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BACKGROUND On November 3, 2015 the City Council authorized the City Manager to execute an Equipment Lease-Maintenance Equipment agreement with US Bancorp in the amount of $414,139 at an interest rate of 1 7% for Callippe Preserve Golf Course maintenance equipment Since then, staff reviewed the Replacement list (Attachment 2) and determined that the replacement of three mowers could be deferred At the time the City was planning for the initial maintenance of the Callippe Preserve Golf Course, it determined that maintenance equipment acquisition could be best achieved through a lease purchase option as this mechanism allowed lease payments to be made consistent with on-going golf course revenues To that end, the City entered into a five year lease purchase agreement in 2010 and final payment on that lease was be made in January 2016 In anticipation of the need to replace equipment purchased in 2005, staff and CourseCo prepared an equipment replacement list representing the type and cost of the new equipment required to be purchased and determined it was best to replace the equipment over a two year period rather than all at one time Phase I equipment was purchased in December 2010 Attachment 2 presents the equipment that is to be replaced over the next one year including this recommended purchase (Phase 2) Staff reviewed various options for acquiring the equipment, including purchasing the equipment with financing from the manufacturer, paying cash, and a lease/purchase agreement A lease purchase agreement was determined to be the most advantageous because (1) it provides a match of the equipment expense with the years of usage, (2) it is a cost-efficient and common practice in the golf industry to lease this type of equipment, and (3) it provides the City with the extra advantage of securing low-cost financing, and (4) it is exempt from State of California requirements for voter approval of incurred debt DISCUSSION City Staff and CourseCo solicited lease purchase rates from various companies to finance the proposed equipment Staff requested a proposal from leasing companies and banks for five year lease rates the result of which are as follows • US Bank 1 78% (revised) JP Morgan Chase Bank 2 00% to 2 25% • Bank of the West Did not bid As a result, staff is recommending that the City enter into a five year lease with US Bancorp A summary of lease payments and terms are as follows Summary of Equipment Lease/Purchase Financing Principal Interest Total Interest Total Principal and Amount Payments Interest $321,372 1 78% $15,227 $336,600 Page 2 of 3