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ITEM #18 <br />CITY OF COLTON <br />AGENDA REPORT <br />FOR COUNCIL MEETING OF AUGUST 16, 2006 <br />TO: HONORABLE MAYOR AND CITY COUNCIL <br />FROM: DILU DE ALWIS, FINANCE DIRECTOR <br />SUBJECT: APPROVAL OF LEASE WITH OPTION PURCHASE OF FIRE TRUCK <br />THROUGH MUNICIPAL FINANCE CORPORATION NTE $600,000 <br />DATE: AUGUST 8, 2006 <br />BACKGROUND: <br />On April 18, 2006 the City Council approved a bid award to KME Fire Apparatus to replace a <br />ladder truck that was sold during fiscal year 2005-06. The Finance Department has been <br />working with Municipal Finance Corporation to develop a method of financing the approved <br />equipment purchase. Municipal Finance Corporation specializes in providing tax-exempt <br />financing for public agencies and non-profit institutions. <br />DISCUSSION/ANALYSIS: <br />Municipal Finance Corporation has offered the City a cost-effective lease financing arrangement <br />to accomplish this purchase of a new ladder truck. The arrangement would allow the City to enter <br />into a Lease Option Agreement in the amount of not to exceed $600,000 at 4.55 percent interest <br />for ten years to finance the acquisition of the ladder truck. The Lease Option Agreement will be a <br />"qualified tax exempt obligation" within the meaning of IRS Code section 265(b)(3). <br />FINANCIAL IMPACT: <br />The annual lease payment of $75,000 is part of the Fire Department budget approved by the City <br />Council on June 20, 2006 in account 100-6090-6091-2500 (Principal) and 100-6090-6091-2510 <br />(Interest). <br />ENVIRONMENTAL IMPACT: <br />None. <br />CONFLICT OF INTEREST — Gift Disclosure Requirements <br />Municipal Finance Corporation <br />President: William Morton, President <br />Contact: Dixie Matte, Manager of Administration <br />