REPORT TO THE CITY COUNCIL
March 26, 2015
FROM: KERRI L. DONIS, Fire Chief
Fire Department
SUBJECT
Title
RESOLUTION - Authorizing the execution and delivery of an 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 in a principal amount not to exceed $7,150,000
Body
RECOMMENDATION
Staff recommends Council authorize the Controller to enter into an Equipment Lease-Purchase Agreement with Community First National Bank and the City of Fresno for the lease purchase of fire apparatus, light vehicles and equipment and adopt the resolution authorizing the execution and delivery of the equipment lease purchase agreement.
EXECUTIVE SUMMARY
The Fire Department was authorized to lease-purchase fire apparatus, equipment and light vehicles to replace existing equipment that is at or near the end of its useful life span and must be replaced. The new equipment will be lease-purchased and will improve the fire fleet, safety for firefighters and the public and should minimize out of service time and reduce repair costs. The cost for replacement of two ladder trucks, eight fully equipped engines, one water tender and eight light vehicles is approximately $7,000,000.
As the City does not currently have a master lease agreement in place, a formal Request for Proposal process was conducted with proposals sent out to over 30 financial institutions and posted on Planet Bids. Community First National Bank was the only respondent, but their proposal was deemed responsive and responsible. The Finance Department reviewed the proposal response, performed reference checks and determined that the quoted rates are very competitive at around 2 percent for the five-year light vehicle and equipment lease period, and 2.5 percent for the fire trucks and engines which are leased over ten-year period. As such, the department is recommending approval of the agreement.
BACKGROUND
The Fire Department fleet contains over 110 fire apparatus, specialty, and light vehicles. The last order of three new fire engines was approved in the FY 2010 Adopted Budget and the vehicles were received in 2011. The FY 2011 Adopted Budget contained approval to lease-purchase another three fire engines. Unfortunately, the City was still experiencing severe economic distress and apparatus and equipment acquisitions were deferred in an effort to minimize expenditures. During that same time frame, the elimination of two company houses meant that the single companies were responding to more calls. As a result, existing apparatus and other vehicles are being heavily utilized, beyond their intended front-line service life of eight years and are regularly experiencing longer out-of-service times due to more extensive and costly repairs.
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 department issued purchase orders for the fire trucks and engines via Purchasing Department approved piggybacks on competitively bid contracts. The water tender, light vehicles and equipment are in the process of being competitively bid through Purchasing and purchase orders will be issued this fiscal year. The apparatus routinely take 10-12 months to build, and the department is anticipating delivery of one truck and four engines this summer, with the balance of equipment anticipated in late winter.
To ensure that the department does not experience delays in equipment replacement in the future, the City Manager requested a proposed replacement plan for all existing apparatus and light vehicles along with the estimated fiscal impact to incorporate into the five-year budget projections. Under this plan, apparatus and light vehicles will be replaced approximately every eight years. Apparatus that are front-line (in service daily), will then rotate into the reserve pool for use when a front-line vehicle is out of service, and older reserve vehicles will be recommended for sale at auction or donation to sister agencies depending upon their condition. Apparatus are routinely utilized in front-line, daily service for approximately eight years and then can serve as reserve apparatus for another 5-7 years depending upon their condition. The department currently has multiple front line apparatus that are 10-12 years old and reserve apparatus over 15 years old, and this equipment should be disposed of. This new equipment will greatly improve the fire fleet and help with response times, reduced repair and maintenance costs and the safety of firefighters and the public.
As the City does not currently have a master lease agreement in place, a formal Request for Proposal process was conducted with proposals sent out to over thirty financial institutions and posted on Planet Bids. Community First National Bank was the only respondent, but their proposal was deemed responsive and responsible. The Finance Department reviewed the proposal response, performed reference checks and determined that the quoted rates are very competitive at around 2 percent for the five-year light vehicle and equipment lease period, and 2.5 percent for the fire trucks and engines which are leased over a ten-year period. As such, the department is recommending approval of the agreement.
The agreement provides that the first payments are due six months after receipt and every six months thereafter. Due to the timing of the receipt, it is anticipated that only one half ($355,800) of the estimated annual payment of $711,600 will be required in FY 2016 for the large apparatus orders. As the light vehicles and equipment will be received and paid for prior to fiscal year end, both semi-annual payments estimated at a total of $169,400 will be incurred in FY 2016.
The City Attorney has reviewed and approved as to form.
ENVIRONMENTAL FINDINGS
This is not a "project" for the purposes of CEQA pursuant to CEQA Guidelines, Section 15378(b)(5), as it is an administrative activity that will not result in direct or indirect physical changes to the environment.
LOCAL PREFERENCE
Local preference did not affect the award of this agreement because there was only one responsive and responsible bidder.
FISCAL IMPACT
There is no impact to the General Fund related to approval of the Equipment Lease-Purchase Agreement in FY 2015. Sufficient funding for the total estimated first-year lease payment of $525,200 is included in the proposed FY 2016 budget. Thereafter, the estimated annual obligation of $881,000 will be requested in each succeeding budget year accordingly.
Attachments
Resolution-Authorizing the Execution and Delivery of an Equipment Lease-Purchase Agreement
Agreement-Equipment Lease-Purchase Agreement