ENCINITAS — Under a lease-only financing agreement, City Council unanimously approved the purchase of a new ladder truck for the fire department at the March 17 meeting.
Rather than a “pay as you go option,” staff proposed a lease option to replace the fire department’s aging ladder truck. Because of the city’s excellent credit rating, interest rates on the lease would be “very good,” according to Public Works Director Larry Watt.
The ladder truck was purchased in 1996, and has cost approximately $370,000 in maintenance costs. “We got 14 good years out of it,” Watt said.
Councilman James Bond questioned the factors used in making a decision to replace fleets and other equipment. “I want to make sure we’re not doing anything we don’t need to do too soon,” Bond said. Age is one of the criteria used to analyze the equipment, as well as maintenance costs, current condition and reliability.
In October 2009, the public works department commissioned Municipal Fleet Consultants to assess the condition of the city’s nine fire apparatus. It found that three units — two reserve pumpers and the ladder truck — should be replaced.
Bond also asked if other fire districts or municipalities might be interested in purchasing the used vehicle. The salvage value of the ladder truck ranges from $75,000 to $100,000. “Whatever we get will be an added benefit to the city,” Watt said, adding that the salvage value of the vehicle had not been added into the financial analysis presented to the council.
Councilman Jerome Stocks asked why such a depreciating asset would ever be purchased as opposed to leased. “We lease copiers,” he said. Finance Manager Jennifer Smith said the down side to such an agreement is the interest rate payment.
The proposal also sought to engage a consultant who specializes in securing equipment financing for municipalities to represent the city’s interests in negotiating a lease agreement. The consultant’s fee would be paid by the selected financing provider.
Mayor Dan Dalager questioned how the council could be assured that the consultant was acting in the best interest of the city. Smith said several safeguards in the proposal allow for transparency in the consultant’s dealings with potential financial institutions.
Housed at Station 5, the purchase price of the new ladder truck is $1,091,414. Since the specific model has a 2009 engine, the maintenance costs will be less than the 2010 model and it will not be required to meet more stringent state air quality standards.