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City of Missoula, Montana Item to be Referred to City Council Committee Committee: A & F Item: Award Contract for Master Equipment Leasing Agreement Date: September 18, 2009 Prepared by: Brentt Ramharter Initiated by: Brentt Ramharter Action Required: Authorize Mayor to execute Master Equipment Leasing Agreement on behalf of the City of Missoula with Wells Fargo Brokerage Services. Recommended Motion: Council awards the contract for the Master Equipment Leasing Agreement to the most responsive proposal (see attached analysis), which is Wells Fargo Brokerage Services. The lease had to be rebid as the City was unable to bring the original financing award to conclusion. Timeline: Referral to committee: September 18, 2009 Committee discussion: September 23, 2009 Deadline: Have council approve ASAP. Background and Alternatives Explored: General Agreement Terms The City will enter into a Master Lease which provides for the financing of eligible assets in an administratively easy and cost-effective manner. a. 1. The City expects all payments made under the Master Lease to be exempt from relevant federal and State of Montana income taxation. 2. The City will access financing under the Master Lease in one reimbursement, as the eligible asset acquisitions have occurred. 3. The repayment terms of individual engagements shall comply with federal arbitrage regulations as to useful life of the assets being financed and the investment and expenditure of proceeds. The City has selected the option of three, five and ten-year terms, with one annual payments made each year. 4. The City will receive tax-exempt interest rates. 5. The City has funded asset acquisitions from available cash and is using the Lease to provide definitive financing. The City will comply with the reimbursement provisions of the Internal Revenue Service Code. 6. The City has the option to prepay a schedule under the Agreement at the time of any lease payment, at an amount equal to outstanding principal (no prepayment penalties). 7. The City will keep assets financed under the lease insured in the same manner as similar assets owned by the City. 1. Security under the Master Lease- Lease payments will be secured by general revenues of the City, subject to annual appropriation by the City. The City Finance Director will be ---PAGE BREAK--- required to put such appropriation in the recommended annual budget. If the City fails to appropriate funds for Master Lease payments in any fiscal year, the Master Lease shall terminate at the end of the fiscal year for which funds have been appropriated. In such an event, the Lessor would own the leased assets and would negotiate the terms for future use of the leased assests. LEASE PAYMENTS UNDER THE MASTER LEASE WILL NOT BE SECURED BY THE GENERAL OBLIGATION TAXING POWERS OF THE CITY. HAVING NOTED THE ABSENCE OF GENERAL OBLIGATION SECURITY FOR ANY LEASE PAYMENT, AS A GENERAL INDICATOR OF THE CITY’S CREDITWORTHINESS, THE CITY’S GENERAL OBLIGATION CREDIT RATING FROM STANDARD & POOR’S IS “AA-” Financial Implications: Please review attached analysis that compares the various proposals to each other. Attachments: Resolution Master Lease Purchase Agreement Master Lease Spreadsheet Master Lease Supplement 1 Master Lease Supplement 2 Master Lease Supplement 3 MLPA 3 Year Schedule MLPA 5 Year Schedule MPLA 10 Year Schedule