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Date
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May 5, 2008
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Agenda
Item No. 26 Roll
Call No. 08-
Communication No. 08-242 Submitted by: Allen
McKinley, Finance Director/Treasurer |
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AGENDA
HEADING:
Approving Master
Lease-Purchase Agreement and Provider.
SYNOPSIS:
Recommend
approval of Master Lease-Purchase Agreement and Provider; De Lage Landen, Frank
Hill, Vice President of Sales, 2600 Grand Blvd. Ste. 380, Kansas City, MO 64108,
is recommended as the City’s provider for the Master Lease-Purchase Agreement
for a three-year period with the option of two one-year renewals.
FISCAL
IMPACT:
Amount:
Borrowing costs under the lease-purchase will be determined by the
interest rate market at the time of the lease.
The RFP sought an interest rate tied to the U.S. Treasury Note at the
time of the borrowing. Proposers quoted
rates as a fixed percentage of the U.S. Treasury Note as reported in the Wall
Street Journal five days prior to closing. Lease-purchases do not count against
the City’s general obligation debt limit.
Source: N/A
ADDITIONAL
INFORMATION:
In January 2008, Bank of America decided to no longer provide
lease-purchase financing for the City.
Bank of America indicated that their business plan no longer included a shorter
term and smaller value lease-purchase program.
Since the last award of the Master Lease-Purchase Agreement in 2004 with
Bank of America, the City was contacted by many financial institutions
indicating an interest in bidding at the expiration of the current Master
Lease-Purchase Agreement. On February
12, 2008, Request For Proposals V08-056 was sent to 28 potential bidders and
three (3) responded. A Proposal
Evaluation and Selection Committee met to review and grade proposals based on
the criteria set forth in the RFP.
Evaluation criteria included experience and qualifications, financial
capability, terms of agreement, and interest rate. De Lage Landen received the highest score,
with Wells Fargo Brokerage Services and John Deere Credit also providing
proposals.
The table below shows the percentage of the Treasury Note Rate to be used
to determine lease-purchase interest rates, the Treasury Note Rate on March 5,
2008, and the interest rate the City would have paid if a lease supplement were
executed on that date.
De Lage Landen
Term
3-years 1.89% 161.9% 3.06%
4-years 2.19% 142.0% 3.11%
5-years 2.49% 131.3% 3.27%
6-years 2.71% 128.8% 3.49%
7-years 2.93% 121.8% 3.57%
8-years 3.14% 117.2% 3.68%
9-years 3.36% 112.5% 3.78%
10-years 3.58% 107.8% 3.86%
The advantages of using the Master Lease-Purchase Agreement include
having a credit facility in place that allows financing of equipment on an
as-needed basis instead of waiting until the annual general obligation bond
issue each June, not incurring issuance costs, and flexibility in the repayment
term which can be set for three to ten years, depending on the expected useful
life of the equipment. In addition, the debt has been structured to not count against
the City’s general obligation debt limit.
PREVIOUS
COUNCIL ACTION(S):
Date: October 25, 2004
Roll Call
Number: 04-2279
Action: Master Lease-Purchase Agreement Form and Provider to Banc of
BOARD/COMMISSION
ACTION(S): NONE
ANTICIPATED
ACTIONS AND FUTURE COMMITMENTS:
Lease-purchase supplements as equipment needs arise.
For more information on this and other agenda items,
please call the City Clerk’s Office at 515-283-4209 or visit the Clerk’s Office
on the second floor of City Hall,