CARB Prop 1B Financial/Other Data Required for Truck Lease-to-Own Programs (Co-mingled funds scenario only)

Transcription

1 CARB Prop 1B Financial/Other Data Required for Truck Lease-to-Own Programs (Co-mingled funds scenario only) 1. Who would own the new trucks and be the lessor? Daimler is the owner and lessor. The structure of the lease agreed with Daimler Truck Financial is a Terminal Rental Adjustment Clause (TRAC). A TRAC leaseto-own must meet certain criteria as defined by the Internal Revenue Code and as such is treated as a true operating lease for income tax purposes. At the same time, the lessor (DTF) is the equipment owner and therefore captures the depreciation tax benefit and any tax credit that will be passed on to the Port in the form of lower financing cost. These leases will be offered to Independent Owner Operators (IOOs) and Licensed Motor Carriers (LMCs). 2. Requested bond funding per truck The CARB grant will be $50,000 per truck. The Ports have agreed to maximize the use of the Proposition 1B grant that was awarded jointly to both Ports and is being administered by the CARB. The CARB Program stipulates that the funds to subsidize the truck purchase needs to be spent in an 18-month period. Therefore, the lease payments in the first 18 months will be accelerated and reduced in the following 66 months. DTF has agreed to have a step down in payments at the 19 th month. 3. Total State funding per truck The CARB has awarded a total of $50,000 per truck. There are no other sources of state funds used. 4. Anticipated truck options (makes, models, fuels) for lease-to-own program Truck options for the lease-to-own program are as follows: Diesel Manufacturer Model Cab Configuration Freightliner Columbia Day Cab International Transtar Day Cab Mack CXU613 Day Cab Volvo T200 Day Cab Freightliner M " Extended Cab International Transtar 26" Extended Cab Mack CXU613 48" Extended Cab Volvo T430 42" Extended Cab

2 LNG Manufacturer Model Cab Configuration Kenworth T800 ISX-G Day Cab Sterling * LT8500 ISL-G Day Cab 5. Anticipated truck purchase price (including any volume discounts) and sales tax Purchase s including sales and excise taxes are as follows: Diesel Manufacturer Model Cab Configuration 100 Unit 250 Unit 500 Unit 1,000 Unit Freightliner Columbia Day Cab $93,310 $93,009 $92,709 $92,408 International Transtar Day Cab $92,160 $92,160 $92,160 $92,160 Mack CXU613 Day Cab $92,550 $92,550 $92,550 $92,550 Volvo T200 Day Cab $91,409 $91,409 $91,409 $91,409 26" Extended Freightliner M2-112 Cab $97,355 $97,054 $96,754 $96,453 26" Extended International Transtar Cab $94,455 $94,455 $94,455 $94,455 48" Extended Mack CXU613 Cab $96,463 $96,463 $96,463 $96,463 42" Extended Volvo T430 Cab $97,122 $97,122 $97,122 $97,122 LNG Manufacturer Model Cab Configuration 100 Unit 250 Unit 500 Unit 1,000 Unit Kenworth T800 ISX-G Day Cab $197,123 $192,313 $188,705 N/A Sterling * LT8500 ISL-G Day Cab $161,135 $161,135 $161,135 $161,135 Note: All prices reflect the Best and Final pricing provided by dealers for the 2008 calendar year. 6. Term of lease options 3 years, 5 years, 7 years? The term of the lease between DTF and the lessee is 7 years

3 7. Interest rate for each term offered The interest rate agreed with DTF on the outstanding balance of the lease will be fixed at the time of signing the lease and will consist of the five year, A - swap rate, which is an index published daily, plus a margin. The margin will range between 1.19% and 1.46% on the LNG and between 2.24% and 2.51% on the diesel. The variation within each type of truck, diesel and LNG, is driven by the tax benefit from depreciation depending on when the transaction is consummated in the calendar year. The variation between the LNG and the diesel margin is a result of a current tax credit when purchasing LNG trucks. For example, using the A - swap rate of 5.55%, the interest rate on LNG trucks ranges between 6.74% and 7.01% and on diesel trucks it ranges between 7.79% and 8.06%. DTF has re-pricing triggers pegged to criteria such as: volume of transactions, Port s credit rating, Daimler s credit rating, default ratio, and unforeseen events such as bankruptcy in the automotive industry and change of control of or acquisition by Daimler. 8. Fees what kind and amount and who pays (truck owner/lessor) The lessor and the Port will pay all fees and taxes including (warranties, Federal Excise Tax (FET), California tire recycle fee. The Ports will pay processing/documentation fee. 9. Which fees are included in calculating the APR No upfront fees are included in the APR that is paid by the Lessee. All fees are paid by the Ports. 10. Effective interest rate (Annual Percentage Rate - APR) for each term For example, the interest rate on LNG trucks ranges between 6.74% and 7.01% and on diesel trucks it ranges between 7.79% and 8.06%. 11. Lease to own program overhead or administrative cost and how determined (such as a fixed dollar amount or percentage of program cost, or per vehicle charge) Lease/grant administration costs will be paid by the Ports to grant and Concession Administrators. Credit, collection, and servicing costs are included in the APR calculations. 12. Estimated monthly payment based on lease term and truck options

4 During the first two years of the seven-year lease, the lessee pays $300 - $400 a month for a diesel truck, $300 for a Sterling LNG truck, and $772 for a Kenworth LNG truck. In the last five years of the lease, the lessee pays $500 - $600 for a diesel truck, $500 for a Sterling LNG truck, and $972 for a Kenworth LNG truck. The payments were structured in this manner to mitigate income tax impact on lessees since the accelerated CARB funds will be considered taxable income. This payment schedule will result in the Port subsidy on a net present value basis to be approximately 70% for diesel trucks, 80% for Sterling LNG, and 60% for Kenworth LNG, the more expensive LNG model. The Port will supplement the $50,000/truck CARB grant in order to reach the levels of subsidy listed above. For example, using an 8% interest rate, the following are examples of typical trucks: Diesel Sterling Kenworth Cost of Truck* 91, , ,123 Monthly Payments Total Monthly Payment 1,191 2,058 2,627 Monthly Maintenance paid by POLB Lessee Monthly Payment first 2 years Lessee Monthly Payment last 5 years Additional Expenses Paid by POLB AVL Locator Cost 2,500 2,500 2,500 Processing/Documentation Fee (B) 96, , , *includes sales and federal excise taxes 13. Dollar amount (residual value or buyout) equipment owner has to pay at end of lease to take ownership and how determined The lease does not have any upfront payment and the lease will be amortized over a seven year period. The residual value at the end of the seven years is 16% of the cost of the truck and the lessee will have an option to purchase the truck by paying half the residual value.

5 14. Total dollars to be paid by lessee to take ownership of truck over the course of the lease (monthly payments, any fees, any residual/buyout), based on lease term Diesel Sterling Kenworth Total Payments Lessee Payments 37,200 37,200 76,847 Lessee Residual Buyout 7,312 12,890 15,770 Port Lease Subsidy 12,884 85,683 93,837 Port Paid Maintainence 11,340 14,700 14,700 Port Subsidy Residual Buyout 7,312 12,890 15,770 Port Other Payments 3,250 3,250 3,250 CARB Grant 50,000 50,000 50, , , ,174 Note: Other Payments Includes:: Automatic Vehicle Locaters (AVLs) Processing Fee 15. Ability to pay off lease early with or without penalty No early pay off permitted 16. Prepayment penalty if pay off early and how calculated N/A 17. Fees/penalties for late payments and default (type and amount) Payments that are more than 10 days past due may be charged an amount equal to 5% of the past due amount. If determined to be in default, the lessee would be responsible for the balance of the lease payments and the residual value of the truck. 18. Any non-program limitations on operation such as annual or excessive mileage None 19. Source of old trucks to be scrapped (lessor s fleet? Individual lessee to trade in old truck to participate?) The lessee will take delivery of the new truck from the dealer s lot. Before the new truck is delivered, an old truck must be turned in to the dealer to be

6 scrapped. The dealer then scraps the old truck and gets a scrapping certificate that is forwarded to the Port s grant administrator. 20. Mechanism to include applications to replace specific old trucks with new lease-to-own trucks in the competitive process for bond funds The Port will support subsidized leases to qualified IOO s and LMC s that meet both operational and credit requirements. The approval process is as follows: 1. Applicants must complete an Application for Truck Replacement Funding. They must demonstrate that they meet the required operational criteria, including compliance with Proposition 1B guidelines. This includes, among other requirements, proof of two years of drayage experience, commitment to 300 trips/year to the San Pedro Bay Ports, and a copy of a valid Transportation Worker Identification Credential (TWIC) or receipt of a TWIC enrollment submission (An applicant will not, however, be able to take possession of truck without proof of a valid TWIC card). The Port s Grant Administrator, TetraTech, will review and forward applications that meet the required operational criteria to DTF, along with a completed credit application. 2. DTF will review the credit of each applicant and either approve or not approve the applicant based on credit criteria established by the Port with DTF s guidance. The credit criteria will be set at a level that will allow the greatest number of applicants to qualify, but minimize the Port s exposure to default risk, to the greatest extent possible. Recent history of bankruptcies, repossessions, and open Federal/State liens or judgments will disqualify applicants. 3. Daimler will notify applicants, as well as the Grant Administrator, if they have been approved or not approved for financing. Truck dealers will be notified of approved applicants. 4. Approved applicants will then proceed to the Clean Truck Sales and Leasing Office, located at Santa Fe and Anaheim in the city of Long Beach. All approved truck dealers as well as Daimler has been located at this site. An applicant will then select their desired truck and complete the sales or lease transaction. Since the Sales and Leasing Office has been located within the City of Long Beach, the sales tax for all Long Beach transactions will accrue to the City of Long Beach. 5. As grant applications for trucks accumulate, the Port s grant administrator will aggregate the number of trucks, by model that needs to be ordered and will advise the respective dealer.

7 6. The lessee will take delivery from the dealer s lot. Before the new truck is delivered, an old truck must be turned in to the dealer to be scrapped. The dealer then scraps the old truck and gets a scrapping certificate that is forwarded to the Port s grant administrator. 21. Mechanism to have both lessor and lessee sign contract with local agency for bond funds or otherwise be jointly and severally obligated to fulfill the conditions of that contract The lessee must sign a Participant Agreement with the Ports before being allowed in the program. The lessor must sign a Program Agreement with the Ports before being allowed in the program. These agreements delineate for both the lessor and lessee their responsibilities including being jointly and severally obligated to fulfill the conditions of the contract. 22. Mechanism to transfer lease from initial lessee to second lessee in case of default (and obligate second lessee under the bond contract) If a lease goes into default, DTF will work with the lessee to turn the truck in without having to resort to repossession. The Port s grant administrator will then identify an eligible grant recipient that agrees to take over payments for the remaining life of the lease. This process is known as slip-seating. DTR will invoice the Port a fee of $1,500 for each truck that is slip-seated with a new lessee. The new lessee will have to be approved for the program and then enter into a lease arrangement with the lessor for the remainder of the lease term. The new lessee will also have to enter into a participant agreement that obligates them to the bond contract. This will enable the Port to keep the trucks in the program and servicing the Port. Note: local agencies awarded bond funding that includes truck lease-to-own programs will need to provide a copy of the sample contract and lease agreement to ARB for review prior to receiving funding