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MEMO TO: Mayor i City Council <br />FROM: Finance Director -Treasurer Rrager <br />DATE: March 12, 1986 <br />RE: TELEPHONE EVUIPMENT LFASr.-PURCHASE. AGREEMENT <br />When the telephone system was purchased the City entered into a <br />72 month lease purchase agreement with Contel Credit <br />Corporation. The interest rate on this lease is 15.251. At the <br />time the lease was entered into that was the market rate for that <br />type of agreement. Subsequently interest rates have been lowered <br />dramatically. Rates on investments which the City is able to <br />purchase are presently at 7.5%. <br />I propose that the City prepay this lease and ref!nance it with <br />an interfund loan from the City's Water Utility Fund. I have <br />Contacted Contel Credit Corp. and the prepayment amount would ne <br />$13,100.91. The balance could be refinanced with an interfund <br />loan from the Water Utility Fund at an interest rate of 7.5% per <br />annum. The term of this interfund loan would he 5 years, which <br />is the same amount of time remaining on the original lease <br />�._ purchase from Contel Credit Corporation. Refinancing this lease <br />with an interfund loan would result in a savings in interest <br />costs of approximately $2,490.24 over five years. <br />RECOMMENDATION: Council authorize staff to prepay the telephone <br />lease -purchase agreement to Contel Credit <br />Corporation in the amount of $13,104.91 and to <br />prepare a resolution authorizing an interfund <br />loan from the Water Fund to the General Fund <br />in the same auoont at 7.51 per annum for a <br />term of 5 years. <br />DB/ds <br />