Short-term financing available to local governments may help the city apply $437,596 to the purchase of new vehicles for its fleet.
The Hot Springs Board of Directors considered resolutions Tuesday night to select Regions Bank as the provider of up to $1 million in short-term financing of capital items in the 2017 budget and approve the purchase of 21 vehicles off the state-contract price list.
Both items of new business hadn't been voted on at presstime.
The state-contract price for the vehicles, including eight Ford SUV Interceptors and two Ford Taurus cars for the police department, totaled $551,029, according to the city. City staff recommended that short-term financing be used for the $254,510 purchase of the 10 police vehicles, the $28,396 purchase of a Dodge Ram 2500 crew cab four-wheel drive for the fire department, the $54,617 purchase of two Dodge Ram 2500 crew cab four-wheel drives for the street department and $100,073 appropriated from the General Fund to go toward the purchase of some of the other eight vehicles.
The city budgeted $362,000 this year for police vehicles. Last year, the department was allocated $480,000 to purchase and outfit 12 vehicles.
The city can issue the short-term debt under the Arkansas Constitution's Amendment 78. Voters passed the City and County Government Redevelopment Bond and Short Term Financing Amendment by almost a 10-point margin in the 2000 General Election. One of its provisions allows local governments to incur short-term financing obligations of five years or fewer for the purchase of property with a useful life of more than one year.
The statute enabling Amendment 78 allows municipalities to issue short-term debt of up to 5 percent of the assessed property value in their cities. According to the city's finance department, the city's Amendment 78 cap was at $33.9 million at the end of 2015. The 2016 calculation is not yet available, but the finance department expects the cap to increase.
The city's Amendment 78 debt had $3,925,068 in aggregate principal at the end of last year, according to the finance department.
Approving Regions Bank as the loan issuer will allow the city to purchase $878,000 in capital items budgeted for 2017. In addition to the vehicles the city intends to purchase with $437,596 in short-term debt, $125,000 in short-term financing has been budgeted for servers at the police and information services departments, $133,000 for a generator at City Hall, $19,000 for a wastewater vacuum truck for the street department and $25,000 for a Pakrat sanitation truck for the parks department.
According to the city, Regions had the lowest financing costs of the four banks that bid on the loan, charging 48 basis points more than the five-year treasury bill rate at the time of the loan. The rate was 1.92 percent Friday. Sixty-five percent of that rate plus 48 basis points would allow the city to borrow the money at 1.72-percent interest, creating an annual debt service of $183,400.
The $878,000 in principal and $38,923 in interest would be paid off in 60-monthly installments of $15,282.
Local on 02/22/2017