City Council agrees to finance purchase of police vehicles

The Mebane City Council approved a five-year loan from First Bank for the purchase of five new vehicle for the Mebane Police Department at Monday night's meeting. The City is financing the five MPD vehicles at an interest rate of 2.58 percent, resulting in payments totaling $59,918.30 in fiscal year 2019-20, and a total of a little more than $19,000 in debt service payments over the next five years. Although multiple city leaders expressed reservations, the financing for the purchase was unanimously approved. 

At Monday night’s Mebane City Council meeting, the elected board approved financing for the purchase of five new vehicles for the Mebane Police Department. Mebane Finance Director Jeanne Tate recommended to the board that the city purchase through financing the five new vehicles for MPD, completely outfitted with full equipment. 

According to Tate, the total on the financing for the five new police vehicles is $266,468. The City put out a bid proposal for a loan, with the winning bid coming from First Bank at 2.58 percent. First Bank offered Mebane the lowest interest rate, no additional fees, and no pre-payment penalty. 

Tate indicated that it will cost Mebane a little over $19,000 in debt payments over five years of financing. Debt payments would not begin until the 2019-20 fiscal year based upon the closing date of the agreement. Next year’s payments would total $59,918.30. Future years’ principal plus interest payments will decline over the ensuing four years.

“Do they (the police vehicles) last that long, Chief?” City Council member Ed Hooks asked to Mebane Police Department Chief Terry Caldwell, among those in attendance at the session. 

"Yes sir,” Caldwell said in response. 

“What is the average life of a police vehicle?” fellow City Council member Patti Philipps asked Caldwell. 

“(It’s) between 125,000 and 150,000 (miles),” Caldwell responded. “Now that we’ve gone to individually-assigned vehicles, it’s 125,000 or so. It’s about five or six years.”  

City Council member Tim Bradley and Mayor Glendel Stephenson expressed reservations about having to finance the police vehicles. But with two considerations in mind - the number of vehicles being purchased, and the money spent in Mebane’s 2018-19 fiscal year budget to provide for the new Mebane Community Park - the two city leaders conceded that financing was the way to go in this specific instance. 

“I assume the reason (we’re financing) is because of the higher number - five (vehicles being purchased),” Bradley said. “My concern initially - and I talked with Jeanne and (City Manager) David (Cheek) both about it - my concern initially was that if we roughly buy three, four cars every year, and if we finance them, then we’re eventually going to get to the same debt payment every year that we would have had if we’d just bought three vehicles each year than we would paying interest. But I understand this is a higher number (of vehicles).” 

“I was all for lease-purchase with the larger fire trucks. I was just a little concerned. But after she (Tate) explained it to me, it makes perfect sense,” Bradley continued. 

“I don’t want to speak against it,” Mayor Stephenson added. “But I want to uphold some degree of what has been said here. We shouldn’t be financing our cars. We want to pay for them. But I understand too that we’ve spent an awful lot of money in the last year or two, and we’ve pulled our balances down quite a bit. I hope we will rebuild our balances to the point that on expendable items and such - short-term things - that we always maintain enough cash balance that that we can pay for them.” 

“We’ve typically not financed police vehicles,” Tate said. “The last time we financed any vehicles was in 2014. And that was a couple of the bigger public works vehicles, like the “vac” (vacuum) truck. This year we chose to do the financing because we had already planned to spend lots of money on the park. So after we transferred fund balance to the new park project, we didn’t want to hit fund balance again with this purchase, which is what we were about to have to do.” 

Tate added that the City’s old loan from the round of 2014 financing is coming off the City’s books this calendar year, and will get paid off. The financing for the new police vehicles will replace it, as was unanimously approved in a vote by the City Council. 

“The decision to add these police positions and vehicles came late in that budget process,” Tate added. “Rather than try to go back and balance the entire budget that late, we would have hit (Mebane’s) fund balance. We’re already at 43 percent of our fund balance to expenditures. Our goal is to keep that at 50 (percent). So rather that reduce that number, we decided to put this into financing.”