4-B
TO: Honorable Mayor and Members of the City Council
ATTENTION: Jeffrey L. Stewart, City Manager
FROM: Len Gorecki, Director of Public Works
SUBJECT: Consideration and possible action to implement a city-wide Vehicle Replacement Program through Enterprise Fleet Management Inc.
DATE: June 12, 2023
EXECUTIVE SUMMARY
Receive input from the City Council regarding the implementation of a city-wide Vehicle Replacement Program with Enterprise Fleet Management, Inc. to replace the City’s aging vehicle fleet.
RECOMMENDATION TO CITY COUNCIL
1) Approve the implementation and framework of a Vehicle Replacement Program; and
2) Direct staff to develop an agreement with Enterprise Fleet Management, Inc. for a Vehicle Replacement Program, in a form approved by the City Attorney, to be brought back for City Council consideration; or
3) Alternatively, discuss and take other action related to this item
FISCAL IMPACT
Vehicle lease expenditures totaling $60,000 in FY 2023-24 and $100,000 in FY 2024-25 have been allocated as part of the proposed biennial 2023-2025 budget under Account Nos. 010-48002-3100 (Street Maintenance) and 010-48002-3900 (Facility Maintenance) for a Vehicle Replacement Pilot Program.
DISCUSSION
Currently, the City’s fleet of light and medium duty vehicles consists of 46 vehicles assigned to various departments. The types of vehicles range from SUVs to specialty trucks primarily utilized by the Public Works Department. This includes 26 vehicles (over half of the fleet) that are over 15 years of age, several of which are near or over 100,000 miles, that are used for critical daily operations. As a result, the majority of the City’s fleet is aged to the point that, in many cases, the annual cost of maintaining an aged unit exceeds its salvage value.
Staff Report – Enterprise Fleet Management Vehicle Replacement Program June 12, 2023
DISCUSSION – Continued
A review of fleet replacement programs in others cities indicates that over the course of the past few years, a number of cities have opted to adopt a vehicle lease program and use contract services for the replacement of their fleets. This includes several neighboring cities such as Paramount, Downey, Norwalk and Lynwood. Their lease programs have resulted in substantial cost savings while allowing them to benefit from use of vehicles for 3- to 5-year cycles; which in turn has contributed to the reduction in maintenance and fuel costs, and significantly increased the resale values.
For the past several months, City staff has worked with representatives from Enterprise Fleet Management, Inc. (Enterprise) to put together a pilot program that would allow the City to test this process and determine if it represents a viable, efficient and long-term plan of action for future acquisition of fleet vehicles. In doing so, certain parameters for a lease program have been established including:
• The City will establish a list of vehicles marked for replacement. • Develop a model that represents a viable proactive replacement cycle of 3 - 5 years depending on economic feasibility and vehicle market conditions. • City staff would identify the required specifications and types of replacement vehicles in order to “right type” the fleet for current job use. • Lower the average age and improve overall safety of the fleet knowing that 26 of the current vehicles are over 15 years old including one vehicle that pre-dates Airbag standards (1998) and 21 vehicles that pre-date Anti-Lock Brake Standards (2007).
• Reduce net operating costs, knowing that newer vehicles significantly lower maintenance expenses and have increased fuel efficiency.
The proposed program offered by Enterprise is an “open -ended” lease structure which would allow the City to replace vehicles with less upfront capital. A suitable replacement plan will allow the City to replace its vehicles more consistently and maintain all the rights of ownership. The following is a list of highlights of this program:
• No mileage restrictions, no abnormal wear and tear and no early termination penalties.
• The City has all the rights of ownership and can equip vehicles with the aftermarket equipment required (i.e. utility bodies, tool boxes, specialty bodies, lights, etc.). • All the equity after resale of a lease vehicle belongs to the City and can be used to fund/lower costs of future replacement vehicles or as credit back to the City. • Leasing will minimize the amount of large capital outlays necessary for purchasing vehicles.
• If the pilot program is successful, the City would establish a proactive fleet replacement plan to acquire additional vehicles on a more consistent basis while significantly reducing maintenance cost and improving fuel economy, safety and vehicle down time.
Staff Report – Enterprise Fleet Management Vehicle Replacement Program June 12, 2023
DISCUSSION – Continued
Refreshing the aged fleet will have a positive impact on fuel expenses . With Corporate Average Fuel Economy (CAFÉ) standards and technology increasing the MPGs of newer vehicles, the process of replacing aged vehicles will allow the City to leverage the best technology and best MPG possible vs the current plan of keeping vehicles for 15+ years.
Enterprise will provide a local Account Team to assist the City with implementing and executing the program at no additional cost to the City. Staff will meet with the Enterprise team annually to proactively evaluate the pilot plan, budgets, and market conditions.
The following is a list of services provided by Enterprise:
• Make recommendations on the most cost-effective vehicles in each class • Review the best time to order or sell vehicles
• Monitor the fleet to ensure efficiencies with maintenance and fuel • Compile analysis on the best alternative fuel vehicles • Review mileage patterns and fuel miles per gallon
• Establish a future long-term replacement plan
For the upcoming 2023-25 budget cycle, the total cost of the pilot program will be determined by the number and type of vehicles selected for replacement. The proposed budget currently has $60,000 in FY 2023-24 and $100,000 in FY 2024-25 earmarked for such a program. Should the City determine at any point in the future that the pilot program is not a good fit, the City can easily cancel services with a 30 -day notice and pay off the loan balances on the leased vehicles in order to take title. Furthermore, while staff intends to move forward with the pilot program, the City is under no contractual obligation to proceed with vehicle replacements in future years.
An agreement with Enterprise can be executed without going through the traditional bidding process by piggybacking off of the existing Sourcewell (formerly NJPA) RFP & contract for Fleet Management Services. Sourcewell is a government agency that has been providing cooperative purchasing programs throughout North America for over 40 years. This cooperative purchasing system enables member entities to purchase on an “as needed” basis from competitively awarded contracts with high performance vendors. The City is a current member of Sourcewell and since Enterprise has been awarded a contract with Sourcewell through a competitive process for Fleet Management Services, the City can enter into an agreement with Enterprise pursuant to the Sourcewell contract.