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Town considers lease-to-buy options on FRPD radio system purchase

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At an August 6 work session, the Front Royal Town Council got a more detailed breakdown on costs of what was estimated at a $500,000 purchase for a modern, Motorola VHS radio system for the Front Royal Police Department. That cost was specified as $545,000, plus annual maintenance costs between $6,400 and $8,400 in years two through five of the purchase.

On July 16, an apparent unanimous council consensus was reached that the FRPD radio expenditure was a necessary one. The necessity being, not only improvement of departmental connectivity town and county-wide, but also having a system that is compatible with other county law enforcement and emergency services departments, as well as the Virginia State Police and other surrounding jurisdictions’ agencies.

At the mid-July work session Vice-Mayor Eugene Tewalt asked if a leasing arrangement could ease the pain of the half-million dollar, up-front price tag. The fiscally-conscious vice mayor expressed a preference for a guesstimate of $80,000 annual lease payments, as opposed to an up-front payment of the total cost.

Teltronic rep Butch Bryant, at the podium, listens to a question from the far end of council table. FRPD Chief Magalis, Capt. Ryman and Major Nicewarner are interested spectators. Photos/Roger Bianchini

With the life expectancy of the system described as long-term, an open-ended lease, even at $80,000 per year, would not make sense, passing a total cost of around $500,000 in six years.

However, on August 6, four, five and seven-year lease-to-buy options were presented to council by Motorola vendor Teltronic rep Butch Bryant. All three options deferred the first payment to one year after the execution of the contract (I can see the vice mayor smiling); with lease rates ranging from 4.52% to 4.86% all three raised the radio system price above the quoted straight purchase price of $545,000.

The four-year lease option carried a $152,324 annual payment and a total price of $609,296; the five-year $124,724 annually for a total cost of $623,620; and the seven-year, $94,083 annually and $658,581 total – I wonder if that vice mayoral smile is turning into a frown?

Councilman Jacob Meza asked Town Finance Director B.J. Wilson what the relative benefits of the lease-to-buy option versus an internal loan by the Town to itself. Wilson said he would look further into those numbers, but guessed the internal loan might be slightly more beneficial for the Town. Wilson said he would also explore alternative financing options through statewide municipal organizations.

Extreme situations sometimes require extreme (financing) solutions.

Questioned on installation timeframes by Councilman William Sealock, Bryant said most of the lead time involved receiving the equipment. Coupling that with installation and testing time to get the system up and fully operational was estimated at three months. See related story here

1 Comment

1 Comment

  1. Kenneth Dameron

    August 13, 2018 at 10:51 am

    Seems to me that, once it has been established that the Police Department NEEDS (how essential?) this new radio system, and the best price quoted is $545,000, the only question is whether the Town can borrow money at less than Motorola wants to charge. I should think that the Town could get a lower rate in the open market.

    Maybe negotiate harder with Motorola, which is obviously eager to sell the radio system. Or maybe fold it into the new Police Department Headquarters, which is being financed (through EDA) by the NMTC at 2.5%. At this rate $545,000 could be paid off in 5 years with monthly payments of $9,672 ($116,068 yearly for a total of $580,340).

    Council could obviously benefit greatly if they had an old (25+ years) Texas Instruments “Executive Business Analyst” calculator, which is capable of computing the payment amount, provided the parameters are defined (i.e., the current value, the interest rate, and the term). There may be a comparable tool available on the Internet as well.

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