AGENDA #4h

MEMORANDUM

 

TO: Mayor and Town Council

 

FROM: W. Calvin Horton, Town Manager

 

SUBJECT: Award of Bid for Lease-Purchase of Vehicle and Computer Replacements for the 2003-2004 Fiscal Year

 

DATE: January 12, 2004

 

 

The attached resolution would authorize the Manager to enter into installment contracts as follows: 1) First Citizens Bank for financing $418,000 for financing vehicles and computer equipment with an average life of three years and 2) RBC Centura for financing vehicles with an average life of seven years totaling $800,100. The current budget provides for both these financings. See Attachment for a listing of the vehicles and computer equipment.

 

BACKGROUND

Vehicles

 

Six years ago, we contracted with a consulting firm, David M. Griffith, Inc., now DMG Maximus, to develop a long-range vehicle replacement plan that would allow the Town to replace vehicles and related capital equipment in accord with the normal useful life of each vehicle.  The consultants recommended that the Town change its vehicle replacement practices from a cash purchase plan to an annual lease-purchase program.  The primary benefit of this plan is that it allows the Town to replace capital equipment in accord with the equipment's useful life, while retaining more cash and taking advantage of the Town's ability to borrow funds at tax-exempt rates. 

 

DMG Maximus reviewed our plan three years ago and recommended that we extend the lease period for all vehicles other than police vehicles to seven years instead of five years to more accurately reflect the normal life of these vehicles. This practice was instituted last year and we propose to continue the seven-year lease period this year. We propose to continue a three-year lease period for police vehicles as originally recommended by DMG Maximus.

 

Computers

 

Five years ago at the recommendation of the Technology Committee, the Town began a three-year replacement program for computer equipment.  We are currently using the program to finance desktop computers, servers and related equipment, and propose to continue a three-year replacement cycle.

 


FINANCING PROPOSALS

 

Requests for proposals for financing the purchase of vehicles and computer equipment were sent to eight financial institutions with responses requested on January 5.  The proposals specified quotes for seven-year fixed rate installment payments on $800,100 for vehicles with an expected useful life averaging seven or more years, and three-year fixed rate installment payments on $228,000 for police cruisers and $190,000 for computer equipment with an expected life averaging three years.

Responses received from financial institutions on January 5 are as follows:


 

 

EVALUATION OF BIDS

The bids received were very competitive and reflect the low interest rate environment in the current economy. Based on the proposals received, we recommend accepting the low bid from First Citizens Bank of 2.10% for the three-year financing totaling $418,000 and the low bid from RBC Centura of 2.79% for the seven-year financing totaling $800,100. 

The majority of vehicles and computer equipment included in this purchase are available through the Town's participation in State purchasing contracts.  Some individual items will require formal bids in accord with normal bidding requirements and will be presented to the Council for approval.

RECOMMENDATION

 

We recommend that the Council adopt the attached resolution authorizing the execution of two lease-purchase contracts for vehicle and computer equipment purchases in the current year totaling $1, 218,100.

ATTACHMENT

 

1.      Listing of Vehicles and Computer Equipment (p. 4).

 


A RESOLUTION AUTHORIZING THE TOWN MANAGER TO EXECUTE LEASE-PURCHASE CONTRACTS FOR VEHICLE AND COMPUTER EQUIPMENT REPLACEMENT PURCHASES FOR THE 2003-2004 FISCAL YEAR (2004-01-12/R-6)

WHEREAS, the Town of Chapel Hill solicited and received competitive proposals from financial institutions for the financing of a variety of vehicles and computer equipment for various departments; and

WHEREAS, First Citizens Bank offers the lowest total interest cost of 2.10% for the three-year term for the purchase of vehicles totaling $228,000 and computer equipment totaling $190,000; and

WHEREAS, RBC Centura offers the lowest total interest cost of 2.79% for the seven-year term for the purchase of vehicles totaling $800,100;

NOW, THEREFORE, BE IT RESOLVED by the Council of the Town of Chapel Hill that the Council authorizes the Town Manager to enter into a contract with First Citizens Bank on behalf of the Town for the financing of vehicles and computer equipment totaling $418,000 at a fixed interest cost of 2.10% for a three-year term with total principal, interest and fees cost of $433,695.20, and to enter into a contract with RBC Centura on behalf of the Town for the financing of additional vehicles totaling $800,100 with a fixed interest rate of 2.79% for a seven-year term with total principal and interest cost of $886,671.52.

BE IT FURTHER RESOLVED that the aforesaid contracts by and between the Town of Chapel Hill, various State contract and other vendors, First Citizens Bank and RBC Centura, together with the amounts to be paid thereunder, be designated as qualified tax-exempt obligations of the Town of Chapel Hill for purposes of Section 265(b)(3) of the Internal Revenue Code of 1986, as amended.

BE IT FURTHER RESOLVED that the Council does not reasonably expect that the Purchaser (and any subordinate entities) will issue more than $10,000,000 in qualified tax-exempt obligations pursuant to such Sections 265(b)(3)(ii) during the current calendar year.

This the 12th day of January, 2004.


ATTACHMENT 1

LISTING OF VEHICLES AND COMPUTER EQUIPMENT

Fiscal Year 2003-04 Financing

pick-up trucks ton, ton and 1 ton

4 wheel drive utility vehicles

tar kettle

front loading sanitation trucks

riding lawn mowers & trailers

roller

midsize sedans

desktop/laptop computers

servers

peripherals