The Salem Utilities Commission agreed Tuesday to loan the city up to $375,000 towards the purchase price of a new platform ladder truck for the fire department.
"Gentlemen, thank you," Fire Chief Jeff Hughes said.
According to the motion, the commission approved entering into a treasury investment note with the city in an amount not to exceed $375,000 for a term of 10 years and an additional five years for a bond anticipation note for fire equipment. The note will be renewable every two years at the tax-exempt bond market rate in effect, with an annual repayment of both principal and interest paid to the Utilities Department by the city.
Mayor John Berlin told commission members the city was in the process of negotiating for a new 102-foot ladder truck with a company that has a demo truck available, noting they're still working on the price, but had an amount to use as a benchmark to know how much money needed to be in place.
He said the city would have a shortfall in the capital improvements fund if they didn't secure a loan from the Utilities Commission to cover part of the cost. The rest will be covered by capital improvements.
City Auditor Betty Brothers stressed that the interest paid on the loan will go to the Utilities Department, not the city. The loan will be treated like any other debt of the city.
"You have our participation," Commission Chairman Bob Hodgson said. "Where we legally can, we are more than happy to help."
In the state of Ohio, he said a treasury investment note allows for a period of 10 years legally, but when the loan is for fire equipment, an additional five years is permitted, so the city will have 15 years to pay back the note with interest which will be updated every two years.
Both Brothers and Hodgson called the deal a win-win for everybody, with Brothers adding the city could have gone to a local bank, but this way, the city, specifically the Utilities Department, can earn the interest rather than a bank. Brothers said the total price of the ladder truck will be less than the original quote of $940,000 given to the city for a different demo truck from a different company late last year.
Berlin said having the financing in place will give him more latitude in the negotiations. The Finance Committee of city council is expected to take action on the fire truck when it meets at 6:30 p.m. Jan. 21, just before the 7 p.m. Salem City Council meeting. Council will also have to take action, allowing city Service/Safety Director Ken Kenst to enter into a contract for the purchase of the fire truck.
Citing the age of the truck and the need for a ladder with a longer reach, Hughes had come to the Finance Committee in 2012 about the need for a new truck and applied for a federal grant but didn't get it. The current ladder truck is 23 years old with a reach of 75 feet, with repairs getting costly.
Berlin said he's hoping to finalize everything in the next two or three weeks. Once the purchase is made, the demo truck will have to be marked and prepared for delivery.
The old truck, once the new truck is in service, will be advertised for sale on governmentdeals.com. Brother said they should be able to receive more than what the company would offer for a trade-in.
As a bonus, Berlin said the addition of the new ladder truck will allow the city to request a review of the city's rating for fire insurance based on safety features, which could lead to an improved rating and lower insurance costs for residents.
"We're hoping this will save everybody in town a few bucks on their fire insurance," he said.
The rating was last changed 11 years ago by the Insurance Services Office, which establishes classifications for cities for safety features. With the addition of the longer ladder truck and adding a 500,000-gallon water dtank on Roosevelt several years ago, which makes more water readily available for fighting fires, he can ask for the review, which could lead to a better rating.
The addition of a longer truck also requires some modifications inside the fire house to accommodate it. Kenst said Stitle Construction will do the work after quoting a cost of $18,600 to remove a section of concrete 15 1/2 feet wide, 6 feet deep and 3 1/2 feet high and rebuilding an inner wall. The renovation will allow them to go back another 6 feet in the northwest section of the fire station, leaving plenty of room to walk behind the truck, Kenst said.
He's expecting the work to begin before the end of January, with the money coming out of capital improvements.