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HomeMy WebLinkAbout11030 City Clerk's Office Item # T1 Background Paper for Proposed Ordinance COUNCIL MEETING DATE: August 25, 2025 TO: President Mark Aliff and Members of City Council CC: Mayor Heather Graham VIA: Marisa Stoller, City Clerk FROM: Andrew Hayes, Public Works Director SUBJECT: AN EMERGENCY ORDINANCE AUTHORIZING THE USE OF LEASE- PURCHASE FINANCING TO ACQUIRE CERTAIN EQUIPMENT PURSUANT TO THE TERMS OF AN EQUIPMENT LEASE-PURCHASE AGREEMENT BY AND BETWEEN THE PUEBLO, COLORADO MUNICIPAL BUILDING CORPORATION, AS LESSOR, AND THE CITY OF PUEBLO, COLORADO, A COLORADO MUNICIPAL CORPORATION, AS LESSEE; BUDGETING AND APPROPRIATING FUNDS IN THE AMOUNT OF $8,800,000.00 INTO PROJECT ACCOUNT CI2512 - PMJC HVAC REPLACEMENT; APPROVING A CONSTRUCTION CONTRACT BETWEEN THE CITY OF PUEBLO, A COLORADO MUNICIPAL CORPORATION AND TRANE U.S., INC., D.B.A. TRANE, A DELAWARE CORPORATION IN THE AMOUNT OF $7,954,518.00, SETTING FORTH $845,482.00 FOR CONTINGENCIES AND ISSUANCE-RELATED EXPENSES; AUTHORIZING OFFICIALS OF THE CITY TO TAKE ALL ACTION NECESSARY TO CARRY OUT THE TRANSACTIONS CONTEMPLATED HEREBY; DECLARING AN EMERGENCY; AND OTHER RELATED MATTERS SUMMARY: This Emergency Ordinance authorizes the use of lease-purchase financing PREVIOUS COUNCIL ACTION: None. BACKGROUND: This ordinance is presented as an emergency ordinance due to the urgent and compelling need to immediately initiate the procurement of the replacement chillers, air handlers, and other long-lead-time HVAC equipment required to complete the project. The equipment manufacturer specified that the units would take between 15-24 weeks to manufacture and deliver. If ordered on September 1, 2025, the City would expect the delivery of the equipment on or about February 23, 2026, in time for installation during the relatively mild spring season, minimizing the impacts of outdoor temperatures causing the need to relocate critical functions (e.g., Municipal Court, Police Department, Information Technology) to other locations during the project. The current HVAC system has suffered numerous outages over the past several years, becoming more frequent in recent months. While the Facilities Maintenance staff and contractors have been able to repair the system and restore operations so far, there have been significant impacts to operations including a building closure, inability to occupy areas of the building due to high internal temperatures, high temperatures in the data center facility, and more. The system's reliability is in question and any delay in immediately initiating this project puts these critical City functions at risk. FINANCIAL IMPLICATIONS: This Emergency Ordinance approves the use of lease-purchase financing to execute the turnkey HVAC replacement project for the Pueblo Municipal Justice Center facility with an interest rate not to exceed 5.5% and a loan amortization period not to exceed 20 years, in accordance with direction provided by City Council to staff during the August 18, 2025 City Council Work Session meeting. The maximum amount to be financed will not exceed $8,800,000.00. This amount includes funding necessary to pay the contract amount as well as contingencies and additional work and other fees and expenses associated with the issuance of the financing to the City. The Ordinance also budgets and appropriates all loan proceeds into Project Account CI2512 - PMJC HVAC Replacement. In addition, the Ordinance awards a construction contract to Trane in the amount of $7,954,518.00 for execution of the project and sets aside the remaining $845,482.00 for contingencies, additional work, and expenses associated with securing financing. BOARD/COMMISSION RECOMMENDATION: Not applicable to this Emergency Ordinance. STAKEHOLDER PROCESS: Not applicable to this Emergency Ordinance. ALTERNATIVES: Failure to approve this Emergency Ordinance will prevent the execution of the HVAC replacement project. RECOMMENDATION: Approval of this Emergency Ordinance. ATTACHMENTS: 1. PMJC HVAC-TRANE CONTRACT - Final Draft 2. Pueblo (City of) Equipment Lease 2025 Purchase and Assignment Agreement 3. Pueblo (City of) Equipment Lease Series 2025 Lease Purchase Agreement ORDINANCE NO.11030 AN EMERGENCY ORDINANCE AUTHORIZING THE USE OF LEASE-PURCHASE FINANCING TO ACQUIRE CERTAIN EQUIPMENT PURSUANT TO THE TERMS OF AN EQUIPMENT LEASE-PURCHASE AGREEMENT BY AND BETWEEN THE PUEBLO, COLORADO MUNICIPAL BUILDING CORPORATION, AS LESSOR, AND THE CITY OF PUEBLO, COLORADO, A COLORADO MUNICIPAL CORPORATION, AS LESSEE; BUDGETING AND APPROPRIATING FUNDS IN THE AMOUNT OF $8,800,000.00 INTO PROJECT ACCOUNT CI2512 - PMJC HVAC REPLACEMENT; APPROVING A CONSTRUCTION CONTRACT BETWEEN THE CITY OF PUEBLO, A COLORADO MUNICIPAL CORPORATION AND TRANE U.S., INC., D.B.A. TRANE, A DELAWARE CORPORATION IN THE AMOUNT OF $7,954,518.00, SETTING FORTH $845,482.00 FOR CONTINGENCIES AND ISSUANCE-RELATED EXPENSES; AUTHORIZING OFFICIALS OF THE CITY TO TAKE ALL ACTION NECESSARY TO CARRY OUT THE TRANSACTIONS CONTEMPLATED HEREBY; DECLARING AN EMERGENCY; AND OTHER RELATED MATTERS organized and existing under and by virtue of Article XX, Section 6 of the Colorado Constitution; and, WHEREAS, the City is authorized pursuant to Section 31-15-801, C.R.S., as amended, -11-- term or short-term rental or leasehold agreements in order to provide necessary land, buildings, equipment, and other property for governmental or proprietary purposes, which agreements may include an option to purchase and acquire title to such leased or rented property, and may have a term, at the discretion of the City, in excess of 30 years; and, WHEREAS, in order to provide for the capital asset needs of the City, the City Council of the its citizens that the City undertake lease-purchase financing of equipment for use by the City for governmental or proprietary purposes; and WHEREAS, the City wishes to obtain lease-purchase financing for the acquisition and installation of an HVAC system and related equipment (the "Equipment") as a replacement for completed within 12 months of the date hereof; and WHEREAS, the Equipment is hereby authorized to be financed by a tax-exempt municipal lease purchase from the Pueblo, Colorado Municipal Building Corporation (the "Corporation") to the City pursuant to a direct placement of a lease-purchase agreement, or an assignment thereof, as a tax- the Finance Director through a request-for-proposals or informal competitive process (a "Financing"); and WHEREAS, pursuant to the Financing, the City is to enter into a Lease Purchase WHEREAS, there has been presented to the City and made available to the Council in connection herewith proposed forms of the Lease and the Assignment; and WHEREAS, City Council, as the governing body of the City, deems it for the benefit of the City and for the efficient and effective administration thereof to enter into the Lease in order to achieve the acquisition and installation of the Equipment on the terms and conditions therein provided; and Inc. has been selected by the City to complete the Project, and accordingly the Council desires to approve and award the construction contract between Trane and th to the costs of the Project, including costs of the Financing, in accordance with the terms of the Lease; NOW, THEREFORE, BE IT ORDAINED BY THE CITY COUNCIL OF PUEBLO, that: SECTION 1. Ratification of Actions. All action heretofore taken, not inconsistent with the provisions of this Ordinance, by the Council or the officers of the City directed toward the completion of the Project and the preparation of the form of the Lease are hereby ratified, approved and confirmed. SECTION 2. The Project. The City is hereby authorized to obtain lease-purchase financing through the Lease to complete the Project within 12 months of the date hereof. All title to, or other indicia of ownership of, the Equipment is to be initially issued in the Co SECTION 3. Maximum Principal Amount; Interest Rate; Term. The principal amount to be financed shall not exceed Eight Million Eight Hundred Thousand Dollars ($8,800,000.00), the interest component of rental payments to be made by the City shall accrue at a rate not to exceed five and half percent (5.50%), and the term of any Lease hereunder shall not exceed twenty (20) years. Rental payments may be made annually, semi-annually, or at any other convenient interval as determined by the Finance Director. SECTION 4. Findings; Authorizations. home rule powers and the laws of the State of Colorado, that the completion of the Project is necessary, convenient, and in furtherance of the governmental purposes of the City and in the best interests of the City and its citizens; and the Council hereby authorizes the same by means of lease-purchase financing. The City hereby elects to apply all of the provisions of the Supplemental Public Securities Act, Part 2 . SECTION 5. Agency Relationship. Pursuant to the Lease, the City shall act as the agent of the Corporation solely for the purpose of acquiring the Equipment. The City will do all things necessary to effect the acquisition of the Equipment free and clear of any encumbrances and subject the same to any security interests as may be contemplated under the Lease. SECTION 6. Approval and Execution of Documents; Authorized Officers. The Lease and the Assignment, in substantially the forms presented to the City and made available to the Council prior to the final adoption of this Ordinance, are in all respects approved, authorized and confirmed. The Mayor is hereby authorized and directed to execute and deliver, and the City Clerk is hereby authorized and directed to affix the seal of the City to, and attest, the Lease and the Assignment hereunder in substantially the forms filed with the City Clerk, with such changes as are not inconsistent with the intent of this Ordinance and as approved by the City Attorney. The Council hereby designates the Finance Director to act as "Authorized Officer" under the Lease. Prior to the execution of the Lease, the final terms of the Financing, the description and price of the Equipment subject to the Lease, and the schedule of rental payments allocated to the Equipment under the Lease shall be approved by a certificate executed by the Finance Director (the Final Terms Certificate). SECTION 7. Additional Documents. The City Clerk is hereby authorized and directed to attest all signatures and acts of any official of the City in connection with the matters authorized by this Ordinance. The Mayor and the Authorized Officer are hereby authorized to execute and deliver for and on behalf of the City any and all additional certificates, documents and other papers and to perform all other acts that they may deem necessary or appropriate in order to implement and carry out the transactions and other matters authorized by this Ordinance. SECTION 8. No General Obligation or Other Indebtedness. The obligation of the City to make rental payments under the Lease is subject to annual appropriation by the Council and constitutes an undertaking of the City to make current expenditures. Such payments are subject to termination and nonrenewal by the City in accordance with the provisions of the Lease. No provision of this Ordinance or any Lease hereunder shall be construed as constituting or giving rise to a general obligation or other indebtedness or multiple fiscal year financial obligation of the City within the meaning of any home rule, constitutional or statutory debt limitation nor a mandatory charge or requirement against the City in any ensuing fiscal year beyond the current fiscal year. SECTION 9. Expression of Need. The City hereby declares its current need for the Equipment. It is hereby declared to be the present intention and expectation of the Council that each Lease will be renewed annually until title to all of the Equipment is acquired by the City pursuant to the Lease; but this declaration shall not be construed as contractually obligating or otherwise binding the City. SECTION 10. Reasonable Rentals. The Council hereby determines and declares that, after execution and delivery of the Lease, the rental payments due thereunder, so long as they are within the limits provided in this Ordinance, will represent the fair value of the use of the Equipment and the purchase price, as defined therein, will represent, as of any date upon which the City may exercise its option to purchase such Equipment, the fair purchase price of such Equipment. The Council further hereby determines and declares that, after the execution and delivery of the Lease, the rental payments due thereunder will not exceed a reasonable amount so as to place the City under an economic or practical compulsion to renew the Lease or to exercise its option to purchase the Equipment pursuant to the Lease. In making such determinations, the Council has given consideration to the cost of acquiring and installing the Equipment, the uses and purposes for which the Equipment will be employed by the City, the benefit to the citizens of the City by reason of the acquisition and use of the Equipment pursuant to the terms and provisions of the Lease, the City's option to purchase the Equipment, and the expected eventual vesting of title to, or other indicia of ownership of, the Equipment in the City. The Council hereby determines and declares that, after execution and delivery of each Lease, the maximum duration of the portion of the Lease allocable to any item of Equipment separately identified in the payment schedule appended thereto will not exceed the weighted average useful life of such item of Equipment. SECTION 11. Construction Project. In furtherance of the Project the Council hereby takes the following actions: (a) Funds in the amount of $8,800,000.00 are hereby deposited, budgeted and appropriated into Project Account CI2512 PMJC HVAC Replacement. (b) The City Council approves the construction contract between Trane U.S., Inc. and the City of Pueblo and authorizes the work to be performed. The contract for said project is hereby awarded to Trane U.S., Inc., in the amount of $7,954,518.00. (c) In addition to the amount of the Construction Contract award amount set forth, as aforementioned, an additional amount is hereby authorized for contingencies, additional work, and issuance-related expenses in the amount of $845,482.00. (d) Funds for the Project, also known as the PMJC HVAC Replacement project work, including associated contingencies, any additional work, and issuance-related expenses in the amount of $8,800,000.00 shall be paid from Project Account CI2512 PMJC HVAC Replacement. SECTION 12. Confirmation of Prior Acts. All prior acts and doings of the officials, agents and employees of the City which are in conformity with the purpose and intent of this Ordinance and in furtherance of the purchase of the Equipment are in all respects ratified, approved and confirmed. The officers and employees of the City of Pueblo are authorized to effect the transactions, policies and procedures described herein. SECTION 13. Severability. The provisions of this Ordinance are hereby declared to be severable. If any section, paragraph, clause, or provision of this Ordinance shall, for any reason, be held to be invalid or unenforceable by a court of competent jurisdiction, the invalidity or unenforceability of such section, paragraph, clause, or provision shall not affect any of the remaining provisions of this Ordinance. SECTION 14. Repealer. All acts, orders, resolutions, ordinances, or parts thereof, in conflict with this Ordinance or with any of the documents hereby approved, are hereby repealed only to the extent of such conflict. This repealer shall not be construed as reviving any resolution, ordinance, or part thereof, heretofore repealed. SECTION 15. Emergency Declaration. The immediate enactment of this Ordinance is necessary to preserve and protect public property and to preserve and protect the health, safety, and welfare of the public and occupants of the Pueblo Municipal Justice Center facility. SECTION 16. Effectiveness. This Ordinance shall become effective immediately upon the date of final action by City Council and the Mayor. Action by City Council: Introduced and initial adoption of Ordinance by City Council on August 11, 2025. Final adoption of Ordinance by City Council on August 25, 2025. ____________________________ President of City Council Action by the Mayor: Approved on _______________. Disapproved on ______________ based on the following objections: ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ____________________________ Mayor Action by City Council After Disapproval by the Mayor: Council did not act to override the Mayor's veto. Ordinance re-adopted on a vote of ____________, on _____________ ____________________________ President of City Council ATTEST ________________________________ City Clerk