SR 05:105 - Laserfiche WebLink

Honorable Mayor and Members of the City Council: BACKGROUND Construction of Callippe Preserve Golf Course continues, with approximately 6 golf holes grassed and currently being maintained by CourseCo, the City's course operator. During the next eight (8) weeks, assuming favorable weather, it is anticipated that the remaining golf holes will be seeded. If the schedule is maintained, all 18 holes should be turned over to CourseCo for grow-in by the end of June. Exhibit A lists the equipment needed for both the grow-in period and on-going course maintenance. The list includes mowers, rollers, utility vehicles, etc., which generally have a useful life of five (5) years or more. A lease/purchase arrangement is recommended 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) the City has the extra advantage of securing low cost financing as described below. CourseCo initially sought lease rates through its parent company, and was offered a rate of 7.4% by GE Capital. The City, however, can secure a lower financing rate than CourseCo because of our ability to issue tax-exempt debt. In an effort to secure more favorable rates, CourseCo contacted three (3) leasing companies on behalf of the City. The proposed rates included 4.74% from Trident Leasing, 4.9% from GE Capital, and the lowest rate of 3.39% from Bank of America. Based on the above offerings, staff is recommending that the City enter into a five-year lease/purchase agreement with Bank of America, and that the Council authorize the City Manager to execute the contract at the 3.39% lease rate (Summary of Terms and Conditions attached as Exhibit B). The quoted fixed rate will be held constant for 45 days from the April 6 date noted in Exhibit B. FISCAL IMPACT The quarterly lease payment for the equipment listed in Exhibit A is $38,083 extending over five years. The initial quarterly payment would be due prior to the golf course opening and is already included in the total project construction budget approved by the Council. The remaining quarterly lease payments would become part of the annual operating budget for Callippe Preserve. Although revenues of the golf course are expected to pay for the annual equipment lease payments, the General Fund will provide the pledge for repayment (i.e., the General Fund is obligated to make the payment if there are insufficient funds in the golf enterprise fund). It may be possible in future years for golf course equipment leases to be backed by a pledge of the golf enterprise fund rather than the General Fund. However, since the golf enterprise fund will not generate revenues until later in FY 2005/06, the General Fund would provide the pledge for this initial five-year lease agreement. SR:05:105 Page 2