HomeMy WebLinkAboutORDINANCE 1557-1993~ ~
Suggested by: Administration
City, ,of ~einai
o~vr~tca ~ "~o. sssy-~~
AN ORDINANCE OF THH COUNCIL 4F THE CITY. OF KENAI, ALASKA
INCREASING ESTINATED REVENt~ES- AND. APPRIJPRIAT~4NS HY $5Z1, 627-.
IN THE GENERAL FUND FGR PURCHASE 4F A.FIRE DEPARTMENT AERIAL"
DEVICE.
WI~EREAS, the City of.Ke~ai desires to purchase A 95~
platforia aerial device for the Fire Depart tent; .and
WHEREAS, funds are available for such purposes in the
9 Equipment Replacement Reserve.
NOW, THEREFORE, HE IT ORDAINED BY THE COUNCIL OF THE CITY OF
KENAI, ALASKA, that estimated revenues and appropriations be
increased as follows:
Geng~ral
Increase Estimated Revenues:
Appropriation of Equipment
Replacement Reserve
Increase Appropriations:
Fire - Machinery & Equipment
$521,627
$521,627
introduced:
Adopted:
Effective:
Approved by Finance: rq~
('7/1/93)
kl
July 7, 1993
July 21, 1993
July 21, 1993
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PASSED HY THE COUNCIL OF THE CITY OF KENAI, ALASKA, this
21 sett day of .T»t v '1 ao~
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.CITY OF KENAI
~F~RE DEPARTMENT
105 SOUTH WILLOW STREET
KENAI, ALASKA 99611
(907)283-7666
Tt~: Charlie Brown, Acting City~..Mdz~ager
FROM s David C . Burnett, ~ Fire .Chief ,~.~
DATEs June 30, 1993
BUBJECTt AERIAL FIRE APPARATV$ BTD
,~ ,
Apt you are aware, on June 28;..1993 the>:bid opening for the Aerial
Fire Apparatus was conducted: `,The Department sent bid
specifications to the following~manu~~ctures:
;,:~
United Fire Service, Inc..~~.
5648 221st Place S.E.
Issaquah, WA 98027
McPherson Supply Company
8222 Portland Avenae~. .
Tacoma, WA 98404 ' ~~ ~~_
;.ti _:
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Simon-West Coast' . I$~.~ =~~z~~~;
~~.
14670 Randall Avenue
Fontana, CA 92355; ~ ~ ~~ ~`
Sutphen Corporation
7000 Columbus-Marysville Rd.
Amlin, OH 43002
Of the above list, the City received-one (1) bid from United Fire
Service, Inc. , which met full : specifications without except~.ons and
is within the budgeted range (80'-Aerial - $425,142.00 and 95'
Platform - $521, 627.00) . •~~~
t have attached the leasing ps:ogras4 for your r®view. I recommend
option number 2 due to early, delivery. Either way the pity goes
(option # 1 or option # 2) payi--ents:~ ~alll not begin until after July
1, 1995. The lease purchase contract is also attached for the City
Attorney's review.
I further recommend that we submit a resolution on July 7, 1993
with full recommendation for the 95' Platform.
Let me know if you need any further faformation.
attachments
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1781-1881
CITY QF KENAI
_ Y 210 FIOAtAO KENAI, ALASKA s~11
TELEPHONE Z33 -7635
FAX 907.283.3014
Mffi~iORAIdDUM
TO: Kenai City Council
FROM: Charles A. Brown, Finance Director~Q~
DATE: July 1, 1993
SUBJECT: Fire Department Aerial
Attached fs an ordinance to purchase a 95' platform aerial
device for the Fire Department. Sy Council action, the
aerial was deleted from the administration's FY94 budget.
However, Council directed that the City administration
obtain bids for an 80' ladder and a 95' platform. The
prices bid were $425,142 and $521,627, respectively. The
administration is recommending the 95' platform because of
greater utility and weight bearing capacity.
At the time the City Council directed the administration to
bid the aerial, the question of form of payment was left
undecided. We were told to investigate a lease purchase
form of payment .
The City Attorney and I have reviewed the lease purchase
agreement. Neither of us feel comfortable with the
agreement.
At this point, I need to explain the purpose of such lease
purchase agreements as they relate to governments. The City
cannot incur general obligation debt without a vote of the
citizens. A time payment plan is general obligation debt.
over the years, attorneys have devised "nonappropriation
clauses" to allow governments to pay for capital purchases
over time without legally incurring debt. The obvious
purpose is to pay over time without asking for voter
approval.
These nonappropriation clauses are escape clauses. They
essentially say that if the legislative body fails to
appropriate money to make the payments, the equipment is
returned to the seller and the payment plan is cancelled.
.. ,~,
Memorandum
K®nai City Council
July 1, 1993
Page Two
fond attorneys claim that a payment plan,.wtt- a valid
nonappropriation clause, will not constitute debt. It matt'
look and smell like debt, but its something else. The
accounting profession has never agreed with this theory. We
analyze these agreements using a "substance over form„
approach. Regardless of the attorneys' opinions, material
lease purchase debt is ~~, booked as general obligation
debt in government financial statements.}
Cary and I do not feel comfortable with the lease purchase
agreement presented by United Fire Service. This fs a very
technical area, and we both admit we lack expertise in these
matters. If we err, we wish to err on the side of
conservatism. A mistake will result in a violation of our
City charter.
For the nonappropriation clause to be valid and meaningful,
it should truly provide an escape from future payments. We
think the clause in this agreement fails that test, for two
reasons:
i} It places an obligation on the City (and thus the
Council} to place each year's payment in the budget.
The City could never fail to appropriate the funds if
it acts according to the contract.
2} Even in the case of nonappropriation (which seems
impossible, based on ,~1, above}, the contract requires
90 days notice. The City has barely begun budget work
for the next fiscal year by March 31. The 90-day
notice makes the nonappropriation clause meaningless.
The seller requires an opinion letter from an attorney,
certifying that the lease purchase agreement is authorized
pursuant to constitutional, statutory, and home rule
provisions (charter} and that it qualifies as tax exempt
debt. GivRn the above problems, Cary is not prepared to
make those statements. If Council wants to pursue this
lease purchase arrangement further, we recom~aend that you
retain bond counsel.
Now that I've said all that, I.11 restate my previous
comments on this matter. A lease purchase arrangement is
not financially sound. It will cost an extra $108,078
(payments of $125,941 x 5 ~ $629,705, less $521,627 cash
price.} It doesn't make sense to me to pa 5.94$ interest
on debt when our latest investor®nta earn about 3.8~t.
Memorandum
Ke»ai City Gouncfl
July 1, 1993
Page three
{Irani,aall~, the Council ~txgt authorized early payoff on t2~~
1980 general obl3,gation. debt I~ecause the.. interest rate ~ ~an .
the~debt was greater than our interest earnings rate,y.
If the money is taken lrom the, Equipment Repiaoement
Reserve, the ba lanc+a- wh l be s ~ ,
~qu~.pntent Replacement Reserve, ~-1-93 $ 900, 000
Y94 Contribution 300, 00,0
FY94 appropriation (grader) <200,0.00>
Fire Aerial _<5„21~~27>
Balance, 6-30-94 5 478.373
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