Oxnard – The Finance & Governance Committee on Tuesday, March 8th, approved the execution and delivery of the Bank of America Master Equipment Lease Purchase Agreement ownership register for the financing and leasing of certain equipment.
THE The agreement will not exceed US$3.3 million. Chief Financial Officer Betsy George said the agreement affects the fire engines, which the city is already in the process of purchasing.
“The council approved the purchase of these devices back in January,” she said. “We brought this article to the committee as a refund two weeks ago. The next step in this process is to seek approval from the committee and council to enter into a financing agreement with Banc of America for these fire engines.”
NHA Advisors Associate Vice President Christian Sprunger said the council approved the purchase of the three fire engines in January for $2.6 million.
“These vehicles were then bought in the last week of January to avoid a 7 percent cost increase that would have gone into effect on February 1,” he said. “To the credit of city employees, this acceleration has saved the city approximately $172,000. A material amount.”
He said the engines were purchased by South Coast Fire Equipment and the city was piggybacking on the City of Los Angeles and its contract.
“The plan is to use equipment leasing to reimburse the city for the amount already spent to purchase the vehicles and also to fund the additional equipment costs for those vehicles,” he said. “The city has had an agreement with Bank of America since 2014 called the Master Equipment Lease Purchasing Agreement. The city has used it several times, in 2018, 2021 and now for the fifth time. Each draw the city makes on this agreement adds an equipment plan. The current gear plan is plan 25.”
He noted that the amount being drawn is $3.3 million and the term is 10 years.
“The purchase price of $3.3 million includes the purchase price and the cost of fitting out the vehicles,” said Sprunger. “That’s estimated at $165,000 per vehicle. It also includes costs that are included in the issuance of this rental agreement. Bank of America has provided a 10-year fixed interest rate of 2.29 percent. They fixed that in January. It was good foresight on the part of city officials to set the interest rate as the interest rate has increased somewhat since then.”
Semi-annual debt service payments are $195,000 every six months or $390,000 per fiscal year.
He said the council will hear the reimbursement decision on March 15.
“On March 29, we come before the council for today’s item, the actual equipment lease and its approval,” he said. “Subject to approval of all of these items, we would then close in early April.”
Mayor John Zaragoza reminded the audience that the savings were $172,000.
“That’s exactly the cost of a different engine,” he said. “The 10-year fixed rate is excellent and it’s a good rate right now.”
Councilor Gabe Teran said that looking at the interest rate over 10 years shows there are incredibly talented people on the city staff, and he asked how much money the city had saved in interest as a result of its actions.
Sprunger said the underlying index for the rate was up 20 basis points.
“That would total about 30,000 to 35,000 in additional interest paid over the life of the loan,” he said. “These are estimates.”
Zaragoza added that the public is well served.
The point was accepted unanimously.