AGENDA #4g

MEMORANDUM

TO:                  Mayor and Town Council

FROM:            W. Calvin Horton, Town Manager

SUBJECT:      Award of Bid for Financing of Computer Replacements for the 2004-2005 Fiscal Year

DATE:                        April 25, 2005

The attached resolution would authorize the Manager to enter into an installment contract with Banc of America Leasing & Capital, LLC for financing $204,000 of computer equipment with an average life of three years.  The proposed funding will provide 103 replacement desktop and laptop computers, 53 of which are designated for the Police Department, and one server for Town data. 

BACKGROUND

This purchase will complete a second round of the three-year replacement cycle for Town desktop and laptop computers. It will replace systems that have expired warranties and that were originally purchased with basic features intended to meet the needs of an expected three year lifetime. Fifty-three of the systems are designated for the Police Department and include 12 laptops that are intended to replace desktop systems in that department so as to provide a better capability for field work by several divisions in the department. Also included are seven replacements for mobile data terminal (MDT) computers used in patrol cars. These MDT’s are used round the clock and have received the most wear and tear of any of our computers. This purchase will become part of the financing package associated with the computer fund and will finalize the fund costs for FY 2005-2006.

The Technology Committee recommended reviewing the replacement cycle during the coming fiscal year (Budget Work Session, March 23, 2005) to see if changing to a different rotation cycle, four years for example, would be appropriate. A decision in the fall of 2005 would allow sufficient time to extend warranties on existing equipment, if appropriate, and make other adjustments to departmental needs prior to purchasing and budget planning in the spring of 2006.

Although there is no program change that will impact the FY 2005-2006 budget, the specific costs for computers under this installment contract are lower than originally anticipated and we will adjust the FY 2005-2006 budget accordingly. The reduction to the proposed fund cost in next year’s budget is approximately $40,000.

FINANCING PROPOSALS

Requests for proposals for financing the purchase of computer equipment were sent to eight financial institutions with responses requested on April 4, 2005.  The proposals specified quotes for $204,000 for computer equipment with an expected life averaging three years.

Responses received from financial institutions on April 15, 2005 are as follows:

EVALUATION OF BIDS

The bids received were competitive and reflect the low interest rate environment in the current economy.  Based on the proposals received, we recommend accepting the low bid from Banc of America Leasing & Capital, LLC of 3.12% for the three-year financing totaling $204,000. 

RECOMMENDATION

We recommend that the Council adopt the attached resolution authorizing the execution of a lease-purchase contract for computer equipment purchases in the current year totaling $204,000.

A RESOLUTION AUTHORIZING THE TOWN MANAGER TO EXECUTE A LEASE-PURCHASE CONTRACT FOR COMPUTER EQUIPMENT REPLACEMENT PURCHASES FOR THE 2004-2005 FISCAL YEAR (2005-04-05/R-4)

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

WHEREAS, Banc of America Leasing & Capital, LLC offers the lowest total interest cost of 3.12% for the three-year term for the purchase of computer equipment totaling $204,000;

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 Banc of America Leasing & Capital, LLC on behalf of the Town for the financing of computer equipment totaling $204,000 at a fixed interest cost of 3.12 % for a three-year term with total principal, interest and fees cost of $215,281.51.

BE IT FURTHER RESOLVED that the aforesaid contract by and between the Town of Chapel Hill, various State contract and other vendors, Banc of America Leasing & Capital, LLC, together with the amounts to be paid thereunder, be designated as a qualified tax-exempt obligation 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 25^th day of April, 2005.