DATE: March 24, 2025
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 2025-2026
RECOMMENDATION
It is recommended that the City Council/EMID Board of Directors 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 2025-2026.
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 $2,348,670 from Fund 501 Vehicle Replacement in FY 2025-2026, including $512,304 for the replacement of vehicles. In addition, the budget will reflect transfers totaling $2,028,234 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, safe and reliable vehicle fleet of all service 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 a minimum of the following baseline useful lives, and funding is planned according to this replacement schedule. However, it is anticipated that most vehicles will 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 and meet state and federal requirements. 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 81 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-two (32) vehicles had adequate funding for replacement in FY 2025-2026. However, Staff is recommending to replace the eight (8) vehicles that are listed in Attachment 1, Vehicles to be Replaced, and to extend the useful lives of twenty- four (24) fully funded vehicles. One additional vehicle’s useful life was reduced to better reflect the anticipated timing for replacement, so twenty-five (25) vehicles are shown in Attachment 3, Changes to Estimated Useful Lives, along with six (6) pieces of small equipment. This recommendation is based on a thorough review of the maintenance history, usage and condition of the vehicles and equipment in question as well as an assessment of the availability in the marketplace of the types of units needed. Staff does not anticipate that deferring the recommended vehicles and equipment 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.
While the future of the regulations is somewhat in flux, the California Air Resources Board has issued its Advanced Clean Fleets initiative which would require that at least 50% of purchases of medium- and heavy-duty vehicles be all-electric which will significantly change the composition of the City’s fleet. The Vehicle Replacement Fund has been adjusted to account for the increased cost of these vehicles where staff felt that there would potentially be the opportunity to find an all-electric version of a vehicle with the capabilities needed.
Further, the Public Works Department is actively working with Peninsula Clean Energy’s GovEV program to create a long-term plan for the installation of electric vehicle 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 City’s average fuel cost per gallon in 2024 was $2.52 (unleaded) and $3.33 (diesel), which was 30% (unleaded) and 27% (diesel) lower than average 2023 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 $2,348,670 (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 assigned to them.
Transfers also account for the future replacement of vehicles. The total recommended transfer for future replacement of vehicles is $1,533,210. This cost is distributed among the various departments and funds based upon the vehicles 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 Years 2023-2024 and 2024-2025, due to excess balance in Fund 501, the City Council approved transfers that were less than the calculated amount. Specifically, 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 2024 Approved 2024-25 ^ Recommended 2025-26 Increase (Decrease)
Prop vs Rec
% ChangeGeneral 1,567,569 1,191,004 1,930,862 363,293 23%Water 232,672 232,672 528,477 295,805 127%Wastewater 531,658 531,657 727,251 195,593 37%ISF-Building 72,901 72,901 82,985 10,084 14%Totals 2,404,800 2,028,234 3,269,575 864,775 36% ^ Council approved freezing or reducing transfers in FY 23-24 and FY 24-25 The increase in allocation charges shown in Table 3 is due largely to the general increase in cost of vehicles combined with the planned future replacement of certain vehicles with all-electric equivalents which are typically more expensive. The Water Division in particular, added a large vehicle (Vac-Con) to its inventory and significantly increased the replacement cost of three medium-duty F-350 trucks to provide adequate funding to replace those units with electric versions. Within the General Fund, adjustments were made for the cost to “upfit” emergency vehicles with specialized equipment like lights and sirens. Vehicles whose replacement charges are recommended to be adjusted are detailed in Attachment 6 and vehicles that have been added to the fleet are listed in Attachment 7.
Attachment 4, Vehicle Replacement Fund Budget Comparisons, shows that the overall cost of the vehicle maintenance operation budget decreased by about 10% ($262,857) due to the following changes:
$45,700 Increase in personnel costs due to routine adjustments employee steps and benefit costs.
($232,700) The cost to purchase the recommended 8 vehicles in FY 2025-2026 compared to 12 vehicles replaced in FY 2024-2025.
($79,600) Decrease in insurance costs.
$3,800 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 2024-2025 with an available fund balance of $6,827,971. The amount reserved for the replacement of vehicles and equipment through the end of FY 2024-2025 is $5,073,799, and the contingency reserve is $100,000 leaving an excess balance of $1,654,172 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 and 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 FY 2025-26