1999 AGN DEC 07 I07 - Laserfiche WebLink

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CITY OF COLTON AGENDA REPORT FOR COUNCIL MEETING OF DECEMBER 7, 1999 TO: HONORABLE MAYOR & CITY COUNCIL APPROVAL: HENRY T. GARCIA, CITY MANAGER FROM: AL HOLLIMAN, FINANCE DIRECTO SUBJECT: ADOPT THE ATTACHED RESOLUTION TO ENTER INTO A TAX-EXEMPT MASTER LEASE TO PROVIDE FINANCING FOR THE ACQUISITION OF CERTAIN EQUIPMENT AND VEHICLES IN THE PRINCIPAL AMOUNT OF APPROXIMATELY $400,000. DATE: NOVEMBER 30, 1999 BACKGROUND In the FY 99-00 Budget, the City Council approved the lease purchase of equipment and vehicles for various departments within the City. This equipment includes one asphalt paving machine, three pick-up trucks and one trailer mounted air compressor for the Street Division, as well as a fire truck for the Fire Department that is approved in the FY 00-01 budget. Staff is recommending the City Council enter into a tax-exempt master lease agreement for these purchases. DISCUSSION/ANALYSIS The Purchasing Division will be soliciting bids for all equipment and vehicles to be included in the master lease, which will be subject to Council approval at the time of bid award. The total cost of the purchases will initially be made from City funds, and the City will be reimbursed from the lease. ALTERNATIVES The City could lease each piece of equipment and vehicle under a separate lease agreement, however, the lease rates would not likely be as competitive. FINANCIAL IMPACT Staff has analyzed the costs and benefits of various methods of financing the equipment and implementing the finance program. There are primarily two common methods for financing these types of equipment. One method is a municipal lease and the other is through the issuance of Certificates of Participation "GOP's." The municipal lease method was selected because of the transaction cost and simplicity of implementation, compared to issuing securities through a bond issue. The lease method also gives us the ability to complete the transaction more quickly than a COP and eliminates the requirements and expense for continuing disclosure, trustee fees and arbitrage reports. The material difference in cost between the two financing options is primarily due to the short term of the lease debt, the high cost of issuing securities and the active short term leasing market. Staff will utilize a competitive process to insure that the lease cost is at an optimum market interest rate. ENVIRONMENTAL IMPACT None Attachments: Resolution Page I of 2 Item #7