Council OKs lease-purchase financing and related ordinance for new fire engine
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Summary
The council authorized approximately $1.018 million in lease-purchase financing for a new fire engine, adopted an ordinance authorizing the financing mechanism, and approved related lease and escrow documents; the city will make annual payments to finance the apparatus.
The Andover City Council voted unanimously to finance a new fire engine through a 10-year lease-purchase agreement with Clayton Holdings LLC (a subsidiary of Commerce Bank) and adopted an ordinance authorizing execution of the lease documents.
Finance staff and the fire chief told the council the city previously approved the purchase of a new fire engine in January and that staff issued a request for proposals in September for lease-purchase financing. The winning bid for a 10-year non-taxable lease-purchase was from Clayton Holdings LLC at a 3.85 percent rate. The financing amount approved for closing is $1,018,000; the approved budget also included $125,000 in paydown from the city this fiscal year against the truck’s purchase price.
City finance staff said the net annual payment will be approximately $122,000 (the annual payment noted at the meeting) and that the $1,018,000 represents the financed portion after the budgeted city contribution. Council adopted the ordinance authorizing the purchase and the lease-purchase agreement, and also approved an escrow agreement to hold funds until vehicle delivery; funds will be released from escrow to the seller once the city accepts the engine.
Councilmembers asked about expected vehicle longevity; the fire chief said NFPA standards anticipate about a 20-year useful life for a front-line engine and the city expects to retain the vehicle for some years beyond the financing term.
Actions taken in a single package included: awarding the lease-purchase financing, adopting the ordinance authorizing the lease-purchase, and approving the equipment lease-purchase agreement and related escrow agreement. All votes on those items passed 6-0.
The package authorizes execution of documents needed to close financing prior to truck delivery and to hold proceeds in escrow pending delivery and acceptance. The equipment will be paid from the lease schedule over the next 10 years as authorized in the city's capital plan.