HomeMy WebLinkAboutMinutes City Council - 11/11/1997 - SpecialI HEREBY CERTIFY that the foregoing is a true and correct copy of the minutes of the
Special Council Meeting of the City of Corpus Christi of November 11, 1997, which were approved
by the City Council on November 18, 1997.
WITNESSETH MY HAND AND SEAL, this 18th day of November, 1997
Armando Chapa
City Secretary
SEAL
MINUTES
CITY OF CORPUS CHRISTI, TEXAS
Special Council Meeting - Fifth Floor Conference Room
November 11, 1997
12:00 p.m.
PRESENT
Mayor Loyd Neal*
Council Members:
Jaime L. Capelo Jr.
Arnold Gonzales
Betty Jean Longoria*
John Longoria
Edward Martin
ABSENT
Mayor Pro Tem Alex L. Garcia Jr.
Melody Cooper
Dr. David McNichols
City Staff:
City Manager Bill Hennings
City Attorney James R. Bray Jr.
City Secretary Armando Chapa
City Manager Hennings began the meeting by introducing Mr. Jorge Garza, Assistant City
Manager for Administrative Services. Mr. Garza explained that staff would provide presentations
on the equipment notes financing program and computer system replacements for the Finance,
Human Resources, Maintenance Services, and Municipal Court departments.
Council Member Capelo asked City Attorney Bray if a quorum of the Council was needed
before the staff presentations could begin, and Mr. Bray said they did not need a quorum.
Mr. Jorge Cruz-Aedo, Director of Finance, gave the first presentation on the equipment notes
financing program. Using visual aids, he explained in detail the four different methods the city uses
to make equipment purchases: pay-as-you-go; lease/purchase; certificates of obligation or bonds;
and other sources such as equipment notes and commercial paper program.
Mr. Cruz-Aedo described the advantages and disadvantages of each program. The pay-as-
you-go method requires full funding in the budget and the normal procurement process is followed.
However, that method requires that the city have cash to make those purchases, which may cause
some purchases to be delayed and there is a greater demand for resources.
He said the lease/purchase method can be quickly implemented with approved lines of credit;
there are no set-up fees; it provides payment flexibility; and, in essence, the city is able to acquire
today's prices and pay for them with tomorrow's dollars. However, the disadvantages of
lease/purchases include that there is a higher interest rate than formal debt; it cannot be used for real
property and certain computer systems and software; and it requires staff time to manage it.
Minutes
Special Council Meeting
November 11, 1997
Page 2
*Mayor Neal arrived at the meeting at 12:08 p.m.
He said the advantages of using certificates of obligation or bonds for equipment purchases
are a low interest rate; the availability of 15- and 30 -year financing; they can be used for all purchase
requirements; they are structured and have low maintenance; and are a formal method of financing.
The disadvantages include that they are a form of long-term debt, and as such are not beneficial for
purchases of equipment that do not have a long life. Also, COs and bonds are tied to property taxes;
involve an issuance cost and arbitrage; and are very structured forms of debt.
The Director of Finance said an alternative financing source is the equipment tax note
program, which he said is very much like a commercial paper program except that it is used for
equipment. Like a certificate of obligation or bond, it provides the lowest interest cost possible; also,
it is like a lease/purchase agreement in that once the program is established, the city would issue the
debt as it is needed. Also, the equipment note program is authorized, approved debt and does not
require a vote of the public; in addition, the city would be able to buy the equipment now and finance
it over the useful life of the equipment. And since it requires property tax support, it is able to
provide the lowest possible financing cost.
Mr. Cruz-Aedo said the equipment note program also involves administrative support,
issuance costs, and can be issued as needed. He said equipment notes also give the city the
opportunity to possibly restructure some of its existing debt, finance future equipment, and possibly
deal with the computer equipment needs for the year 2000. He said staff estimates that the total cost
for new equipment for the next seven years, including refinancing and issuance costs, will total $30
million He said if that $30 million was financed using equipment notes rather than lease/purchase,
it would result in a savings of approximately $200,000 a year.
*Council Member Betty Jean Longoria arrived at the meeting at 12:20 p.m.
Responding to Mayor Neal, Mr. Cruz-Aedo said the city is paying $1.8 million each year on
its total outstanding leases. He said the equipment notes program provides some options for possibly
refinancing some of that debt; he added that it would cost about $4.5 million to finance $30 million.
A brief discussion ensued.
Council Member Martin said he thought the equipment notes program was being proposed
in order to pay for new computers. City Manager Hennings replied that the purpose of the program
is to save money and use the tool that produces the lowest cost financing for the city's needs, of
which the computer systems is just one. Mr. Cruz-Aedo said if the city is going to continue to buy
equipment over time, the equipment notes program is a more efficient financing mechanism and it
provides relief to the General Fund. He noted that the city is already struggling to make existing
payments in the General Fund.
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Special Council Meeting
November 11, 1997
Page 3
Council Member Gonzales asked about efforts to Lengthen the life of the city's equipment,
which Mr. Hennings explained.
Mayor Neal said it would be difficult for him to make an informed decision on this issue
without having a better understanding of next year's budget.
The next presentation was made by Mr. John Bacon, Director of Information Systems, who
explained the problem the city is facing with its computer systems with regard to the year 2000. He
said it involves all of the city's mainframe applications, desktop environment, and several
miscellaneous systems. He said the biggest concern is about four major systems. Finance, Human
Resources, Maintenance Services, and Municipal Court. He said other major systems that are not
on the mainframe include public safety, computer-aided dispatch, records management system at the
Police Department, and the library system. Mr. Bacon said most of those are supported by vendors,
who will be responsible for solving the year 2000 problem. He noted that the library system is
already compliant for the year 2000.
Mr. Bacon said that of the approximately 900 personal computers in use in the city, about
half of them are suspected to not be in compliance with the year 2000, or about $1 million worth of
computers, which he explained. He also discussed other areas that may be of concern, such as
vehicles, services from major suppliers, and vendors to which the city supplies services.
With regard to the city's vehicles being in compliance, Mr. Jim Davis, Fleet Management
Superintendent, said he has spoken with representatives of General Motors and Ford Motor
Company and they assured him that their company's vehicles are in compliance. He said that while
the city may be vulnerable in some area of its equipment, to date staff has not found any evidence
that the equipment will not be in compliance for the year 2000.
Mr. Bacon described the city's mainframe applications in detail, as well as a comparison of
converting the computer systems or replacing them. He referred to a proposed time table that
describes the request for proposals for replacing the computer systems, including an outsourcing
proposal. Mr. Martin asked if the outsourcing proposals really allow for competitive bids or are they
IBM -directed. Mr. Bacon replied that it is not IBM -directed; he added that they do not preclude the
mainframe as an option, but it is not written for the mainframe.
According to the time frame, RFPs are expected by November 17th, and staff hopes to bring
the computer system purchase to the Council for award on April 21, 1998, with a very short
installation cycle of about eight months to have the system in place by the end of 1998.
Mr. Martin said that although technically the Council did not have to vote on concurring to
release the RFPs, he thought it would have been wise to somehow get the Council committed to the
process involved in replacing the computer system, which could cost $7 million. Mr. Hennings said
Minutes
Special Council Meeting
November 11, 1997
Page 4
one of the difficulties has been with the cost issue, and on November 17th they will begin to have
more information through the RFPs, and then they can also begin to determine how it will be
financed.
Mr. Martin also asked what actions the other governmental entities in Corpus Christi would
be taking with regard to the year 2000 computer issue. Mr. Bacon said Nueces County was planning
to retain their equipment and converting it to make it compliant; he said he did not know what
Corpus Christi Independent School District was doing.
Mayor Neal said he had raised that issue at the Texas Municipal League meeting, and they
basically said that cities were coping with the problem on their own. Mr. Martin said that a
partnership of the city, county and school district might be beneficial in reducing costs.
Mayor Neal asked if, once a new system is in place, whether the data could be downloaded
or if it would have to be entered, and Mr. Bacon said it would be a combination of the two. The
Mayor commented on the experiences he had as his company converted its system.
Dr. Gonzales emphasized the importance of talking with other entities and sharing
information about the computer systems. Mr. Martin discussed the need to have outside expertise
to evaluate the city's efforts on this project. A discussion ensued.
The other department heads involved in this project --Mr. Cruz-Aedo in the Finance
Department, Ms. Barbara Sudhoff with Municipal Court, Mr. Davis with Fleet Management, and
Ms. Cynthia Garcia with Human Resources --further explained contacts they have made with their
respective peers and representatives from other entities to discuss how they can learn from others'
experiences with this issue.
Mr. Martin said he had previously raised several of his concerns at other meetings, including
the need for outside expertise and talking with other entities, but his concerns have been ignored. Dr.
Gonzales echoed Mr. Martin's concerns.
Mr. Hennings said staff had conducted a successful pre -proposal conference that was
attended by several vendors. He noted that staff had a longer presentation to give during the special
Council meeting (but the time for the start of the regular Council meeting was approaching). Dr.
Gonzales asked if their questions would be answered, and Mr. Hennings said they would be. Mayor
Neal said they needed to have another discussion on this issue very soon.
The special Council meeting was adjourned at 1:35 p.m. on November 11, 1997.