AGENDA #4g
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 2001-2002 Fiscal Year
DATE: March 25, 2002
The attached resolution would authorize the Manager to enter into installment contracts with Ashford Capital Corporation for the lease-purchase of a variety of vehicles and related equipment for the current fiscal year totaling $1,679,100 as budgeted ($1,490,900 in vehicles with an average life of 7 years and $188,200 in vehicles with an average life of 3 years) and $145,000 for computer-related equipment as budgeted. See Attachment 1 for a listing of the vehicles and Attachment 2 for a listing of the computer equipment.
BACKGROUND
Vehicles
Four 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.
Last year we arranged for DMG Maximus, Inc. to review the Town’s plan for vehicle replacement as we proposed in our initial plan. Based on their review, we would finance a modified list of vehicles for 7 years, rather than 5 years as we had previously done. The revised plan better matches the financing and the expected life of our fleet. We would continue to finance police cruisers over three years.
Computers
Three years ago the Town at the recommendation of the Technology Committee began a three-year replacement cycle program for computer equipment. We are currently using the program to finance desktop computers, servers and related equipment.
FINANCING PROPOSALS
Requests for proposals for financing the purchase of vehicles and computer equipment were sent to six financial institutions with responses requested on March 11. The proposals specified quotes for seven-year fixed rate installment payments on $1,490,900 of vehicles with an expected useful life averaging 7 or more years, and three-year fixed rate installment payments on $333,200 for police cruisers and computer equipment with an expected life averaging 3 years.
Six responses were reviewed on March 11 as follows:
|
|
3 Year Term ($333,200) |
7 Year Term ($1,490,900) |
||
|
Financial Institution |
Interest Rate |
Total Principal, Interest & Fees |
Interest Rate |
Total Principal, Interest, & Fee |
|
Ashford Capital Corporation |
3.12% |
351,627 |
3.94% |
1,720,480 |
|
Bank of America |
3.48% |
353,796 |
4.17% |
1,734,595 |
|
Branch Banking & Trust |
3.58% |
354,384 |
4.31% |
1,742,982 |
|
First Citizens’ Bank |
4.19% |
358,054 |
4.86% |
1,776,725 |
|
First Union Bank. |
4.35% |
359,026 |
4.35% |
1,745,424 |
|
RBC Centura Bank |
3.58% |
354,545 |
4.40% |
1,750,958 |
Based on the proposals received, we recommend accepting the low bids from Ashford Capital Corporations of 3.12% for the 3-year financing totaling $351,627 and 3.94% on the 7-year financing totaling $1,720,480.
Attached is a resolution authorizing the Manager to execute lease-purchase contracts with Ashford Capital Corporation for the purchase of vehicles and computer equipment for the current year.
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 resolutions authorizing the execution of two lease-purchase contracts for vehicle and computer equipment purchases in the current year totaling $2,072,107.
1. Listing of Vehicles (p. 4).
2. Listing of Computer Equipment (p. 5).
A RESOLUTION AUTHORIZING THE TOWN MANAGER TO EXECUTE LEASE-PURCHASE CONTRACTS FOR VEHICLE AND COMPUTER EQUIPMENT REPLACEMENT PURCHASES FOR THE 2001-2002 FISCAL YEAR (2002-03-25/R-7)
WHEREAS, the Town of Chapel Hill solicited and received competitive proposals from financial institutions for the lease-purchase of a variety of vehicles and computer equipment for various departments; and
WHEREAS, Ashford Capital Corporation offers the lowest total interest cost of 3.12% for the 3-year term for the purchase of vehicles totaling $188,200 and computer equipment totaling $145,000;
WHEREAS, Ashford Capital Corporation offers the lowest total interest cost of 3.94% for the 7-year term for the purchase of vehicles totaling $1,490,900;
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 Ashford Capital Corporation on behalf of the Town for the lease-purchase of vehicles and computer equipment totaling $333,200 at a fixed interest cost of 3.12% for the three year term at a total principal and interest cost of $351,627 and for the lease purchase of additional vehicles totaling $1,490,900 for a fixed interest rate of 3.94% for a seven year term for a total principal and interest cost of $1,720,480.
BE IT FURTHER RESOLVED that the aforesaid contracts by and between the Town of Chapel Hill, various State contract and other vendors, and Ashford Capital Corporation, 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 25th day of March, 2002.