TITLE
Recommendation to authorize City Manager to execute a lease-purchase agreement and related financing documents with Banc of America Leasing & Capital LLC (BofA) for the financing of personal computers and computer-related equipment, and to finance a mainframe replacement in an amount not to exceed $2,326,000, including interest, payable over a four-year period; and authorize City Manager to execute a Master Purchase Agreement with Mainline Information Systems, Inc.
(Citywide)
DISCUSSION
In 2003, the City implemented a program to extend the replacement cycle for personal
computers (PCs) from three to four years as a budget reduction strategy. The program
was successful in reducing costs. Annual lease payments for PCs and servers have
declined from $2.2 million in FY 02 to $935,000 in FY 05, a reduction of $1.265 million.
Currently, there are 1,100 City PCs over four years old. In FY 05, the plan calls for
1,185 PCs, laptops and servers to be replaced at an estimated cost of $1,775,800. The
equipment will continue to be acquired from Dell Marketing L.P., utilizing Dell Master
Purchase Agreement No. 28280.
In addition, the City's five-year-old mainframe, which runs key applications including
financial systems, payroll and utility billing, must be upgraded in order to run software
needed for critical applications. The City used lease financing to acquire the existing
mainframe. The mainframe replacement cost is approximately $543,000, but will result
in savings of $50,000 annually in software and communications equipment costs, and
will increase processing speeds by approximately 40 percent. Price quotes were
solicited from three major mainframe providers. Mainline Information Systems, Inc.
(Mainline) offered the most favorable overall price including a software discount of
$187,000 over three years, plus a $40,000 trade-in allowance on the existing mainframe
(current market value is $10,000 - $15,000). Staff recommends setting up a Master
Purchase Agreement for Mainline purchases.
The Department of Financial Management conducted a bid process to secure the most
favorable financing terms for these purchases. Requests for bids were solicited from
over 20 finance companies and 11 responded. BofA offered the best terms with a rate
of 3.02 percent and is, therefore, recommended to provide the required financing.
This matter was reviewed by Senior Deputy City Attorney Donna F. Gwin on June 2,
2005, and by Budget Management Offtcer David Wodynski on June 1,2005.
TIMING CONSIDERATIONS
City Council action is requested on June 14, 2005, as the financing proposal expires on
June 30.2005.
FISCAL IMPACT
The total amount to be financed under the BofA agreement will not exceed $2,183,000
and will be financed over a four-year period. The total debt service (principal and
interest) for the agreement is $2,326,000. Of that amount, $145,350 will be paid in Fy
05. Subsequent debt service payments of approximately $2,180,000 will be
appropriated through the annual budget process. Sufficient funds have been budgeted
in the General Services Fund (IS 385) and in the Technology Services Department (TS)
to support this activity.
SUGGESTED ACTION
Approve recommendation.
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Respectfully Submitted,
MICHAEL A. KILLEBREW
DIRECTOR OF FINANCIAL MANAGEMENT
CURTIS TANI
DIRECTOR OF TECHNOLOGY SERVICES