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Purchase of Fire Apparatus -Page 2 of 3 - November 16, 2009 Anal sis Cost. The bid cost of the unit that staff is recommending for purchase is $465,010. This is inclusive of sales tax and apre-payment discount of $17,320. Depending on the number of units ultimately ordered by Alameda County, the City may realize additional savings of $2,000. In addition to the acquisition cost, the new fire engine must be equipped with a substantial amount of equipment. The new equipment that the unit will need ranges from a push broom to a defibrillator. Some minor equipment can come from the old engine that will go to reserves status, however, this is minimal. Staff estimates that the cost of the needed equipment to outfit the new engine is approximately $140,000. Consequently, the total cost to place the new fire engine in service is approximately $605,000. Lease/Purchase Financing. Staff is recommending that the City finance the purchase of the new fire engine (fire engine only, not any equipment required to properly out fit the unit) through a five year lease/purchase agreement. The City has used lease/purchase financing in the past, most notably to acquire computer hardware and software. In brief, a lender (bank, financing or leasing company) purchases the equipment and then leases it to the City for a specified period. At the end of the lease period the lender sells the equipment to the City for $1 and the City becomes the legal owner Staff is recommending that Council approve alease/purchase agreement with Oshkosh Capital. Oshkosh Capital is affiliated with the fire engine manufacturer and acts as a financing partner. Staff has reviewed the terms of the proposed lease/purchase and fmds them competitive. The lease would be for a period of five years, and the annual payments would be approximately $104,550, based on current quotes. The total interest paid would be $57,740. The implied interest rate is approximately 3.8%. Staff would note that the terms above are a current quote. The terms may change slightly by the time the transaction completed. To provide for this contingency, the attached resolutions indicate that the City Manager may enter into alease/purchase agreement based on rates current at the time, but not to exceed 4.5%. Current City Council Policy Not applicable Previous City Council Action(s) The 2009-10 budget, adopted by the City Council on June 1, 2009, provides for alease/purchase payment in the amount of $150,000. City Council Committee Review and Action Not applicable Applicable General Plan Policy Not applicable G:\Council\2009-] 0 Resolutions & Staff Reports\Purchase of Fire Apparatus 2009.docx