HomeMy WebLinkAboutAgenda Statement 1984/09/04 Item 5 COUNCIL AGENDA STATEMENT
Item 5
Meeting Date 9/04/84
[TEM TITLE: Resolution //7j tApproving Municipal Lease and Option Agreement with
Security Pacific Capital Markets Group
;uBMITTED BY: Director of Financep[/! (4/5ths Vote: Yes No X )
ZEVIEWED BY: City Manager
)n July 24, 1984, the City Council approved the acquisition of data processing equip-
lent from Burroughs Corporation and financing through a third party lease purchase
arrangement. The Finance Department has solicited bids from interested third party
'inancial institutions and the lowest and most responsible bid was submitted by Security
'acific Capital Markets Group.
;ECOMMENDATION: Adopt resolution.
OARDS/COMMISSIONS RECOMMENDATION: Not Applicable.
'ISCUSSION:
he total amount to be financed is $155,488.86 calculated as follows:
Hardware net cost $117,111 .06
Software cost 26,815.00
Total Hardware and Software $143,926.06
Applicable sales tax @ 6% 8,635.56
Total purchase including sales tax $152,561 .62
Payoff of old equipment 2,927.24
Total amount to be financed $155,488.86
)licitation of Bids
wee firms were contacted that specialize in municipal lease purchase financing and
;ked to submit bids. The resulting bids were as follows:
Quarterly Effective
Number of Payment Total of Present Interest
Firm Term Payments Amount Payments Value Rate
Security Pacific 5 yrs 20(1) $10,068 $201 ,360 $149,897 10.37%
First Municipal Leasing 5 yrs 20(1) $10,100 $202,000 $150,265 10.53%
San Diego Trust 5 yrs 20(2) $ 9,902 $198,040 $151 ,734 10.82%
Payment in arrears, i .e. payments are due at end of quarter.
Payments in advance, i .e. payments are due at beginning of quarter.
rm A-113 (Rev. 11/79)
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Page 2, Item 5
Meeting Date 9/04/84
Because the bids received had different times for beginning the quarterly payments,
present values were calculated in order to put the bids on a comparable basis of
value and to determine the effective interest rate to the City. Present value
recognizes the time value of money, i .e. a dollar today is worth more than a dollar
in the future. The longer a payment can be deferred, the result is less cost to
the City. Therefore, the above analysis indicates that the Security Pacific bid,
with quarterly payments in arrears, results in the lowest cost and least effective
interest rate to the City.
Since the City is not paying cash but is financing the acquisition over a five year
period, it means that we have use of the funds for investment purposes for five
years which also helps to reduce the cost to the City.
Lease Agreement
The Agreement proposed to be entered into with Security Pacific Capital Markets
Group has the following terms:
Equipment: Burroughs B-2925 Central Processor
Finance Structure: Lease Purchase
Amount to be Financed: $155,500
Term: 5 Years
Interest Rate: 10.37%
Payment Mode: Quarterly in Arrears
Payment: $10,068.71 per Quarter
FISCAL IMPACT:
Lease payments to be made by the City are in the amount of $40,274.84 per year
for five years.
For the remainder of fiscal year 1984-85, the City will be obligated to make three
quarterly payments totaling $30,206.13. This is within the budgeted amount of
$33,385.50 in Account 5271-Rentals and Leases.
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