Agenda Packets - 2003/06/09 - Laserfiche WebLink

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Item No. 9G Type of Business: CA Meeting Date: June 9, 2003 City of Mounds View Staff Report To: Honorable Mayor and City Council From: Mary Burg, Golf Course Manager Subject: Resolution No. 6029; Resending of Resolution 6001, Purchase of Golf Cars from Internal Funds Background On May 12, 2003, the City of Mounds View adopted Resolution 6001 approving the purchase of rental golf cars through a program offered by Club Car, Inc. Discussion The City Council approved Resolution 6001 which authorized the purchase of five rental golf cars. The purchase was proposed to the council as a purchase program offered through Club Car, Inc. Upon further review and due to the complexities of the Lease/Purchase requirements it would be in the best interest of the City not to enter into that program; but rather to internally fund this purchase. In the past, the Golf Course has leased four golf cars for a period of four and a half months at an annual cost of $2,632. This process began with a proposal for an installment purchase of five golf cars with annual payments of $3,531.60 for five years. Having the four cars available for six months rather than four and a half plus the addition of the fifth car would generate additional revenues exceeding the additional cost. The complication comes from wherein the terms submitted by the third party financing entity were really a lease rather than an installment purchase. This created the need for legal opinions to ensure the tax-exempt status of the lease. These costs, the complexity of the contract and the loss of revenue while we accomplish the review made the arrangement undesirable. I am proposing instead that the City purchase the golf cars outright. The price per golf car does not change due to the financing. To accomplish this, the Bridges Golf Course would need to borrow additional money internally through the inter-fund loans. Interest paid to the other City funds would be comparable to the interest that would have been paid through the installment purchase. This would avoid legal costs and lost revenue from delays. Finance Director Charlie Hansen has been consulted and endorses this alternative. As stated in Resolution 6001, the outright purchase will benefit The Bridges in that we will have access to golf cars for the full length of the golf season. A fleet replacement program will be on a 15-year rotation basis, with five cars replaced every five years. However, five cars currently in the fleet will be in service 18 years under this plan.