TO: Mayor and Commissioners
FROM: Hugh B. Dunkley, Chief Financial Officer
THROUGH: Terrence R. Moore, ICMA-CM
DATE: January 17, 2023
Title
CONSIDERATION OF OPTIONS FOR PURCHASE OF CITY VEHICLES AND EQUIPMENT
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Recommended Action:
Recommendation
N/A - Workshop discussion item.
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Background:
The City’s FY2022/23 adopted budget includes consideration for leasing vehicles and equipment to facilitate City operations, i.e., police, fire, public works, utilities and the like. Leasing by state and local governments is the result of a number of economic and legal factors, including but not limited to the following:
§ Leasing enables state and local governments to enhance their cash flow by spreading the cost of equipment over several fiscal periods;
§ Leasing allows governments to purchase property and equipment through installment payments, which can be made monthly, quarterly, semi-annually or annually;
§ Leasing may also be more cost-effective because governments can purchase equipment or facilities at today’s prices, not next year’s prices -- thus effectively escaping inflation;
§ Annual savings realized through decreased maintenance costs will also help to offset the annual interest cost of the leased equipment; and
§ The costs and fees as well as the formalities associated with executing a municipal lease are not as great or as involved as other forms of municipal borrowing, i.e., revenue bond issue.
As with all borrowing transactions, the primary disadvantage to the City in entering into a lease arrangement is that the City will have to bear the cost of interest over the life of the lease agreement. Therefore, an alternative to leasing is to simply purchase the vehicles or equipment outright, providing the funds exist.
Replacement vehicle purchases are made from the Central Garage Fund, which currently has inadequate reserves for funding the budgeted FY2023 vehicle replacements of $2.3 million. At the end of the last audited fisca...
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