AGENDA #4j

 

MEMORANDUM

 

TO:                  Mayor and Town Council

 

FROM:            W. Calvin Horton, Town Manager

 

SUBJECT:       Resolution Authorizing Purchase of Roll Carts for Second Phase of Curbside Refuse Collection

 

DATE:             July 2, 2001

 

The attached resolution would authorize the Manager to accept an installment purchase contract and low bid offered by Branch Banking & Trust to finance the purchase of 6,000 roll carts over three years at a fixed interest rate of 3.88%.

 

BACKGROUND

 

The Town Council last year authorized implementation of weekly collection of residential refuse at the curb over a two year period, starting in February, 2000. During fiscal 2000-01, one half of the Town was converted to the new system as scheduled in early February. A total of 4,600 wheeled carts was bought through installment purchase, based on a successful bid by Otto Industries, Inc., for the carts at a unit cost of $34 (compared to an original assumed unit cost of $55) and an interest rate of 5.03% presented by BB&T (compared to an original assumed interest rate of 5.5%). An additional 100 carts were purchased at the same unit cost of $34 using operating funds within the Solid Waste Services Division of the Public Works Department.

 

The total cost of $154,600 for these 4,600 carts is being paid on a three-year installment basis, starting in fiscal 2001-02 for the first payment of $57,600, including interest. The final payment of that same amount will be made in fiscal 2003-04.

 

As noted in the original bid award for roll carts dated October 23, 2000, the bid solicitation process included an option to acquire carts for the second year of implementation of curbside using the bids submitted during the first phase. We noted in that same memorandum that we anticipated an order for 4,900 carts during the second phase in fiscal 2001-02.

 

DISCUSSION

 

We indicated in original discussions of curbside service that the actual number of carts that we would order for the second phase of program implementation would be determined based on an analysis of actual experience during the first phase. We believe that 6,000, rather the estimated 4,900, carts need to be acquired for the second phase.

 

This increase is based on the following:

 

·        Actual exemptions are about 4% rather than the assumed 7% rate, with most of those exempted requesting that they be provided a roll cart (cf., we had assumed that exempted residents would not request a roll cart)

 

·        More residences have been added to certain routes compared to the number in the original count made over one year ago (e.g., an additional 100 residences each were added to two existing routes)

 

·        Portions of Meadowmont will come on line during the upcoming fiscal year

 

This requested increase in the number of carts for the second phase of program implementation will not impact the operating budget during fiscal 2001-02, because the first installment payment will not be needed until fiscal 2002-03. The overall cost of the 6,000 carts will be $225,000, including interest, or $75,000 in each of three fiscal years starting in fiscal 2002-03. The estimated 4,900 carts would have cost $172,500, or $52,500 less over the same three fiscal years.

 

Even with the additional 1,100 carts, the total capital costs for providing residents with wheeled carts over the two phases of program implementation ultimately will be $150,300 less than the original estimate of $547,800 because of the relatively favorable unit cost for the carts and interest rate for installment purchase.

 

FINANCING PROPOSALS

 

We propose to finance the purchase of the carts through an installment contract over a three-year period.  Requests for proposals for financing this purchase were sent to five financial institutions on June 25, 2001, with responses requested on June 29, 2001.  The proposals specified quotes for three-year fixed rate installment payments.

 

Four responses were received on June 29, 2001, as follows:

 

 

 

EVALUATION OF FINANCING PROPOSALS

 

Based on the above proposals, Branch Banking & Trust offers the lowest total interest cost with a bid of 3.88% for the three-year term.

 

The attached Resolution would authorize the Manager to enter into a lease-purchase contract with Branch Banking & Trust for purchase of the roll carts.  The resolution confirms that the Town does not expect to issue more than $10 million in tax-exempt debt during the calendar year, which allows financial institutions to bid lower rates for governmental lease-purchase contracts. 

 

RECOMMENDATION

 

That the Council adopt the attached resolution accepting the low bid of Branch Banking & Trust for an installment purchase contract for this purchase.

 

A RESOLUTION AUTHORIZING A LEASE-PURCHASE CONTRACT FOR THE PURCHASE OF 6,000 ROLL CARTS FOR THE PUBLIC WORKS DEPARTMENT  (2000-07-02/R-6)

 

WHEREAS, the Town of Chapel Hill solicited and received competitive proposals from financial institutions for the lease-purchase of 6,000 roll carts for implementation of a curbside solid waste collections program; and

 

WHEREAS, Branch Banking & Trust offers the lowest interest rate of 3.88% for this purchase;

 

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 Branch Banking & Trust on behalf of the Town for the lease-purchase of 6,000 roll carts at a fixed interest rate of 3.88% for a three-year term.

 

BE IT FURTHER RESOLVED that the aforesaid contract by and between the Town of Chapel Hill and Branch Banking & Trust, 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 2^nd day of July, 2001.