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HomeMy WebLinkAbout05 - 800 MHz and Documentation Imaging Lease/Purchase FinancingDecember 14, 1998 Agenda Item # 5 CITY OF NEWPORT BEACH ADMINISTRATIVE SERVICES DEPARTMENT December 14,1998 TO: Honorable Mayor and City Council FROM: Dick Kurth, Acting Administrative Services Director SUBJECT: 800 MHz & DOCUMENT IMAGING LEASE /PURCHASE FINANCING Discussion The City has been considering lease /purchase financing for the 800 MHz, Digital Radio Conversion Equipment and Document Imaging Systems. To that end, the City Council approved Resolution 98 -65 in September which contained repayment provisions in the event we selected to use lease /purchase financing for this equipment. The resolution included specific language that enables us to exercise a repayment option up to one year after service placement or three years after payment of the invoice. That, in addition to the current low interest rate (4.74 %), makes it financially advantageous for the City to pursue five year lease / purchase financing instead of continuing to pay cash during the next two fiscal years. This appears to be the right opportunity to enter this particular financial market. After reviewing lease /purchase finance proposals from seven (7) firms, we recommend accepting the proposal from Municipal Funding Group of Kearney, Missouri. Municipal Funding Group has proposed to provide a total of $2,497,877.00 with five annual payments of $546,884.23 at a 4.74% annual percentage rate. We have provided Municipal Funding Group with a brief letter of intent to accept the terms and conditions of their proposal pending Council approval. At the time this year's budget was developed, it was anticipated that adjustments would be needed when the final decision was made regarding the funding mechanism for procurement and installation of the approved equipment. Since the most likely possibility at that time appeared to be lease financing, the original budget contains funds to support that. Therefore in the current year, there will actually be a surplus of about $37,000 for the project if we proceed with the financing, due primarily to the lower rate now available. However, had the lease opportunity been unattractive and we therefore continued to make cash payments, we would have needed a $1.2M budget amendment to keep up with actual cash outflow. Budgets for the next four years will be developed to include funds for lease payments of $546,884.23, rather than actual purchase expenses. Considering the City's average earnings rate (currently about 5.8 %), the net savings from the lease - purchase financing will be about $220,000 (present value) over the five year period. Kurt Yeager of Stradling, Yocca, Carlson & Rauth worked directly with Municipal Funding Group to ensure that the lease documents contain appropriate language for the City. His firm will render its formal, legal opinion at the time of funding. The actual Agreement will be available for review in the City Clerk's office. Recommendation Approve the attached resolution and authorize the Acting City Manager to execute the Master Equipment Lease /Purchase Agreement and related agreements referenced in the resolution for the 800 MHz Radio System and Document Imaging Systems Project with Municipal Funding Group. Attachments RESOLUTION NO. RESOLUTION OF THE CITY COUNCIL OF THE CITY OF NEWPORT BEACH AUTHORIZING THE EXECUTION AND DELIVERY OF A MASTER EQUIPMENT LEASEIPURCHASE AGREEMENT, AND RELATED INSTRUMENTS, AND DETERMINING OTHER MATTERS IN CONNECTION THEREWITH WHEREAS, the City of Newport Beach ( "Lessee ") is a chartered city (a public body, corporate and politic) duly created, established and authorized to transact business and exercise its powers, all under and pursuant to the City Charter and the Constitution and laws of the State of California; and WHEREAS, the City Council of Lessee has determined that a true and very real need exists for the equipment and other items (the "Equipment') consisting of a document imaging system, certain digital radio equipment and components of the 800 megahertz police communication system all as more fully described in the proposed Master Equipment Lease /Purchase Agreement with Municipal Funding Group, together with an associated Escrow Agreement, Tax Compliance Agreement and No Arbitrage Certificate (collectively, the "Agreement ") presented to this City Council; and WHEREAS, the Lessee has taken the necessary steps, including those relating to any applicable legal bidding requirements to arrange for the acquisition of the Equipment; and WHEREAS, Lessee proposes to enter into the Agreement with Municipal Funding Group and all other identified parties substantially in the form presented to this City Council; and NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of Newport Beach does hereby resolve, order, and determine as follows: Section 1. It is hereby found and determined that the terms of the Agreement in the form presented to this City Council and incorporated in this resolution are in the best interests of Lessee for the acquisition of the Equipment. Section 2. The Agreement is hereby approved. The City Manager of Lessee and any other officer of Lessee who shall have power to execute contracts on behalf of Lessee be, and each of them thereby is, authorized to execute, acknowledge and deliver the Agreement (including the documents associated therewith referenced in the recitals hereto) with any changes, insertions and omissions therein as may be approved by the officers who execute the Agreement, such approval to be conclusively evidenced by such execution and delivery of the Agreement. The City Manager of the lessee and any other officer of Lessee who shall have power to do so be, and each of them hereby is, authorized to affix the official seal of Lessee to the Agreement and attest the same. Section 3. The proper officers of Lessee be, and each of them hereby is, authorized and directed to execute and deliver any and all papers, instruments, opinions, certificates, affidavits and other documents to do or cause to be done any and all other acts and things necessary or proper for carrying out this resolution and the Agreement. Section 4. The Lessee further certifies that this resolution has not been repealed or amended and remains in full force and effect and further certifies that the within Master Equipment Lease /Purchase Agreement is the same as presented to said City Council of the Lessee Section 5. Stradling Yocca Carlson & Rauth, a Professional Corporation, is confirmed to act as counsel to the City on the terms set forth in the letter on file with the Director of Finance for the purpose of rendering certain opinions to the Lessor on behalf of the City, in conjunction with the City Attorney. Section 6. This resolution shall take effect immediately upon its adoption. ADOPTED this day of 1998. Mayor, City of Newport Beach ATTEST: City Clerk, City of Newport Beach STATE OF CALIFORNIA ) ss. COUNTY OF ORANGE I hereby certify that the foregoing Resolution was duly and regularly adopted by the City Council of the City of Newport Beach at a regular meeting thereof held on the day of 1998, by the following vote: AYES: COUNCIL MEMBERS: NOES: COUNCIL MEMBERS: ABSENT: COUNCIL MEMBERS: ABSTAIN: COUNCIL MEMBERS: City Clerk, City of Newport Beach