TITLE
Consider a memorandum/resolution authorizing a lease with purchase option of a backhoe for the Street Services division.
SUMMARY
DATE: October 3, 2017
TO: Ronald L. Olson, City Manager
FROM: Jonathan Locke, Executive Director of Finance
SUBJECT: Authorize lease with purchase option of a backhoe for the Street Services division
BACKGROUND AND FINDINGS:
The three-year lease on one of the Street Services division’s existing backhoes expires in December 2017. Due to the escalating cost of maintaining this type of heavy equipment as it ages, staff does not feel that purchasing the existing unit would be in the best interest of the City. The Street Services division is therefore requesting to initiate a new three-year backhoe lease with a purchase option at the end of the lease.
The division utilizes two backhoes that are critical pieces of equipment for ongoing street maintenance programs. One of these is an 11 year-old unit and is owned by the city; the other backhoe has been replaced every three years through new leases, since 2008, to ensure reliability.
THE ALTERNATIVES CONSIDERED:
1.) Purchase the existing backhoe for $50,715.71. This machine would have no warranty remaining and, as known from past experience, the repair and maintenance costs would dramatically increase. Future reliability would also be of concern.
2.) Return the leased backhoe and not replace it. This would limit the division to one 11-year-old backhoe with no backup and would very likely prevent the division from completing its mission in a timely manner.
3.) Procure a rental unit. This is not practical because these backhoes are not always readily available in this area. Rental cost for the backhoe would also average $3,500/mo. vs. leasing at $1,909.45/mo.
4.) Initiate a new three-year lease, as in the past, for a new backhoe that would provide dependable ser...
Click here for full text