By writing a sizable check now, the city of Washington will get a discount on a new fire truck.
The Washington Fire Department sought bids to replace a 1997 pumper truck earlier this month. The low bid came in from Pierce Fire Equipment, Inc. with the price tag of $432,075. The other bids for the truck came from Alexis Fire Equipment ($498,588) and Mid-America Fire Equipment ($440,298).
Pierce’s winning bid, however, is not the final sticker price.
Washington Fire Chief Bill Halmich explained to the council that the contract with Pierce has options for extra savings. Halmich said the contract’s options could drop the cost by close to $16,000.
The first deduction, which would save $6,443, would come if the city made the chassis payment 90 days prior to delivery. Another $9,143 in savings would occur if the city chooses to pay the total cost up front with a $1,169 performance bond. The total savings would drop the cost of the pumper down to $416,489—a grand total of $15,586 less than the initial price.
The council unanimously approved the plan to pay up front.
The prepayment would have to be made within 15 days after Pierce approves the contract.
Halmich told the council he didn’t push the prepayment option because he was unsure about available city funds.
“If the city is in a position to take advantage of both deductions, it would reduce the price by $16,000 and we’d be insured of completing the project by virtue of the bonds,” Halmich said.
City Administrator Jim Briggs said the city should be able to prepay, however, the money is tied up in investments.
“(The money) is not just sitting in a vault somewhere,” he said.
Briggs said pulling the money out now would still save the city money in the long run. Normally the money is invested and earns interest. In this case, however, it would be unlikely for the invested money to earn enough interest to cover the $9,143 difference. Halmich said the city typically receives 1 to 2 percent annual return on investment and this purchase would get about a 5 percent savings.
“The value of the savings would exceed the current return on investment,” Halmich said.
Halmich said the fire department has used the prepayment plan when purchasing a tanker and other smaller units before with prepayment with no problems. He also said that this plan would be the biggest cost savings the department has had in a while.
Halmich said the city can expect to have the truck delivered this summer in either July or August.