City Hall to be collateral in deal for emergency vehicles

April 21--PETERSBURG -- City officials are being forced to turn to some unlikely heroes to make sure the city's fire and EMS services receive much needed new vehicles. Because of the city's financial crisis, officials are making a deal with private citizens who can front the cost for new emergency vehicles. In an interesting twist, the city is also willing to put up city hall as collateral for the deal, as an assurance to the lenders that they will get paid back.

The police force currently needs 16 new vehicles, at a cost of $614,288. The fire department needs three new trucks, at a cost of $2,145,527.

"Every single day that a firefighter rolls out on a piece of equipment older than he is, or a police officer responds to an emergency call in a car with 160,000 miles on it, are days we want to avoid," said Interim City Manager Tom Tyrrell. "We want to get this equipment as soon as possible."

The need for new police and fire vehicles is not news to Tyrrell, or Interim Finance Director Nelsie Birch, who included in the upcoming fiscal year budget the necessary funds to obtain the equipment. The city normally obtains this type of equipment through lease agreements with vendors.

Though the problem lies the city's ability, or lack thereof, to access markets with a credit rating of "BB" with a negative outlook. This makes it extremely difficult for the city to find anyone willing to enter into a lease agreement with the city.

"We went out four different times," said Tyrrell. "We solicited four different times to the market, and were unsuccessful in getting any parties to propose."

Tyrrell noted that when soliciting these types of agreements, you solicit to "thousands of people." Though the money for the vehicles is already set aside in the upcoming budget, city officials were unable to find anyone willing to enter into a lease agreement with the city because of the city's financial woes.

Because of the predicament, City Council authorized Tyrrell during the April 4 meeting to "undertake emergency procurement action" so the necessary fire and police vehicles can be attained. This action is forcing Tyrrell and other officials to seek private funds to get the equipment. This means asking individual citizens who have the financial means to put up money for the fire and police vehicles.

"We've reached out to four people, who are interested and capable," said Tyrrell. He noted that all are property owners in Petersburg. They will remain anonymous until the deal is closed.

"[This agreement] is outside the rules because we couldn't get a partner inside the rules," said Tyrrell.

Included in this deal is an interesting caveat: officials must put up additional collateral, in addition to the cars themselves, in the form of city-owned property. The building that will be used is none other than 135 N. Union St., the Petersburg City Hall.

"What they're looking for is some assurance that no matter what happens, we're going to pay the note," said Tyrrell.

City Hall will act as a strong notice to the citizens who enter the agreement that they will get paid back.

"It's not a securitization in the financial sense, as much as it is in the emotional sense: they know that the city isn't going to let it go," said Tyrrell.

The deal will be evaluated in two areas: the interest rate and how fast the deal can close.

"Although it's an emergency procurement, we still want to get the best deal we can," said Tyrrell.

Officials are are hoping to close the deal as soon as possible, and have meetings set up with potential lenders in the upcoming days.

--John Adam may be reached at jadam@progress-index.com or 804-722-5172.

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