For the first time since 2003, the city of Crestwood has purchased new police vehicles.
The Board of Aldermen voted 7-0 last week to enter into a lease-purchase agreement with Ford Municipal Financing to finance the purchase of 10 police vehicles for a total amount of $227,573.07.
The city will cover that lease-purchase agreement by making three annual payments of $75,857.69 in 2007, 2008 and 2009.
Because the city previously had budgeted $90,000 in its 2007 budget to pay for new vehicles, the lease-purchase agreement will shave more than $14,000 off that budgeted expense this year.
The Police Department reported in November that it had an emergency-response fleet with an average vehicle of 5.6 years old and more than 80,000 miles.
Police Chief Michael Paillou said he is relieved that after nearly a year of work to present a plan to purchase new police vehicles, aldermen finally have approved the expenditure.
“When I took over, I knew this was a priority,” he said. “The fleet was worn out. The cars mechanically, they were sound. But our maintenance bills were just horrendous.”
Paillou said the department’s next priority with its vehicles is developing a better exit strategy through its fleet-management system.
“We have to now look at the rest of the fleet and what’s our exit strategy going to be if we properly maintain these cars to get the best life expectancy out of them and continue to replace the leftover vehicles over this three-year period or at some point as money frees up,” Paillou said. “The biggest thing is the worst of the fleet’s going to be off the street. The last I checked, six of the 10 had over a hundred-thousand miles on them.”
While aldermen last week approved the Ford Municipal lease-purchase agreement, some board members had asked City Administrator Frank Myers if there were other options that would save interest payments on the lease.
Two such options for the $227,573.07 cost of the vehicles were paying for them out of the capital-improvements fund or its non-expendable trust.
While Myers acknowledged that both options were possible and that aldermen instead could pay from those funds, he discouraged them from using either fund to maintain the city’s cash balance.
“If the city was to use its capital-improvement fund and repay it back rather than Ford Motor Co., there would be some interest savings,” Myers said. “Instead of the city paying interest of $12,834.27, the city would basically forego interest earnings on its money of $9,817.69 for a savings of a little over $3,000 …
“Yes, you can save a little over $3,000 in interest, but we are just now rebuilding our cash position. And by making, by paying for this out of our own (capital-improvements) account … we’re foregoing the availability of that cash. And I do think that there’s value when you’re coming through the kind of financial recovery that this city is coming through that we protect our cash position and continue to build upon it before we borrow from ourselves.”
Myers also said because the non-expendable trust, which grew in February to more than $468,000, is designed to protect against cash-flow challenges in the general fund, he also would be opposed to spending money from that fund.
“The non-expendable trust is there for the general fund to deal with our cash-flow challenges that we know we’re going to have later in the year …,” Myers said. “We’re foregoing the availability of that cash by doing that. And the city is coming out of a very austere cash position where we previously had a line of credit to help juggle our costs. I think the prudent thing to do is for the city at this point in time to protect its cash, to forego the $3,000 savings in interest and continue to build up cash.”
While both wound up voting in favor of the lease-purchase agreement, board President Jerry Miguel of Ward 3 and Ward 4 Alderman Steve Nieder said during the board’s May 8 meeting that they would like to consider either the capital-improvements fund or the non-expendable trust for the purchase of the police vehicles.
“There’s $3 million in the bank in cash between the general fund, the non-expendable trust and the capital-improvements fund,” Miguel said. “I think from a liquidity standpoint, we’re in pretty good shape.”
Because of the city’s current position of using voter-approved funds from Proposition S — a property-tax increase approved in April 2006 — to pay off a $2.8 million annual-appropriation note that covers the city’s previous debts, Myers said he would advise against using the city’s cash flow.
“The challenge is looking back just two years ago the city had a $2 million short-term debt plus a $1.5 million line of credit because it didn’t have adequate cash,” Myers said. “And because of Proposition S, the city borrowed, was able to obtain, secure a loan, I think it was $2.8 million.”
“I mean, that’s a liability of $2.4 million that we still have,” Assistant City Administrator Justina Tate said.
“I understand the liability’s there …,” Miguel said. “But this is not long term. It’s not a large amount. This should not be a cash-flow issue. It’s not a cash-flow issue when you look at the balances in our accounts. That said, $3,000 isn’t that great of an amount in the whole course of things.”
Nieder agreed with Miguel that because the city has “pretty decent cash flow,” it should be able to cover the lease agreement for the vehicles and save $3,000 in interest.
“We do, as Alderman Miguel pointed out, have a pretty decent cash flow right now in reserve …,” Nieder said. “So I don’t understand why we wouldn’t want to go ahead and save that $3,000 and put it in the bank.”
Ward 3 Alderman Gregg Roby, who said he had asked Myers to consider using the capital-improvements fund to pay for the police vehicles, apologized to Myers for that consideration and said he now believes the city should build its cash flow.
“If we have a major emergency occur and we need to dip into funds immediately to get dollars and they’re not there and we have to go out to a bank and borrow money, we may be paying a rate that’s going to make that $3,000 disappear real quick,” Roby said. “So I think it’s a toss up. I apologize to Mr. Myers. I brought it up to you during the week, and it just seemed at the time a really smart thing to do. We start showing people that hey, we’re now back on our feet, we don’t need your money, we’ve got excess, we continue to pay our bills and pay ourselves back and keep the interest. But after talking with you (Myers), I certainly understand your concern and your caution in trying to make sure this city does have appropriate funds to finance the emergencies if they’re needed.”