Laserfiche WebLink
ity of <br /> <br />iver <br /> <br />TO: <br /> <br />FROM: <br /> <br />DATE: <br /> <br />SUBJECT: <br /> <br />Mayor and City Council <br /> <br />Lori Johnson, Finance Director <br /> <br />August 15, 1996 <br /> <br />Fire Department Pumper <br />Financing <br /> <br />As Bruce outlined in his memo, he is requesting approval of the purchase of a <br />pumper with a cost of $301,275.00. The Council has already discussed the <br />funding of this purchase and that information is reiterated in the previous <br />memo. With the funding in place, the remaining item to be discussed is the <br />financing mechanism to be used. <br /> <br />First, the contract requires an additional interest payment if the city does not <br />pay $142,650.00 for the chassis at the time of frame-up at the factory. This <br />additional interest adds $4,250.00 to the price of the pumper. Assuming that <br />there is $72,000.00 in reserve, that payment will be made at time of frame-up <br />which will reduce the additional interest cost to approximately $2,125.00. <br />This brings to total cost of the pumper to approximately $303,400.00 with a <br />balance remaining to be paid of approximately $231,400.00. <br /> <br />The balance remaining could be financed several ways; an internal loan, <br />equipment certificates, or manufacturer financing could be used. At this <br />point it seems most probable that manufacturer financing will be used unless <br />equipment certificate interest rates are lower at the time of financing. The <br />manufacturer is guaranteeing interest rates of 5.6 percent for five years, 5.8 <br />percent for seven years, and 5.95 percent for ten years. Since the financing <br />does not need to be finalized until three weeks prior to delivery of the vehicle, <br />there is no need to make a decision at this point. It is impossible to guess <br />where interest rates will be in ten or twelve months when we take delivery; if <br />rates are lower, an equipment certificate will be issued for the pumper. In no <br />case will the interest rate be higher than listed above. <br /> <br />Finally, all of our funding discussions have been based on a seven year <br />repayment term. Based on the guaranteed rate for a seven year term, an <br />annual payment of approximately $41,000.00 is required. Unless rates or <br />funding change substantially prior to delivery of the pumper, the term will <br />remain at seven years. <br /> <br />13065 Orono Parkway · P.O. Box 490 · Elk River, MN 55330 · (612) 441-7420 · Fax: (612) 441-7425 <br /> <br /> <br />