payment described above as tax-free to Lessor or Assignee.
The amount of tax that will have been saved on such amount shall
be known as "Tax Savings".
If Federal tax administrative authorities formally notify
Lessor or Assignee of a disallowance, elimination, reduction, or
disqualification, in whole or in part, of the Tax Savings, or if
Lessor or Assignee shall include the interest income portion of
the repayment amount in income as a result of good faith
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determination that such interest income is not properly treated
as tax-free to Lessor or Assignee, Lessee shall pay to Lessor or
Assignee an amount such that the amount after deduction therefrom
of all taxes required to be paid by Lessor or Assignee in respect
of the receipt of such amount under the laws of any Federal,
state or local government or taxing authority in the United
States, shall fully compensate Lessor or Assignee for the loss of
any such Tax Savings including any interest, penalties, or
additions to taxes payable, as a result of such disallowance,
elimination, reduction, or disqualification of such anticipated
benefits. The amounts payable pursuant to this subsection shall
be payable upon demand by Lessor or Assignee. Any such demand
shall be accompanied by a statement describing in reasonable
detail the loss of the Tax Savings and setting forth the
computation of the amounts so payable. Lessee agrees to be bound
by any reasonable determination of the amounts set forth in such
statement.
Disallowance, elimination, reduction or disqualification in
whole or in part of the Tax Savings in an amount to compensate
Lessor or Assignee for the loss of any such Tax Savings,
including interest, penalties or additions to taxes payable shall
be limited to "Tax Savings" from Section 103 of the Internal
Revenue Code as enacted on the effective date, September 22,
1986, of the lease agreement between the Lessor and Lessee."
E. Section 25 is amended to read as follows:
"25. Noncancellable. This lease is noncancellable. Lessee
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may prepay this obligation at any time provided that Lessee is
not in default on the terms and provisions as provided herein.
Prepayment is to occur without penalty and for the amount
determined to be the outstanding principal balance plus any
accrued interest at the time of any such payment.
F. Section 28 is added and amends the section on the
signature page of the lease agreement referred to as "Additional
Terms" and reads as follows:
"28. A copy of the GTE Leasing Corporation's Certificate
of Acceptance is attached hereto as Exhibit "A" and incorporated
herein by reference, and it shall be used by GTEL and Lessee to
show that the telephone equipment and system installation have
been accepted by the City.
ATTEST:
CITY OF SAN BERNARDINO
City Clerk
By
Mayor
Approved as to form:
GTE LEASING CORPORATION
t/2~~/:;
. i..._
. ~.
City Attorney
By
Title
fk~
..J1j MldrAlAt _/
4
~ 4 -
0 GTE CASING CORPoQTION 0
(fiE
CERTIFICATE
OF
ACCEPTANCE Schedule No.
LESSEE'S CERTIFICATE OF DELIVERY AND INSTALLATION
The undersigned hereby certifies that all Equipment covered by the Schedule identified above and made pur.
suant to a lease (the "Lease") between GTE Leasing Corporation as lessor and the undersigned as lessee,
which Lease was signed by lessee on
,19
, has been delivered to the
undersigned and found satisfactory, that Installation thereof has been satisfactorily completed and that the
Equipment Is hereby unconditionally accepted In accordance with the terms and conditions of the above
described Lease. Further, the undersigned acknowledges that GTE Leasing Corporation or Its assignee has ir.
revocable rights resulting from such acceptance, including the right to receive payments without offset or
defense. The undersigned also acknowledges that this Certificate of Acceptance will prevail, where relevant,
in the event of a conflict with the Lease described above. The undersigned further certifies that he/she has, or
has been delegated, the authority to accept the Equipment.
DATED
Lessee
By
(L.S.)
Title
SUPPLIER'S CERTIFICATE OF DELIVERY AND INSTALLATION
The undersigned hereby certifies that the aforesaid Equipment has been delivered, and that undersigned
has completed the installation thereof in a workmanlike manner.
DATE
Supplier
By
Title
REV, 3183 ML