DATE: March 25, 2024
TO: Mayor and Members of the City Council
President and Members of the EMID Board of Directors
VIA: Stefan Chatwin, City/District Manager
Marlene Subhashini, Assistant City/District Manager
FROM: Andrew Brozyna, Public Works Director/City Engineer Kurt Zander, Building and Vehicle Maintenance Manager
DEPARTMENT: Public Works
SUBJECT: VEHICLE REPLACEMENT FUND OVERVIEW AND INTERNAL SERVICE FUND ALLOCATIONS FOR FY 2024-2025
RECOMMENDATION
It is recommended that the City Council review this report and its attachments and direct that the budget be prepared as outlined or provide alternate policy direction regarding the development of the Vehicle Replacement Internal Service Fund budget for FY 2024-2025.
EXECUTIVE SUMMARY
There are two budget impacts associated with the Vehicle Replacement Fund: (1) expenditures associated with the Vehicle Maintenance Division operation, including the purchase of replacement vehicles (Attachment 1); and (2) the transfer of funding to support the Vehicle Maintenance Division operation and for the future replacement of vehicles, which are reallocated to each user department’s budget based upon the assignment of the vehicle (Attachment 2).
If the budget is prepared as detailed in this report, the Vehicle Maintenance Division is estimated to require the expenditure of $2,512,125 from Fund 501 Vehicle Replacement Fund in FY 2024-2025, including $745,000 for the replacement of vehicles. In addition, the budget will reflect transfers totaling $2,404,887 to the Vehicle Replacement fund budget from the General Fund and Enterprise Funds to support the maintenance
operation and the future replacement of vehicles in the fleet.
BACKGROUND
The vehicle maintenance and replacement program was created to provide proactive and effective management, maintenance, inspection, repair, and replacement of all City/District vehicles in order to ensure a consistently efficient and safe vehicle fleet of all service vehicle types through established vehicle maintenance protocols. A reliable fleet allows staff to continue to provide the highest quality service to the Foster City community.
The Vehicle Replacement Fund provides for the distribution of costs for fleet management among user departments and funds. It also serves as a funding mechanism for the on-going replacement of vehicles. Setting aside replacement funding and planning for replacement over the life of the vehicles provides for an orderly replacement process.
As a guideline, vehicles in the City’s fleet are expected to achieve at least the following minimum useful lives, and funding is planned according to this replacement schedule.
However, it is expected for most vehicles to significantly exceed these minimums, sometimes by twice the minimum life or more.
Table 2: Minimum Useful Lives (Funding Cycle)
Vehicle Type: Funding Available After:
Police cruisers 5 years
Police motorcycles 6 years
Sedans 6-7 years
Maintenance trucks and tractors 8-13 years
ANALYSIS
The Vehicle Maintenance Division continually monitors the fleet to ensure that each vehicle continues to effectively serve the needs of the City. The vehicles are subject to on-going comprehensive evaluation of factors such as safety, life expectancy, performance, maintenance record, mileage, condition, fuel efficiency and sustainability, integrated technology, lighting, and customization to suit department operations.
Regardless of assigned useful life, vehicles are only recommended to be replaced when this analysis has demonstrated that replacement is warranted.
In Attachment 2, Internal Service Fund Charges, the distribution by division of the 79 vehicles in the City’s fleet is detailed in parenthesis. The Vehicle Maintenance Division also maintains over 400 pieces of small equipment.
Based on their age, thirty-three (33) vehicles had adequate funding for replacement in FY 2024-2025. However, Staff is recommending to replace the twelve (12) vehicles that are listed in Attachment 1, Vehicles to be Replaced, and to extend the useful lives of the twenty-one (21) vehicles shown in Attachment 3, Changes to Estimated Useful Lives.
This recommendation is based on a thorough review of the maintenance history, usage and condition of the vehicles in question as well as an assessment of the availability in the marketplace of the types of vehicles needed. Staff does not anticipate that deferring the remaining vehicles will have a significant negative impact on City operations or on future scheduled replacements based on the overall condition of the fleet.
When vehicles are recommended for replacement, Vehicle Maintenance staff continues to evaluate fuel efficient fleet alternatives when assessing the choice of replacement vehicles. The vehicle inventory currently includes four (4) Toyota Prius hybrids, two (2) Ford C-Max hybrids, one (1) Ford Escape hybrid and one (1) Ford Focus electric vehicle.
The City has entered into an agreement with Peninsula Clean Energy to participate in their GovEV program that will assist the City to create a long-term plan for the installation of charging infrastructure and the future purchase of electric fleet vehicles in conformance with regulations of the California Air Resources Board and other regulatory agencies.
Staff routinely monitors fuel costs, and, despite the affect that the economy is having on fuel prices, Staff anticipates that the current fuel budget is adequate. The average fuel cost per gallon in 2023 was $3.65 (unleaded) and $4.23 (diesel), which was 8% lower (unleaded) and 4% higher (diesel) than average 2022 prices.
CEQA
Not Applicable
FISCAL IMPACT
There are two budget impacts associated with the Vehicle Replacement Fund.
The expenditures for the Vehicle Maintenance operation are found in the Vehicle Maintenance Division budget, including staffing, maintenance supplies, replacement of vehicles, insurance and fuel for the vehicle fleet. The total recommended budget for the Vehicle Maintenance operation is $2,512,125 (Attachments 4 and 5).
The second budget impact is transfers from the General and Enterprise Funds to the Vehicle Maintenance Fund to fund the Vehicle Maintenance operation. The cost for the Vehicle Maintenance Division operations is distributed among the various departments and funds based upon the number of vehicles that are assigned to them.
Transfers also account for the future replacement of vehicles. The total recommended transfer for future replacement of vehicles is $737,763. This cost is distributed among the various departments and funds based upon the number and type of vehicles that are assigned to them.
Since FY 2014-15, only 85% of the total projected vehicle replacement costs are charged back to departments. Because of interest earnings, cost savings associated with purchases and revenue from the sale of replaced vehicles, this fund tends to experience a growing reserve balance. Employing a discounted charge-back methodology reduces the impact to the General Fund while maintaining a sufficient balance to accomplish the necessary vehicle and vehicle maintenance division equipment purchases.
In Fiscal Year 2023-2024, the City Council approved a transfer that was less than the calculated proposed amount. Any proposed transfer that was greater than the previous year was frozen at the previous year’s amount. A summary of the total fiscal impact as distributed among funds is shown in Table 3. Details are shown in the attachments to this report.
Table 3: Vehicle Replacement Fund Annual Replacement Charge (Transfer) Summary – All Funds Fund
Proposed
FY 23-24
Approved
FY 23-24 ^
Recommended
FY 24-25
Increase
(Decrease)
Prop vs Rec
General 1,605,587 1,207,995 1,567,657 (37,930)
Water 198,050 198,050 232,672 34,622
Wastewater 427,534 427,534 531,657 104,123
ISF-Building 103,394 103,394 72,901 (30,493)
Totals 2,334,565 1,936,973 2,404,887 70,322
^ Council approved freezing or reducing transfers in FY 23-24 The increase in allocation charges shown in Table 3 is due largely to the overall increase in the cost of the Vehicle Maintenance operation, summarized below and detailed in Attachment 5, which includes the addition of a Fleet Supervisor position in the Vehicle Maintenance division. The Fleet Supervisor job classification was approved by the City Council by Resolution 2023-121 on December 18, 2023 (Attachment 9). Staff will be providing additional details of this as well as any other proposed personnel additions/changes at the next budget study session on May 13, 2024 when we discuss the overall preliminary FY 2024-2025 City/EMID budget. This cost is offset, in large part, by a notable reduction in many divisions’ replacement charges related to the resetting of the annual charge upon the recommended purchase of twelve (12) vehicles in FY 2024- 2025.
Attachment 4, Vehicle Replacement Fund Budget Comparisons, shows that the overall cost of the vehicle maintenance operation budget increased by 72% ($1,054,069) due to the following changes:
$242,480 Increase in personnel costs due to the addition of a Fleet Supervisor position as well as regular cost of living adjustments for assigned staff. $745,000 The cost to purchase the recommended 12 vehicles in FY 2024-2025 compared to no vehicles replaced in FY 2023-2024.
$73,250 Increase in insurance costs.
($6,600) Other minor adjustments in supplies and services.
Staff routinely monitors fund balances to ensure that adequate funds are available. Based on the Mid-Year Financial Review calculations from the Finance Department outlined in the Internal Service Fund Overview also contained in this agenda packet, the Vehicle Replacement Fund is expected to end Fiscal Year 2023-2024 with an available fund balance of $6,292,580. The amount reserved for the replacement of vehicles and equipment through the end of FY 2023-2024 is $4,897,058, and the contingency reserve is $100,000 leaving an excess balance of $1,295,522 in the fund
CITY COUNCIL VISION, MISSION, AND VALUE/PRIORITY AREA
As Vehicle Maintenance provides for and maintains vehicles for nearly all City operations, the Vehicle Maintenance budget addresses all of the City’s priority goals.
ATTACHMENTS
Attachment 1 - Vehicles to be Replaced / Equipment to be Replaced Attachment 2 - Internal Service Fund Charges
Attachment 3 - Changes to Estimated Useful Lives
Attachment 4 - Vehicle Replacement Fund Budget Comparisons (501-0560) Attachment 5 - 501-Vehicle Replacement Fund Expenses
Attachment 6 - Changes to Replacement Values
Attachment 7 - Vehicles/Equipment Added or Deleted
Attachment 8 - Vehicle Replacement Fund Budget Narrative Attachment 9 – City Resolution 2023-121