Memorandum

Kenai Peninsula Borough  Finance Department

To: Timothy Navarre, Assembly President

Kenai Peninsula Borough Assembly Members

Thru: Dale L. Bagley, Borough Mayor

From: Jeffrey E. Sinz

Date: March 22, 2001

Subject: Ordinance 2001-09, Approving the Lease-Purchase of a CT scanner for the Central Peninsula General Hospital

Central Peninsula General Hospital, Inc. (GPGH, Inc.) current CT scanner is in need of replacement. Normal replacement is five to seven years and the current CT scanner is 13 years old and outdated. Currently, some patients must travel to Anchorage for testing.

The attached ordinance asks the assembly to approve the lease-purchase of a Siemens CT scanner for an amount not to exceed $1,400,000. The ordinance would authorize the purchase of the CT scanner and authorize the Mayor or his designee to enter into a capital-lease agreement with the financial institution offering the lowest net present cost of financing as determined through a formal competitive selection process.

CPGH, Inc. is proposing that the CT scanner be acquired through a five-year capital lease, rather than an outright purchase primarily because of the favorable interest rates currently available. The cost of financing is expected to be less than the rate of interest available on borough investments resulting in a net savings due to the lease. In addition, CPGH, Inc. would like to retain funds in the hospital plant expansion and replacement fund for other anticipated capital expenditures.