Finance Highlights 2011 1021 - Laserfiche WebLink

Home

Purchase of Fire Apparatus Page 2 of 2 October 21, 2011 prepayment discount of $23,837. The total amount of the purchase and the related financing for the two engines is $971,090. Staff is recommending that the City finance the purchase of the new fire engines (fire engines only, not any equipment required to properly outfit the unit upon delivery) through a five -year lease /purchase agreement. The City has used lease /purchase financing in the past, most notably to acquire other fire apparatus and computer hardware and software. Generally, the 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 City Council approve a lease /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 finds it most competitive and best meets the interests of the City. Staff also obtained quotes from Capital One Public Finance and Holman Capital (JP Morgan Chase reviewed the acquisition but declined to offer a quote). For the five -year financing, the quoted rates ranged between 2.20% and 2.45 %, with Oshkosh providing the best rate. Also, Pierce offered an additional prepayment discount with Oshkosh financing. The lease would be for a period of five years, and the annual payments would be approximately $207,200. Funds will initially be appropriated for annual lease payments in 2012 -13. The first payment is due one year after commencement of the lease. Golden State Fire has indicated the engines are expected to be delivered to the City by July 2012. CONCLUSION Staff recommends that the Finance Committee review and approve for City Council approval the acquisition of two replacement fire trucks and authorize the City Manager to execute a lease purchase agreement and other documents with Oshkosh Capital necessary to finance the acquisition. G: \Finance Committee \2011- 12 \10- 21 -11 \fc memo repurchase of fire apparatus. docx