Agenda

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ARF- 5088

2. A.

Work Session

Meeting Date:	09/25/2018
Submitted For:	Steve Sanders	Submitted By:	Betty Hurst, Contracts Administrator
Department:	Public Works
Fiscal Year:	FY2019	Budgeted?:	Yes
Contract Dates Begin & End:	09-25-18 to 09-24-2025	Grant?:	No
Matching Requirement?:	No	Fund?:	New

Information

Request/Subject

Request for Purchase of One (1) New 120M2 AWD Blade from Empire Caterpillar

Background Information

On August 7, 2018, the Board of Supervisors approved the use of the Sourcewell (NJPA) contract 032515-CAT which allows Gila County to purchase goods and services with discounts. The blade that will be replaced will be J-1 which is 32 years old. The frequent break-downs and extra expense is not a good business practice. After 32 years, the wear and tear of frequent heavy equipment use just costs more.

Consolidated Roads plans to trade in a 1986 CAT 120G Motor Grader (J-1) that Gila County bought used in 1993 for $54,942. The life-to-date hours are 10,028 and $116,146 has been spent in maintenance and repairs, which includes everything except fuel. The repair costs have escalated and the reliability has decreased so it’s time to replace it.

Evaluation

The discount of 34% from Caterpillar under the Sourcewell-NJPA Contract 032515-CAT when purchasing a new piece of equipment, combined with the discount for parts and repair is quite a savings. This purchase is for seven (7) years with an option to keep it or exercise the Client Guaranteed Buy Back at $90,240 and used less than 7,000 hours.

Looking at some of the same model machines for sale through other Caterpillar dealers, the price is very similar but this price from Empire is lower. Public Works would like to purchase the machine utilizing Caterpillar Financial. The breakdown of the financing is as follows:

266,114.00     price of machine
-$21,350.00     credit for J-1 trade in
       $450.00     documentation fee
$245,214.00     Amount Financed
$54,181.38     Interest over 7 years @ 5.05%
$90,240.00     Balloon Payment
$299,395.38     Cost of Financed Transaction (not including sales tax est. $24,102)

If the Board approves this transaction, the first payment will be due September 26^th.

Empire Caterpillar is offering a buy-back option at the end of 7 years that Caterpillar Financial does not offer. These are the three options:

Pay CAT for the balloon amount of $90,240 and Gila County owns the machine.
Re-finance the balloon amount for 24-48 months term and Gila County owns the machine.
Return the machine to Empire CAT prior to paying the balloon amount in the 7th year prior to end of contract and Empire will retain the machine in their inventory. Providing that all payments are current and the machine hours do not register more than 6999 hours.

Conclusion

Time is of the essence for this purchase at this price because the financing interest is increasing from 5.05% to 5.35% as of October 1st. Combined with the NJPA-Sourcewell 34% machine discount it is a very good deal. The price of this machine with estimated sales tax is $323,497.38 comparable to $369,228 and $372,600 same model and year machines.

Recommendation

The Public Works Director and Finance Director recommend the purchase of the Caterpillar 120M2 AWD Blade with financing through Caterpillar Financial.

Suggested Motion

Information/Discussion/Action to approve the use of the National Joint Powers Association (Sourcewell) Contract No. 032515-CAT to finance a new 2018 model 120M2 AWD Caterpillar Motor Grader (serial number M9H00559) from Empire Machinery using Caterpillar Financial Services Corporation. This is a payment schedule of eight payments ending in September 2025, under a Governmental Agreement for special financing in the amount of $299,395.38. (Steve Sanders)

Attachments
Lease Contract - Empire
2018 Caterpillar Coop Contract Discounts v1