Memorandum

City of Lawrence

Finance Department

TO:	Thomas M. Markus, City Manager Diane Stoddard, Assistant City Manager Casey Toomay, Assistant City Manager
FROM:	Bryan Kidney, Finance Director
CC:	Mark Heim, Assistant Finance Director Robert Aaron, Fleet Manager - Public Works Department
DATE:	7/19/2016
RE:	Equipment Lease Purchase Agreement with U.S. Bank

Background

The Public Works department seeks to finance the purchase of two vehicles through a lease purchase agreement.  The vehicles and equipment will consist of one Dodge Ram HD truck with utility body and one tandem axle dump truck with spreader and plow (2017 Freightliner M2 108 SD, including feedback hydraulics).  The vehicles and related equipment were authorized for purchase by the governing body on December 1, 2015 by Resolution 7146 and January 12, 2016 by Resolution 7149.  The cost of the vehicles and equipment to be financed under the Lease is approximately $239,000.

The City solicited proposals from interested banks to provide lease purchase financing.  Under the lease purchase agreement, the City will lease the vehicles from the bank, with semi-annual lease payments over a period of 5 years (through March 2021).  At the final lease payment date, the City has the option to acquire the vehicles from the bank for a purchase price of $1.00.  The City has the right to prepay the lease at any time without penalty.

The City received seven (7) proposals from interested banks.  The best proposal was received from U.S. Bancorp Government Leasing and Finance, Inc. (attached hereto) with an interest rate of 1.53% and allowing for early payoff of the lease at any time with no premium. The lowest bid from Signature Public Funding Corporation included a 2% prepay premium. A prepay penalty could cost as much as $4,386. The interest rate cost difference between the US Bankcorp and Signature Public amounts to $253. The total amount to be financed is $244,259, which includes the purchase price of the vehicles and equipment, together with the costs of entering into the lease.

Bidder Name	Lease   Interest Rate	Prepay Premium Y/N
Signature Public Funding Corporation	1.490%	Y
US Bancorp Government Leasing & Finance	1.530%	N
Clayton Holdings, LLC (Commerce Bank)	1.760%	N
RCB Bank	1.990%	N
Emprise Bank	2.250%	N
KS State Bank	2.570%	N
*VFI Financing

*Bid received from VFI Financing was incomplete.  Submitted bid did not adhere to the total requested amount and did not specify lease interest rate.

Budget Impact

The repayment of the lease is $25,311.78 every six months ($50,623.56 per annum). The source of the semi-annual payments is accounted for in our annual vehicle replacement program. The 2016 and 2017 vehicle replacement program budget is included in the Capital Improvement Fund. The 2018-2021 payments will need to be included in the General Fund budget or, if replenished, the Capital Improvement Fund.

Staff Recommendation

Staff recommends approval of the resolution authorizing the lease purchase agreement and related escrow agreement with U.S. Bancorp Government Leasing and Finance, Inc. on these terms. U.S. Bancorp proposed the best overall rate with no prepayment premium.

Action

Adopt Resolution No. 7169 to authorize the City to (1) enter into a lease purchase agreement with U.S. Bancorp Government Leasing and Finance, Inc. to finance the acquisition of the above-described equipment and (2) an escrow agreement with U.S. Bank National Association.