SR-112685-6UFD:CMD:lh:lpalft
City Council Meeting of 11/26/85
TO: Mayor and City Council
FROM: City Staff
Santa' Monica, Cali.forni.a
SUBJECT: Approval of Various Documents and Other Actions ,,~
Necessary for Lease-Purchase of an Aerial Ladder Fi_re~v;,
• Truck
i
Thi.s'staff report requests that the City Council approve various
documents. and authorize the City Manager to complete negoti.ati.ons
and execute documents necessary to lease-purchase an aerial
ladder fire truck through the Cali_forni.a Ci.ti.es Fi.nanci.ng
Corporation.
Background
The Ci.ty's FY1985-86 capital budget authorized staff to
lease-purchase an aerial ladder fire truck to augment the Fire
Department's abi_li.ty to respond to upper story rescue and fire
suppression needs during a fire emergency.
Under the .provi.si.on of Section 2506A(2) of the Santa Monica.
Municipal Code, on July 16, 1985 the Purchasing Agent ordered an '
aerial ladder fire truck which would meet City speci.fi.cations
under the Los Angeles City Fire Department contract #A59532 for
$285,896.58. Delivery of this equipment i.s expected i.n
mid-December 1985. ®•
~17V %' ~ i5~,~+
1
Staff have determined that a highly advantageous manner to
lease-purchase thi-s equipment i.s through the Cali.forni.a Cities
Fi.nanci.ng Corporation (CCFC).
The CCFC was formed i.n 1984 based on a League of Cali.forni.a
Ci.ti.es task force recommendation to form such an entity to help
local governments finance equipment and capital needs. The goal
of the CCFC i.s to provide an effi.ci.ent, simple and cost-effective
,, ~
alternative to tradi_ti_onal bond issues. acid conventional borrowing ``~'
by sponsoring "pooled fi.nanci_ngs" i.n whi.ch a number of pktbli.c
entities may parti.ci.pate at the same time.
Parti.ci.pants i.n the CCFC program incur substantially lower costs
through pooled fi.nanci.ngs by sharing certain fixed costs (such as
bond counsel fees, pri.nti.ng of an official statement and bonds,
and the expenses of underwri.ting). Further, interest rates are
at the lowest possible level because CCFC obtains insurance to
ensure i.ts offerings obtain "AAA" ratings.
Despite the fact that fi.nanci.ngs are done on a pooled basis, each
participant is only responsible for i.ts own lease payments. When
a1T lease payments have been made, the parti_ci.pant assumes
ownership of the equipment or capital item.
The program works as follows:
-- CCFC brings together local governments wish i. rig to
finance speci_fi.c capital purchases.
__ CCFC sells Certi.fi.cates of Parti.cipati.on (COP) to
private investors.
-- CCFC retains the services of a trustee to admi.ni-s ter
the COP funds, receive annual ,lease payments from
parti.ci.pati.ng local governments, and make payments to
the investors.
-- CCFC provides the COP funds to finance the speci.fi_ed
capital purchases and subsequently leases the capital
items to the parti.ci.pati.ng local governments.
.., a
--, Participating local governments make annual lease.y~:.
payments consi.sti.ng of principal and interest to the
CCFC for a speci.fi.ed period of time during which the
local .government leases the capital item.
Lease-Purchase of the Aerial Ladder Fire Truck
Attached are drafts. of the lease agreement between the CCFC and
the City of Santa Monica, the trust agreement between the CCFC,
the City of Santa Monica and First Interstate Bank (as trustee),
a purchase agreement between the Underwriters (Merri.ll Lynch
Capital Markets and Stone & Youngberg), the Preli_mi.nary Offi.ci.al
Statement which CCFC will use to finance the Ci.ty's aerial ladder
fire truck and other capital items for the various other local
governments involved i.n this issue, and a resolution approving
these documents and authori.zi.ng the City Manager to execute them
when they have been fi:nalized. The resolution also contains
maximum values for various financial li.mi.ts affecting this issue:
the maximum pri.nci.pal amount of the lease, maximum lease term,
the maximum annual lease .payment, and maximum underwriters
discount percentage.
3 -
The CCFC will sell COP's on or about December 19, 1985. It i.s
anti.ci.pated that the average interest rate over the lease term
will be about 7.0°s, depending on market conditions at the ti-me of
sale.
Budget/Fi_nanci.al Impact
For FY1985-86, $50,000 has been appropriated at account number
01-730-313-000-903 i.n the Public Safety category of the Capital
,., us
Budget.. When the Certi.fi.cates of Parti.cipati.on are sold this ""
appropri.ati.on will be reviewed and any necessary change wi.kl be
included in the mi.d-year budget report.
Recommendation
It i.s recommended that the Council approve the attached
resolution:
1) Approving the attached final drafts of ,the Lease
Agreement, Trust Agreement, Purchase Agreement and
Preli.mi.nary Official Statement, and authorize the City
Manager with the concurrance of the City Attorney to
make any necessary changes to finalize these documents,
and
2) Authori.zi.ng the City Manager to execute these
agreements and other necessary documents with the
Cali-forni.a Ci.ti.es Financing Corporation to effect this
joint lease fi.nanci.ng.
Prepared bye Mike Dennis, Director of Finance
- 4 -