12-12-2016 BPU RPT 09 - Laserfiche WebLink

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J � P U B L I C U T I L I T I E S BOARD OF PUBLIC UTILITIES RIVERSIDE PUBLIC UTILITIES Board Memorandum DATE: DECEMBER 12, 2016 ITEM NO: 9 SUBJECT: RIVERSIDE PUBLIC UTILITIES PARTICIPATION IN THE 2016 CITY LEASE PURCHASE BOND ISSUANCE FOR THE PURCHASE OF WATER HEAVY VEHICLES AND EQUIPMENT IN AN ESTIMATED AMOUNT OF $2,300,000 ISSUE: Approval of Riverside Public Utilities' participation in the 2016 City Lease Purchase Bond issuance for the purchase of heavy vehicles and equipment for the Water Utility in an estimated amount of $2,300,000. RECOMMENDATIONS: That the Board of Public Utilities: Approve Riverside Public Utilities' participation in the 2016 City Lease Purchase Bond Issuance for the purchase of Water Heavy Vehicles and Equipment in an estimated amount of $2,300,000; 2. Authorize the City Manager, or his designee, to execute the necessary documents; and 3. Direct staff to provide a report to the Board with the final associated costs of issuance for the Water Utility's share of the Lease Purchase Bonds after approval by the City Council. BACKGROUND: Staff recommends approval of a lease purchase financing of water fleet heavy equipment to better manage annual cash flow and enable the replacement of aging equipment critical to the daily mission of the Water Utility. During the two year budget process, the Water Utility identified a need to replace aging heavy vehicles and equipment totaling approximately $2,000,000. These vehicles are needed to perform ongoing construction, maintenance and operation activities in an efficient and safe manner. On average, the existing equipment is 20 years old. Due to the drop in revenues from the drought, the Water Utility was only able to fund equipment purchases of $610,000 and $875,000, respectively for fiscal years 2017 and 2018, which was included in the City Council and Board approved Two -Year Budget. At the time of budget approval, the plan was to research financing or purchase options for equipment needed with funding available. In March 2016 the City Council approved the Fiscal Policies which included maintaining a capital repair /replacement reserve to accumulate funds for replacement /repair of facilities and equipment in a more routine, timely manner. This reserve has a current balance of $750,000. The City Council in July 2015 authorized the Police Department to purchase a new radio system and in October 2015 authorized the Community Development Department to purchase permitting software and associated hardware. In both instances, the City Council approved using a Lease Purchase method for financing these projects. The City plans to undertake a lease purchase financing to fund this equipment. The City's Chief Financial Officer recommended combining City and Utility equipment needs to obtain best pricing.