The Honorable Board of Supervisors
County of Los Angeles
383 Kenneth Hahn Hall of Administration
500 West Temple Street
Los Angeles, CA 90012
Dear Supervisors:
AUTHORIZE THE PURCHASING AGENT TO COMPLETE AND EXECUTE ALL
NECESSARY DOCUMENTS RELATIVE TO THE ACQUISITION OF A 500-HOUR
MAINTENANCE INSPECTION AND SERVICE FOR THE SIKORSKY S-70 FIREHAWK
HELICOPTER
(ALL DISTRICTS) (3-VOTES)
IT IS RECOMMENDED THAT YOUR BOARD ACTING AS THE GOVERNING BODY OF
THE CONSOLIDATED FIRE PROTECTION DISTRICT:
Authorize the County Purchasing Agent to complete and execute all necessary purchasing
documents relative to the acquisition of a 500-hour maintenance inspection and service for the
Sikorsky S-70 Firehawk Helicopter, not to exceed $200,000.
PURPOSE/JUSTIFICATION OF THE RECOMMENDED ACTION
The purpose of this recommended action is to authorize issuance of a purchase order to
provide a 500-hour maintenance inspection and service of the Sikorsky S-70 Firehawk
Helicopter #16, Serial Number 702453, as required by our “Total Assurance Program”
maintenance agreement with Sikorsky Aircraft Corporation. Labor, expenses, and service for
the 500-hour maintenance inspection will be performed at Barton Heliport and shall include six
helicopter mechanics and one quality assurance representative.
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FISCAL IMPACT/FINANCING:
Pursuant to the Budget Correction Plan that was transmitted to your Board on August 18, 2000, these replacement helicopters and related equipment will be 100% leased-purchased in order to maintain a minimal prudent reserve over the next three years. The Chief Administrative Office and the Internal Services Department has negotiated a ten year lease-purchase financing package provided through Sikorsky by GE Capital Public Finance for the following items (costs include sales/use tax):
· $21.1 million for two S-70A FIREHAWKS from Sikorsky.
· $ 2.0 million for EMS interiors/avionics from Air Methods.
· $ 1.3 million for water tanks/extended landing gear from Aero Union.
· $ 0.6 million for ground support equipment from Sikorsky that our mechanics will need to maintain the helicopters.
The projected annual cost for this lease-purchase is $3.4 million ($1.6 million for 2000-01). Each of the vendors for this acquisition will be funded from an escrow fund established under an escrow agreement among the County, GE Capital and the State Street Bank as escrow agent. The $25 million in purchase costs will be deposited by GE Capital into the escrow fund upon execution of the Sales Agreement and then funds will be disbursed at County direction according to the payment terms established in the purchasing documents.
Under the TAP, there is a minimum annual requirement of six hundred flight hours and the flight hour rate is fixed at $924 hour through December 31, 2003, resulting in a minimum annual cost of $554,000 during this period. The TAP hourly flight rates are then increased for the next three calendar years: $989 for calendar year 2004, $1063 for calendar year 2005, and $1148 for calendar year 2006. For the remaining six calendar years, the increase each calendar year will be a minimum of 1.5%. The maximum increase that can be imposed in any one calendar year is capped at 11%, with any excess being recovered in future years of the agreement. However, the actual hourly flight rate used during these six calendar years will be determined by a formula using the U.S. Department of Labor, Bureau of Labor Statistics Producer Price Index-Commodities for aircraft parts and auxiliary equipment. Both the District and Sikorksy have the right under TAP to ask for a change in this formula if either party believes that the formula is not equitable to that party based on a schedule of actual part prices to be provided annually by Sikorsky. The hourly flight rate used for the last six months of the TAP agreement (January through June of 2013) will be the rate used for calendar year 2012.
The Department will pay TAP costs due in the current fiscal year (estimated at $100,000) from available funds in its Services & Supplies budget. The information provided by Conklin and de Decker indicate that using TAP to procure helicopter parts will cost us $1.2 million more over the 12 year term of the agreement than if the District were to purchase these parts on an as-needed basis. However, this cost is offset by avoiding an up-front parts inventory cost of at least $4.5 million (which would have to be immediately replenished for critical parts) and the fact that TAP serves as insurance that the District will not incur substantial unexpected costs due to catastrophic failure of parts. In addition, the District will no longer be incurring costs to purchase parts for the three Bell 205’s.
Following the appropriation adjustments from the Department’s Helicopter ACO Fund included in Attachment III, our District will have sufficient funding to pay for the helicopter training and lease-purchase costs of the helicopters due in the current fiscal year. The $1.6 million in lease payments due in the current fiscal year will be funded from the Department’s Other Charges budget through a combination of the $1.4 million budget adjustment attached. The $655,000 for Sikorsky training services due in 2000-01 will be funded from the Department’s Services & Supplies budget by the attached reallocation to the budget. Future TAP costs will be funded by annual increases in revenue received by the District from property taxes and reimbursement for services provided to other agencies.
Attachment IV is the Sales Agreement with Sikorsky for the helicopters, ground support equipment. Attachment V is the TAP Agreement with Sikorsky. Both agreements have been approved as to form by County Counsel.
We will be selling the three Bell 205’s and associated parts as surplus once the FIREHAWKS are operational. These sales are expected to provide approximately $4.6 million of one-time monies to help finance future lease-purchase payments. If in the future we were in a cash position to
buyout the lease-purchase, we would go back to the Board for the authority necessary to do that in order to minimize financing costs.