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RESOLUTION NO. 2016-148 OF THE CITY COUNCIL OF THE CITY OF CHULA VISTA APPROVING A SOLE SOURCE PURCHASE OF ONE PIERCE AERIAL LADDER TRUCK FROM PIERCE MANUFACTURING AND A 10-YEAR LEASE PURCHASE AGREEMENT FOR THIS ACQUISITION BETWEEN THE CITY OF CHULA VISTA AND JPMORGAN CHASE BANK, N.A. AND AUTHORIZING THE CITY MANAGER TO EXECUTE THE AGREEMENT AT AN INTEREST RATE MOST FAVORABLE TO THE CITY, NOT TO EXCEED THREE PERCENT
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RECOMMENDED ACTION
Recommended Action
Council adopt the resolution.
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SUMMARY
The Chula Vista Fire Department delivers Fire, Rescue and Emergency Medical Services to Chula Vista residents, visitors, and employees daily. Emergency response service delivery are provided with several different types of fire apparatus including triple combination pumper/fire engines, aerial ladder trucks, a heavy rescue, a brush engine and battalion chief command vehicles. The Fire Department needs to replace several fire apparatus due to excessive years of service, escalating maintenance costs and safety issues. With the suspension of funding in the City’s vehicle replacement fund, the historical funding source utilized for fire apparatus replacement is no longer available. The Finance and Fire Departments have identified a lease purchase program through JPMorgan Chase Bank N.A. (JPMorgan) that provides a means to purchase one (1) Aerial Ladder Truck from Pierce Manufacturing. A lease/purchase program will minimize the immediate fiscal impact.
Under Chula Vista Municipal Code Section 2.56.070.B.4, a sole source purchase is an exception to the City’s formal competitive bid requirements for equipment purchases exceeding $100,000 when a commodity is available from only one known source as the result of unique market conditions; such is the case with Pierce Manufacturing’s Pierce Aerial Ladder Truck, which is affordable to City because of the 10-year lease purchase agreement with JPMorgan Chase Bank, N.A
Staff is requesting authorization to enter into a sole source purchase with Pierce Manufacturing and a 10-year lease purchase agreement with JPMorgan Chase for the acquisition of (1) Aerial Ladder Truck in order to replace an existing frontline Aerial Ladder Truck that will be transitioned into reserve fleet service.
ENVIRONMENTAL REVIEW
Environmental Notice
Environmental Notice
The activity is not a “Project” as defined under Section 15378 of the California Environmental Quality Act State Guidelines; therefore, pursuant to State Guidelines Section 15060(c)(3) no environmental review is required.
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Environmental Determination
The Director of Development Services has reviewed the proposed activity for compliance with the California Environmental Quality Act (CEQA) and has determined that the activity is not a “Project” as defined under Section 15378 of the State CEQA Guidelines because it will not result in a physical change in the environment; therefore, pursuant to Section 15060(c)(3) of the State CEQA Guidelines, the activity is not subject to CEQA. Thus, no environmental review is required.
BOARD/COMMISSION RECOMMENDATION
Not Applicable
DISCUSSION
The Fire Department responds to Fire, Rescue and Emergency Medical incidents both within the City and surrounding cities. In addition, the Fire Department provides mutual aid assistance throughout the State of California on a reimbursable basis. These emergency services are provided with the following frontline fire apparatus - eight (8) pumper/engines, two (2) aerial ladder trucks, one (1) heavy rescue truck, one (1) brush engine and two (2) battalion chief command vehicles. The reserve apparatus consist of the following - five (5) reserve pumper/engines, one (1) reserve aerial ladder truck and two (2) reserve battalion chief command vehicle.
As a result of several factors including, elimination of ongoing vehicle replacement funding, excessive years of service, escalating maintenance costs, increased downtime of frontline apparatus, decreased fleet depth, decreased reliability and safety issues; the Fire Department is in need of several new fire apparatus. The Fire Department and Public Works Department are challenged on a daily basis with maintaining an adequate fire apparatus fleet (frontline and reserve) due to the above factors.
National Fire Protection Association (NFPA) Standard 1901 on Automotive Fire Apparatus and other National Fleet Maintenance Organizations recommend large vehicle replacements based on several criteria to include, years of service, mileage, maintenance costs, functional obsolescence, and inability to obtain repair parts as well as technology and safety improvements. After extensive research of national industry standard recommendations and standards adopted by other Fire Departments, the Fire Department recommends that fire apparatus be replaced based on 10 to 12 years of frontline service plus five years of reserve service for a total service life of up to 17 years.
The current frontline aerial ladder truck that will be transitioned to reserve status has served 13 years to date in frontline service. The current reserve aerial ladder truck that will subsequently be surveyed out of the fire department’s fleet has 22 years of total service.
This purchase is a sole source purchase through Pierce Manufacturing. The Fire Department uses Pierce Manufacturing to purchase frontline operational emergency response vehicles for several critical reasons:
1. Equipment Standardization: Providing the same type of emergency response apparatus is critical in order to provide a standard approach to training all personnel. This ensures that our personnel can operate fire apparatus at a competent level while under duress of emergency response.
2. Safety: Fire personnel are consistently moved from one fire station to another. Maintaining a fleet of fire apparatus that operate consistently throughout our fleet ensures driver/operators and firefighters can operate and locate equipment in an efficient and timely manner while working in emergency situations.
3. Operational Efficiency and interoperability: The City and neighboring fire agencies respond to emergencies together on a daily basis.
To establish this lease purchase agreement, JPMorgan requires City assets to be used as collateral during the aerial ladder truck 12 month build time from Pierce Manufacturing. Seven City owned fire apparatus will be used for this purpose. As such, JPMorgan will be added to the titles of these fire apparatus until the new aerial ladder truck is delivered. At which time JPMorgan will be removed from the titles of the seven fire apparatus and added to the title of the new aerial ladder truck for the duration of the lease purchase agreement.
The purchase of this new fire apparatus will significantly improve the overall quality, reliability, cost effectiveness, fleet depth and safety of the City’s fire apparatus fleet to help maintain a proper level of fire, rescue and emergency medical service to Chula Vista.
DECISION-MAKER CONFLICT
Staff has reviewed the decision contemplated by this action and has determined that it is not site-specific and consequently, the 500-foot rule found in California Code of Regulations Title 2, section 18702.2(a)(11), is not applicable to this decision for purposes of determining a disqualifying real property-related financial conflict of interest under the Political Reform Act (Cal. Gov't Code § 87100, et seq.).
Staff is not independently aware, and has not been informed by any City of Chula Vista City Council member, of any other fact that may constitute a basis for a decision maker conflict of interest in this matter.
LINK TO STRATEGIC GOALS
The City’s Strategic Plan has five major goals: Operational Excellence, Economic Vitality, Healthy Community, Strong and Secure Neighborhoods and a Connected Community. This resolution meets the goals of Operational Excellence and Healthy Community. Updating our current fleet of fire apparatus will allow the Fire Department to provide improved service. The new engines will assist with response times; improve firefighter safety, and overall operational and fiscal efficiency.
CURRENT YEAR FISCAL IMPACT
Total cost to purchase one (1) aerial ladder truck is $1,229,469.64 from Pierce Manufacturing. Fire and Finance Departments are recommending acquiring this equipment via a 10-year lease purchase agreement with JPMorgan Chase. The first lease purchase payment is scheduled to be due in July 2017 (FY 17/18); therefore, no lease payments will be due in FY2016-17.
The rate quoted is 2.1% and is subject to change based on the current market rate which may change depending on market fluctuations until the City locks the rate at the time of the execution of the final agreement. This results in an estimated payment of $137,589.70. The total estimated amount paid for this fire apparatus including interest will be $1,375,896.97 through the 10-year lease purchase. Final rates will be finalized by July 27, 2016 and the appropriation requested is sufficient to pay all costs in FY16/17.
Equipment to properly outfit this aerial ladder truck is an additional cost beyond the apparatus cost. Equipment and outfitting cost for the aerial ladder truck is estimated at $320,000.00. Equipment cost is estimated at $300,000.00 and labor hours necessary to accomplish the outfitting are estimated at $20,000.00. Due to the fluctuating delivery of the aerial ladder truck from Pierce Manufacturing, staff is not requesting the equipment and outfitting funds at this time. Staff will return to Council based on updated delivery estimates from Pierce Manufacturing and request this funding in the appropriate fiscal year.
ONGOING FISCAL IMPACT
The ongoing fiscal impact associated with this purchase will include annual lease purchase payments, fleet maintenance, tools, and equipment replacement. The annual lease purchase payment cost $137,589.70 is scheduled to begin in FY 17/18 and end in FY 27/28. Due to the depletion of Equipment Replacement Funds, the annual lease payments will be included in future operating budgets which may require reductions or tradeoffs in other areas of the General Fund budget.
ATTACHMENTS
Resolutions
JPMorgan Chase Purchase Agreement
Aerial Ladder Truck Quote
Staff Contact: Harry Muns, David Bilby