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DATE: March 23, 2026
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 Michael Miller, Fleet Supervisor
DEPARTMENT: Public Works
SUBJECT: VEHICLE REPLACEMENT FUND OVERVIEW AND INTERNAL SERVICE FUND ALLOCATIONS FOR FY 2026-2027 AND FY
2027-2028
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 2026-2027 and FY 2027-2028.
EXECUTIVE SUMMARY
There are two budget impacts associated with the Vehicle Replacement Fund:
1. Vehicle Replacement Fund expenditures for Vehicle Maintenance Division operations, including the purchase of replacement vehicles (Attachment 1 and Attachment 5); and
2. Transfers into the Vehicle Replacement Fund to support Vehicle Maintenance Division operations and future vehicle replacement costs.
These transfer costs are allocated to each user department based on vehicle assignment (Attachment 2).
The proposed budget for the Vehicle Maintenance Division includes expenditures from
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the Vehicle Replacement Fund (Fund 501) of $2,291,607 in FY 2026-2027 and $6,593,460 in
FY 2027-2028. These amounts include $289,892 in FY 2026-2027 and $4,518,695 in FY 2027-2028 for vehicle replacement (Attachment 1). The budget also reflects transfers to the Vehicle Replacement Fund from the General and Enterprise Funds totaling $4,846,485 in FY 2026-2027 and $3,069,527 in FY 2027-2028 (Attachment 2) to support maintenance operations and future fleet replacement needs.
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.
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 1 1
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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 vehicle age, twenty-five (25) vehicles will have adequate funding for replacement in FY 2026–2027. Staff recommends replacing the four (4) vehicles listed in Attachment 1, Vehicles to be Replaced, and extending the useful lives of the remaining twenty-one (21) fully funded vehicles. In addition, it’s recommended to extend the useful lives of two (2) non- fully funded vehicles and reduce the useful life of one (1) vehicle to better reflect the anticipated replacement timing. As a result, twenty-four (24) vehicles are included in Attachment 3, Changes to Estimated Useful Lives for FY 2026-2027.
For FY 2027-2028, thirty-five (35) vehicles will have adequate funding for replacement. Of the thirty-five (35) vehicles, Staff recommends replacing the twenty- three (23) vehicles listed in Attachment 1, Vehicles to be Replaced, and extending the useful lives of the remaining eleven(11) vehicles. In addition, it is recommended to reduce the useful life of three (3) pieces of equipment to better reflect anticipated replacement.
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, which are significantly higher.
When vehicles are recommended for replacement, Vehicle Maintenance staff continues to evaluate fuel efficient fleet alternatives when assessing the choice of replacement vehicles. 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 by year 2024 and all purchases to be electric by year 2030 which will significantly change the composition of the City’s fleet. The Vehicle Replacement Fund was initially partially adjusted last fiscal year 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. For FY 2026-2027, all the remaining vehicles subject to the regulation were adjusted to reflect anticipated costs of electric vehicles, which show a significate increase detailed in Attachment 6 – Changes to Replacement Values (FY 2026-2027)
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 updated values are listed in Attachment 6 - Changes to Replacement Values. 1 1
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Further, the Public Works Department is continuing to work 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 market conditions. Based on 2025 fuel usage levels and recent pricing trends, combined with forecasts indicating potential fuel price increases due to recent and planned refinery closures in California, staff recommends increasing the fuel budget by $75,000 to account for potential market fluctuations.
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 $2,291,607 in FY 2026-2027 and $6,593,460 in FY 2027- 2028. (Attachments 4 and 5). The Vehicle Maintenance operation budget is largely influenced by the planned purchase of vehicles.
The second budget impact is transfers from the General and Enterprise Funds to the Vehicle Maintenance Fund to fund the Vehicle Maintenance operation. The total transfers to the Vehicle Replacement Fund from the General Fund and Enterprise Funds is $ $4,846,484 in FY 2026-2027 and $3,069,526 in FY 2027-2028 (Attachment 2) to support maintenance operations and future replacement of vehicles. 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. The portion of the recommended transfer attributed to future replacement of vehicles for FY 2026-2027 is $2,944,769 and $ 1,094,761 for FY 2027-2028. 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.
A summary of the total fiscal impact comparison between FY 2025-26 and FY 2026-27 and FY 2027-2028 as distributed among funds is shown in the table below. Details are shown in the attachments to this report.
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Vehicle Replacement Fund Annual Replacement Charge (Transfer) Summary – All Funds Fund 2025-26
Recommend
2026-27
Increase
(Decrease)
%
Changes
Recommend
2027-28
Increase
(Decrease)
%
Change
General 1,930,863 3,505,412 1,574,549 82% 1,931,671 (1,573,741) -45% Water 528,477 311,464 (217,013) -41% 353,436 41,972 13% Wastewater 727,251 924,086 196,835 27% 683,130 (240,956) -26% Building 82,985 105,522 22,537 27% 101,289 (4,233) -4%
Totals 3,269,576 4,846,484 1,576,908 48% 3,069,526 (1,776,958) -37% The FY 2026-2027 increase in allocation charges shown in the table above 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 estimated to be significantly more expensive. Within the General Fund, the Parks and Public Works Streets divisions show a significant increase in the replacement cost of medium-duty F-250 trucks to provide adequate funding to replace those units with electric versions.
Water Enterprise shows a decrease due to extending the useful life of vehicles, and to the fact that replacement values of the vehicles were previously adjusted in FY 2025- 2026. Wastewater Enterprise shows an increase due to increasing costs of vehicles and decreasing the useful life of a vehicle. Vehicles whose replacement charges are recommended to be adjusted are detailed in Attachment 6. Although no vehicles have been added to the list as of the writing of this report, equipment that was added as part of the Fuel Systems Improvement Project (CIP 301-700) has been included in Attachment 7.
The FY 2027-2028 decrease in allocation is attributed to the planned purchase of vehicles for which costs were increased in FY 2026-2027. Water Enterprise has an increase in FY2027-2028 returning to a more typical level following the decrease in FY 2026-2027.
Staff routinely monitors fund balances to ensure that adequate funds are available.
The table below shows the estimated fund balance in FY 2026-2027 and FY 2027- 2028:
FY 26-27 FY 27-28
Estimated fund balance 8,225,240 Estimated fund balance 10,780,117 Allocations from Depts 4,846,484 Allocations from Depts 3,069,526 Expenditures (including
vehicle purchase) -2,291,607
Expenditures (including vehicle
purchase) -6,593,460
New Balance End of 26-27 10,780,117 New Balance End of 27-28 7,256,184 Amount reserved for
replacement of vehicles -9,341,863
Amount reserved for
replacement of vehicles -6,166,051
Fund contingency -100,000 Fund contingency -100,000
Total 1,338,254 Total 990,133
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Based on the projected beginning fund balance, departmental allocations, and anticipated expenditures, the fund is expected to remain adequately funded in each fiscal year to cover planned vehicle replacement obligations as well as the established contingency reserve.
CITY COUNCIL VISION, MISSION, AND VALUE/PRIORITY AREA
Staff Empowerment and Operational Excellence
ATTACHMENTS:
Attachment 1a - Vehicles to be Replaced/Equipment to be Replaced FY 26-27 Attachment 1b - Vehicles to be Replaced/Equipment to be Replaced FY 27-28 Attachment 2a - Internal Service Fund Charges FY 26-27
Attachment 2b - Internal Service Fund Charges FY 27-28
Attachment 3 - Changes to Estimated Useful Lives FY 26-27 and FY 27-28 Attachment 4 - Vehicle Replacement Fund Budget Comparisons (501-0560) Attachment 5 - Vehicle Replacement Fund Expenses
Attachment 6a - Changes to Replacement Values FY 26-27
Attachment 6b - Changes to Replacement Values FY 27-28
Attachment 7 - Vehicles/Equipment Added or Deleted
Attachment 8 - Vehicle Replacement Fund Budget Narrative