142-2000 LTC
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CITY OF MIAMI BEACH
1700 CONVENTION CENTER DRIVE, MIAMI BEACH FL 33139-1824
http:\\ci.miami-beach.fl.us
L T C N 142-2000
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LETTER TO THE COMMISSION
TO:
Mayor Neisen O. Kasdin and
Members of the City Commission
Lawrence,,~.;..L~~
City Man1!f'J'
Analysis of Acquisition Options for Fire Apparatus
DATE: July 25, 2000
FROM:
SUBJECT:
Attached is a copy of a memo from Sergio Rodriguez, City Manager, dated November 19, 1999 in
response to a request for an analysis of acquisition options for fire apparatus by Commissioner
Garcia. At the time this response was prepared Commissioner Garcia had expressed a concern
regarding the use of General Obligation Bond proceeds to purchase this equipment rather than lease
the equipment. The attached analysis was sent to him at that time.
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ATTACH.
.CITY OF MIAMI BEACH
CITY HALL 1700 CONVENTION CENTER DRIVE MIAMI BEACH, FLORIDA 33139
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TO:
Mayor Neisen o. Kasdin and
Members ofthe City mission
DATE: November 19, 1999
FROM: Sergio Rodriguez
City Manager
SUBJECT: Analysis of Acquisition Options for Fire Apparatus
The following analysis was prepared in response to Commissioner Garcia's concern regarding the
proposed purchase of fire apparatus with General Obligation Bond proceeds.
Commissioner Garcia specifically mentioned a leasing option that he had presented to the City for
fire rescue vehicles. We have used this proposal as a basis for comparison of the three types of
acquisition methods: an operating lease (a lease with no equity position); a fmancing lease ( lease-
purchase)and a purchase. These three cases are shown on the attached schedule.
Operating Lease - The City has not been offered nor have we found a true operating lease for
equipment as specialized as fire apparatus. Such equipment frequently has no substantial resale
value following its use for operations of this type.
Financing Lease - This is the type ofIeasing proposal that was made for three fire rescue vehicles.
It was actually a lease- purchase with the vehicles being fmanced over a three year period and then
purchased for $1 at the end of the lease period. This proposal was made using an annual rate of
6.42% beginning in December 1997. This proposed financing lease would have had a total interest
cost to the City of$112,096.
Purchase - A purchase of this type of equipment could be made from the proceeds of a general
obligation bond and essentially could be repaid in the same year with the principal portion of the
annual debt service payment. Using a short -term rate of3.9% (which is the rate for a serial maturity
of a general obligation bond in the same time frame as the financing lease described above) the total
cost ofinterest would $33,345 or less depending on the timing of the purchase.
Financing leases are typically offered by the private sector at rates that are significantly higher and
therefore not competitive with tax exempt rates that the City can achieve through the issuance of a
general obligation bond. Additionally, there should not be a concern regarding the use of bond
proceeds to purchase equipment that has a useful life shorter than the "total term" of a bond issue.
Bonds are usually structured with a portion of the principal maturing on an annual basis. Therefore,
assets of this type can be acquired with bond proceeds and the related debt can be'repaid in the same
year or over a few years through the principal portions of the annual debt service payments.
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