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HomeMy WebLinkAboutOrdinance No. 2635-2012theuYyo( RENAL ALASKA Suggested by: Administration CITY OF KENAI ORDINANCE NO. 2635 -2012 AN ORDINANCE OF THE COUNCIL OF THE CITY OF KENAI, ALASKA, AMENDING KENAI MUNICIPAL CODE SECTION 7.25.110, "EQUIPMENT REPLACEMENT FUND," TO EXPAND THE USE OF THE FUND TO ALLOW THE PURCHASE OF EQUIPMENT OTHER THAN "HEAVY EQUIPMENT" COSTING IN EXCESS OF $50,000. WHEREAS, the City's Equipment Replacement Fund, as defined by KMC 7.25.110 is to provide fmancing for "heavy equipment which is anticipated to cost in excess of fifty thousand dollars ($50,000.00) and which would otherwise be financed by the General Fund "; and, WHEREAS, the purpose of the Equipment Replacement Fund is to provide a mechanism for the purchase of expensive equipment and to generate funds to be available to replace equipment on a predetermined schedule by "leasing" the equipment to the operating department at a rate that will be sufficient to cover the original investment plus inflation; and, WHEREAS, the use of an Equipment Replacement Fund spreads the cost of significant equipment over its useful life, as opposed to large periodic purchases that would cause significant budget fluctuations in an operating fund; and, WHEREAS, limiting the use of the equipment replacement fund to "heavy equipment" precludes its use to other purchases that could benefit by using such a fund; and, WHEREAS, the fund should be available to be utilized for the purchase of any significant equipment, equipment which is anticipated to cost in excess of $50,000, who's periodic replacement can be estimated and who's cost would be more reasonably paid over the useful life of the equipment as opposed to the year of purchase. NOW, THEREFORE, BE IT ORDAINED BY THE COUNCIL OF THE CITY OF KENAI, ALASKA, as follows: Section 1 Form. This is a Code ordinance. Section 2. Amendment of Section 7.25.110 of the Kenai Municipal Code: The Kenai Municipal Code, Section 7.25.110, Equipment Replacement Fund, is hereby amended as follows: New Text Underlined. [DELETED TEXT BRACKETED] Ordinance No. 2635 -2012 Page 2 of 3 7.25.110 Equipment Replacement Fund. (a) A fund entitled Equipment Replacement Fund is created. The fund shall be an internal service fund as defined by generally accepted accounting principles. The purpose of the fund is to provide financing for [HEAVY] equipment which is anticipated to cost in excess of fifty thousand dollars ($50,000.00) and which would otherwise be financed by the General Fund. (b) The Equipment Replacement Fund is not required to have an annual budget; however, any cash outlay for equipment purchases from the Equipment Replacement Fund shall be approved by resolution of the City Council. (c) The Equipment Replacement Fund shall be allocated interest earnings on all cash balances in the fund. Proceeds from the sale of surplus [HEAVY] equipment will be deposited in the Equipment Replacement Fund if the fund will be financing the replacement of the equipment, or if the equipment was purchased with fund assets. Any transfer of Equipment Replacement Fund assets to another fund shall be accomplished by ordinance. (d) The City Manager will maintain a schedule of all equipment owned by the Equipment Replacement Fund and shall make recommendations to the City Council when equipment is to be purchased by the fund. Section 3. Severability: If any part or provision of this ordinance or application thereof to any person or circumstances is adjudged invalid by any court of competent jurisdiction, such judgment shall be confined in its operation to the part, provision, or application directly involved in all controversy in which this judgment shall have been rendered, and shall not affect or impair the validity of the remainder of this title or application thereof to other persons or circumstances. The City Council hereby declares that it would have enacted the remainder of this ordinance even without such part, provision, or application. Section 4. Effective Date: Pursuant to KMC 1.15.070(f), this ordinance shall take effect one month after adoption. New Text Underlined; (DELETED TEXT BRACKETED] Ordinance No. 2635 -2012 Page 3 of 3 PASSED BY THE COUNCIL OF THE CITY OF KENAI, ALASKA, this sixth day of June, 2012. ATTEST: Said - Mbdigh, City Clerk PAT PORTER, MAYOR Introduced: May 16, 2012 Adopted: June 6, 2012 Effective: July 6, 2012 New Text Underlined: [DELETED TEXT BRACKETED] tl, try f` KENAI, ALASKA "Village with a Past, Ci y with a Future" FINANCE DEPARTMENT 210 Fidalgo Avenue, Kenai, Alaska 99611 -7794 Telephone: 907 - 283 -7535 ext 221 / FAX: 907 -283 -3014 To: Rick Koch, City Manager ifFrom Terry Eubank, Finance Director Date: May 30, 2012 Re: SUBSTITUTE Ordinance 2635 -2012 A substitute has been prepared for Ordinance 2635 -2012 to correct the wording of the Ordinance. Modifications were made to the whereas's and the title to clarify the issue and correct word usage. The recommended changes to KMC 7.25.110 remain the same in the substitute. Tillage with a Past, Ci y with a Future FINANCE DEPARTMENT 210 Fidalgo Avenue, Kenai, Alaska 99611 -7794 Telephone: 907 - 283 -7535 ext 221 / FAX: 907 - 283 -3014 tik To: Rick Koch, City Manager 7/. From: Terry Eubank, Finance Director Date: May 8, 2012 Re: Ordinance 2635 -2012 The purpose of this memo is to support amendment of KMC 7.25.110 Equipment Replacement Fund (ERF), to expand the use of the fund to any significant capital purchase the purchase of which is better spread over the useful life of the asset and thus eliminating the significant budgetary impact on the operating fund when paid for in a single budgetary period. The purchase of significant equipment, equipment costing in excess of $50,000, who's replacement is scheduled is traditionally accomplished through and internal service fund like the City's ERF. The City's ERE limits purchases to "heavy" equipment and ignores other possible uses meeting the traditional use of such funds. The FY2013 Budget proposes using the Equipment Replacement Fund to purchase the network infrastructure necessary to virtualize the City's network. The cost of this computer equipment is estimated at $100,000 with a useful life of five years. The ERF is the perfect vehicle for the purchase of this equipment allowing the City to fund the purchase over five years at a rate of $22,777 per year rather than a single $100,000 purchase in FY2013. The long -term schedule of replacements and payments for the Equipment Replacement Fund provided by the City Manager in his FY2013 Budget transmittal shows the fund is able to fund this purchase without impacting other planned replacements. Amendment to the language of KMC 7.25.110 by removing the word "heavy" will expand the use of the fund to other purchases meeting the intent and purpose of an ERF.