REPORT TO THE CITY COUNCIL
December 10, 2015
FROM: MICHAEL LIMA, Controller
Finance Department
BY: PHILLIP HARDCASTLE, Principal Accountant-Debt Management
Finance Department
SUBJECT
Title
RESOLUTION - Authorizing the First Amendment to the Equipment Lease-Purchase Agreement with Community First National Bank, as Lessor, for the acquisition, purchase, financing and leasing of certain equipment for the Fresno Fire Department for Fiscal Years 2016 and 2017; authorizing the execution and delivery of documents required in connection therewith; and authorizing all other actions necessary to the consummation of the transactions contemplated by this resolution
Body
RECOMMENDATION
Staff recommends the City Council award an extension of the Fire Equipment Lease-Purchase Agreement to acquire public safety vehicles and equipment budgeted in fiscal years 2016 and 2017, and authorizes the Controller or designee to execute same.
EXECUTIVE SUMMARY
The Fire Department is in need of two ladder trucks, three engines, seven light duty vehicles, and 320 radios for field personnel, which were approved for purchase and financing in the FY 2016 Adopted Budget. In addition, the public safety fleet is expected to need additional equipment in FY 2017 in order to keep up with the demand of the Police and Fire Departments.
The Fire Department currently has a Fire Equipment Lease-Purchase Agreement with Community First National Bank for the purchase of equipment that was budgeted in FY 2015. The lender has offered to extend their line of credit and increase that line of credit by an additional $15 million to a total of $22.15 million, and provide rates that are increasing by only 15 basis points (bps), or 0.15%. Rates on purchases already financed are between 2.31% and 2.92%. Given these rates, staff believes the City would not benefit by going through an RFP process at this time. This line of credit will be available until no later than August 28, 2016.
BACKGROUND
The Fire Department fleet contains over 110 fire apparatus, specialty, and light vehicles. Prior to approval of the Fire Equipment Lease-Purchase Agreement on April 1, 2015, the last order of three new fire engines was approved in the FY 2010 Adopted Budget and the vehicles were received in 2011. In FY 2014, the department was approved to order two engines and a ladder truck, and in FY 2015 another ladder truck, four engines and one water tender along with equipment and light vehicles. The apparatus routinely take 10-12 months to build. The department received these vehicles and funded them under the Fire Equipment Lease-Purchase Agreement dated April 1, 2015.
As part of the FY 2016 budget, Council approved the purchase of two more ladder trucks, three engines, seven light duty vehicles and 320 radios for field personnel. Total cost is estimated to be $5.6 million. The department also anticipates needing additional equipment in FY 2017. Police vehicles will also need to be acquired in FY 2017, and the total estimated financing for all of these purchases is not expected to exceed $15 million. Police fleet to be acquired in FY 2016 has already been financed through the extension of their Lease Purchase Agreement with Kansas State Bank.
The City currently has a Fire Equipment Lease-Purchase Agreement that provides for a line of credit not to exceed $7.15 million for the purchase of the fire equipment budgeted in the FY 2015 Budget. The Finance Department is considering an RFP for a citywide Master Equipment Lease Purchase Agreement later in FY 2016 or early in FY 2017. Staff believes that putting one out at this time would produce the same outcomes as seen in the past five years. In the last five years, every time the City has put out an RFP for lease-financing services, it has received either one or zero responses due to our credit ratings. As the City’s credit improves over the course of the next year, staff believes the opportunity will return to provide a citywide Master Equipment Lease Purchase Agreement.
Until that time, the lender of the Fire Equipment Lease-Purchase Agreement has offered to extend their line of credit, increase that line of credit by an additional $15 million to a total of $22.15 million, and provide interest rates that are increasing by only 15 bps (0.15%). Rates on purchases already financed are between 2.31% and 2.92%. With these kinds of rates, staff believes the City would not benefit by going through an RFP process at this time. This line of credit will be available until no later than August 28, 2016.
The City Attorney has reviewed and approved as to form.
ENVIRONMENTAL FINDING
This item is not a “project” for the purposes of the California Environmental Quality Act.
LOCAL PREFERENCE
Local preference was not implemented because this item is an amendment to an existing agreement.
FISCAL IMPACT
The FY 2016 Adopted Budget included approval of acquiring the Fire equipment. Financing of the equipment needs to be approved to move forward with acquisition under this Fire Equipment Lease-Purchase Agreement.
Attachment:
Amendment to Fire Equipment Lease-Purchase Agreement