AGENDA #4f

MEMORANDUM

TO:                  Mayor and Town Council

FROM:            W. Calvin Horton, Town Manager

SUBJECT:       Bid Award for Lease Purchase of Computer Systems for 2000-2001

DATE:             November 13, 2000

INTRODUCTION

The attached resolution would authorize the Manager to enter into an installment contract with Wachovia Bank for the lease-purchase of a 70 desktop computers and related equipment for the current year totaling $150,000.  Funding for this purchase was included in the adopted budget for the current fiscal year 2000-2001.

BACKGROUND

Last fiscal year, we recommended changing our computer system 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.  The Town’s Technology Committee also endorsed this recommendation.

We began the program last year with the establishment of a computer equipment replacement fund, and now propose continuation of the program with the second round of computer replacements totaling $150,000.  Continuation of the program would allow the replacement of all desktops computers every three years as recommended by the Town’s Technology Committee.  The replacement computers would be purchased by participation in the State’ Computer Contract, thereby assuring that we receive the lowest prices available.

FINANCING PROPOSALS

Requests for proposals for financing computers were sent to six financial institutions with responses requested on November 7.  The proposals specified quotes for three-year fixed rate installment payments on $150,000 for desktop computers and related equipment with an expected life of 3 years.

Four responses were received on November 7 as follows:

EVALUATION OF BIDS

Based on the above proposals, Wachovia offers the lowest total interest cost with a bid of 5.00%.  Payments would begin with the closing and signing of the lease-purchase contract, with two semi-annual payments due this year for a total annual cost of $53,137.

Attached is a resolution authorizing the Manager to execute a lease-purchase contract with Wachovia Bank.

RECOMMENDATION

We recommend that the Council adopt the attached resolution authorizing the execution of a lease-purchase contract for computer system purchases in the current year totaling $150,000.

A RESOLUTION AUTHORIZING THE TOWN MANAGER TO EXECUTE A LEASE-PURCHASE CONTRACT FOR COMPUTER SYSTEMS REPLACEMENT PURCHASES FOR FISCAL 2000-2001 (2000-11-13/R-6)

WHEREAS, the Town of Chapel Hill solicited and received competitive proposals from financial institutions for the lease-purchase of computers and related equipment for various departments; and

WHEREAS, Wachovia Bank offers the lowest fixed interest rate of 5.00% for the purchase of desktop computers and related equipment;

NOW, THEREFORE, BE IT RESOVED by the Council of the Town of Chapel Hill that the Council authorizes the Town Manager to enter into a contract with Wachovia Bank on behalf of the Town for the lease-purchase of computers and related equipment at a fixed interest rate of 5.00%.

BE IT FURTHER RESOLVED that the aforesaid contracts by and between the Town of Chapel Hill, various State contract and other vendors, and Wachovia Bank, together with the amounts to be paid thereunder, be and the same are hereby 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 13^th day of November, 2000.