CC 2013-11-12_08.c. Lease Purchase Financing - IT ImprovementsMEMORANDUM
TO: CITY COUNCIL
FROM: DEBBIE MALICOAT, ADMINISTRATIVE SERVICES DIRECTOR -r--
SUBJECT: CONSIDERATION OF A RESOLUTION FOR LEASE PURCHASE
FINANCING FOR INFORMATION TECHNOLOGY IMPROVEMENTS
DATE: NOVEMBER 12, 2013
RECOMMENDATION:
It is recommended the City Council adopt a resolution determining the need for
acquisition of certain information technology equipment and services related to the
implementation of a storage area network, server virtualization, and enterprise data
backup solution, and authorizing the City Manager to execute all necessary documents
for the financing thereof, through Santander Bank (formerly Sovereign Bank).
IMPACT ON FINANCIAL AND PERSONNEL RESOURCES:
No direct impact on financial or personnel resources is associated with adopting the
resolution. Annual lease payments of $29,915 for the server upgrade project were
included in the FY 2013-15 biennial budget. Based on the proposed financing, actual
annual lease payments will be approximately $28,378.
BACKGROUND:
At the October 8, 2013 meeting, the City Council approved an agreement with CIO
Solutions related to the implementation of a storage area network, server virtualization,
and enterprise data backup solution. Staff anticipated financing this project over a
period of five years, which was reflected in the budget. Staff issued an RFP for
financing in September 2013 and, based on an analysis of the responses, recommends
entering into a financing agreement with Santander Bank.
ANALYSIS OF ISSUES:
Given the life cycle of the equipment and the current economic situation, it was
determined that spreading the cost of the equipment over a five year period would be
prudent and appropriate. This is also consistent with an overall goal previously
recommended to Council to transition large capital purchases to leases in order to
reduce upfront costs and establish consistent annual replacement costs. Use of lease
Item 8.c. - Page 1
CITY COUNCIL
RESOLUTION FOR INFORMATION TECHNOLOGY LEASE FINANCING
SEPTEMBER 10, 2013
PAGE2
purchase agreements has been very successful with public safety equipment
acquisitions.
Staff issued a Request for Proposal (RFP) for financing the project for a five year term
and received three responses from various lenders. After review of the proposals, staff
recommends using Santander Bank as the lender for the proposed lease. Santander
Bank is a large lender with a thorough understanding of the needs of municipal
borrowers and provided the lowest interest rate and lowest total cost of borrowing. The
interest rate is 2.15% for 5 years, with payments in advance.
ALTERNATIVES:
Santander Bank has provided two options in their proposal. The first option would
require debt service payments annually every December (based on our estimated
schedule). The second option would require the first payment to be made in December,
like option #1, but future payments would be made each July 1st. This saves the City
approximately $1,000 in interest over the life of the loan. Staff recommends utilizing this
option as it is the most cost effective and does not pose any problems administratively.
ADVANTAGES:
Adopting the resolution will allow the lease purchase financing to move forward.
DISADVANTAGES:
There are no disadvantages to adopting the resolution.
ENVIRONMENTAL REVIEW:
No environmental review is required for this item.
PUBLIC NOTIFICATION AND COMMENTS:
The Agenda was posted in front of City Hall on Thursday, November 7, 2013. The
Agenda and report were posted on the City's website on Friday, November 8, 2013. No
public comments were received.
Item 8.c. - Page 2
RESOLUTION NO. ---
A RESOLUTION OF THE CITY COUNCIL OF THE CITY
OF ARROYO GRANDE REGARDING THE MASTER
LEASE PURCHASE AGREEMENT DATED SEPTEMBER
12, 2013 BETWEEN SANTANDER BANK, N.A. (F.K.A.
SOVEREIGN BANK, N.A.) AND THE CITY OF ARROYO
GRANDE AND SCHEDULE NO. 001 THEREOF DATED
AS OF DECEMBER 2, 2013
WHEREAS, at its November 12, 2013 meeting the City Council approved staff's
recommendation to award the bid for a lease agreement to Santander Bank. related to
the financing of certain information technology equipment and services related to the
implementation of a storage area network, server virtualization, and enterprise data
backup solution ; and
WHEREAS, Santander Bank has provided the City with a Master Lease Purchase
Agreement, which includes Schedule No. 001, a copy of which is attached hereto; and
WHEREAS, Santander Bank's leasing procedures require that the City Council adopt a
resolution making certain determinations and providing for the authorization for the
designated person to execute and deliver the Master Lease Purchase Agreement and
Schedule as well as any other documents necessary to the consummation of the
transaction.
NOW, THEREFORE BE IT RESOLVED by the City Council of the City of Arroyo
Grande as follows:
Section 1. Determination of Need. The City Council has determined that a true and
very real need exists for the acquisition of the Equipment described on Exhibit A of
Schedule No. 001 to the Master Lease Purchase Agreement (Agreement) dated as of
September 12, 2013 between the City of Arroyo Grande (Lessee) and Santander Bank,
N.A. (F.K.A. Sovereign Bank, N.A.) (Lessor).
Section 2. Approval and Authorization. The City Council has determined that the
Agreement and Schedule, substantially in the form presented at this meeting, are in the
best interests of the City for the acquisition of such Equipment, and the City Council
hereby approves entering into the Agreement and Schedule and hereby designates and
authorizes the City Manager, Steven Adams, to execute and deliver the Agreement and
Schedule on Lessee's behalf with such changes thereto as the City Manager deems
appropriate, and any related documents, including any Escrow Agreement, necessary
to the consummation of the transaction contemplated by the Agreement and Schedule.
Item 8.c. - Page 3
RESOLUTION NO.
PAGE2
On motion of Council Member , seconded by Council Member
and on the following roll call vote, to wit:
AYES:
NOES:
ABSENT:
the foregoing Resolution was passed and adopted this day of , 2013.
Item 8.c. - Page 4
RESOLUTION NO.
PAGE3
TONY FERRARA, MAYOR
ATTEST:
KELLY WETMORE, CITY CLERK
APPROVED AS TO CONTENT:
STEVEN ADAMS, CITY MANAGER
APPROVED AS TO FORM:
TIMOTHY J. CARMEL, CITY ATTORNEY
Item 8.c. - Page 5
Schedule No. 001
EXHIBIT A
DESCRIPTION OF EQUIPMENT OF LEASE AGREEMENT
RE: Master Lease Purchase Agreement dated as of 09/12/13, between Santander Bank, N.A. (F.K.A.
Sovereign Bank, N.A.) (Lessor) and City of Arroyo Grande (Lessee) and Schedule No. 001 thereto dated
as of December 2, 2013.
Below is a detailed description of all the items of Equipment including quantity, model number and serial number where applicable:
Quantity VIN #/Serial Number Type, Make, Model, Department
Virtual Hosts HP WSCA Pricing
2 HP Smart Buy ProLiant DL360p Gens 2 x Intel Xeon E5 2660 8 Core 2 20GHz 20MB 32GB
SC Smart Array P420i 1 GB FBWC 2 x 460W IC 3 Year NBD Warranty
24 SMART BUY 16GB KIT 1X16GB DR XDDR3 PC3L 10600R 1333MHZ
2 4GB SD FLASH MEDIA KIT
2 DVDROM SATA JACKBLACK 9 SMM K
2 1GBE 4PORT 331T ADAPTER
4 183M10A C13 UL POWER CORD
2 SMART BUY 3YR UPG WARR 24X7 4HR ONSITE FOR PROLIANT DL360
VMWare Licensing
1 VMware vSphere v 5 O Essentials Plus Kit License 3 Host Max 2 CPU Per Host
1 Production SNS VSPHERE 5 ESS PLUS F 3YR
Juniper Switches (City Hall Network Switch)
1 EX3300 24T 24 port 10/100/1000BASE-T with 4 SFP uplink ports optics not included
1 Juniper Standard Power Cord
1 Jcare 3 year NBD Support for EX 3300 24T
SAN Switch
1 EX3300 24T 24 port 10/100/1000BASE-T with 4 SFP uplink ports optics not included
1 Juniper Standard Power Cord
1 Jcare 3 year NBD Support for EX 3300 24T
Nimble Enterprise Storage System
2 Nimble CS220 12TB Raw 320GB Flash cache 6x1 GigE SP Dual Controllers
2 NBD Serv Softw Suooort for 220 24x7 3 Yr
EQUIPMENT LOCATION Complete only if equipment will not be located at Lessee's address
BILLING ADDRESS:
Lessee: City of Arroyo Grande Lessor: Santander Bank, N.A.
By: By:
Typed: ~~~~~~~~~~~~~~ Typed:
Title: Title:
Date: Date:
A-1
Item 8.c. - Page 6
Schedule No. 001 of Lease Agreement
EXHIBIT B
SCHEDULE OF PAYMENTS
Totals: $141,297.58 $4,869.10 $136,428.48 Rate 2.1500%
Payment Payment Purchase Outstanding
Pmt# Date Amount Interest Principal Price Balance
1212/2013 $136,428.48
1 12/212013 $28,259.52 $0.00 $28,259.52 $108,168.96
2 7/1/2014 $28,259.52 $1,350.16 $26,909.36 $81,259.61 $81,259.61
3 7/1/2015 $28,259.52 $1,747.08 $26,512.43 $54,747.17 $54,747.17
4 7/1/2016 $28,259.52 $1,177.06 $27,082.45 $27,664.72 $27,664.72
5 7/1/2017 $28,259.52 $594.79 $27,664.72 $0.00 $0.00
Lessee: City of Arroyo Grande
BY: _____________ _
TITLE: ____________ _
DATE: ____________ _
B-1
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