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HomeMy WebLinkAboutS09-City Attorney - 1 - Clef OF SAN BERNARDCo - REQUOT FOR COUNCIL AC'-ON - From: JAMES F. PENMAN Subject: LEASE/PURCHASE WITH PACIFICORP CORPORATION Dept: City Attorney Date: December 17, 1987 Synopsis of Previous Council action: Resolutions 87-345, 87-346, 87-347 adopted on October 5, 1987 Recommended motion: 1. Assign to City Attorney for review by Bond Counsel; or 2. Adopt Resolution authorizing City Attorney contract re-write ~~ ( . . / '-' lJ~ Signature Contact person: LEK von KAESBORG III Phone: 5355 Supporting data attached: Ward: FUNDING REQUIREMENTS: Amount: Source: Finance: Council Notes: 75-0262 Agenda Item No. s-? - 4- - CICt OF SAN BERNARDQo - REQUOT FOR COUNCIL AC'..JoN - STAFF REPORT The staff reports, bid spec. F-87-38 and Resolutions 87-345, 87-346, 87-347 submitted to the Council on October 5, 1987 made no mention of a Municipal Bond. The contract package received in the purchasing Department on December 10, 1987 requires the City, among other things, to allow Pacificorp Corporation (PCC) to assign the subject contract pursuant to the terms of Sections 103 and 265 of the Internal Revenue Code. These sections describe, in essence, the tax advan- tages to holders of Municipal Bonds. Part of the contract requires the City of waive all rights against whatever Corporation PCC assigns the contract. (9.1) Neither can the City, under the terms of this contract, abate any payment for any reason. (4.3) This Agreement also limits how the City may use the equip- ment, it is lease/purchasing. (lO.l(c)) A nearly identical lease/purchasing Agreement was entered into by the City and a company called Municipal Leasing Corporation (M.L.C.) for the purpose of lease/purchasing some trucks. When the City, because of the confusion caused when M.L.C. assigned the contract to Ford Motor Credit Cor- poration, withheld payment, one of the City's trucks was repossessed. It is our belief that M.L.C. is now the same company as PCC. The apparent advantage of this type of Agreement is that the City receives a slightly lower interest rate because the in- terest received from a Municipality is virtually tax free. This makes the contract very profitable and therefore easy to assign for a profit if the Assignee is well protected from the Municipality. The nature of this Agreement's tax consequences and the severity of its terms as presented to the City, indicate that Bond Counsel approval is required before it is accepted. Attached as Exhibit "A" is the contract submitted to the City by Pacificorp. An alternative contract is being prepared and will be passed out at the Council meeting. 75-0264 '--- --~ --. - /,,'", '-' '<>._.~ STAFF REPORT December 17, 1987 Page 2 The contract was not received in time to be reviewed prior to the regular Agenda deadline. If this item is not acted upon at the December 21, 1987 Council meeting, it will delay the purchase of the furniture to City Hall.