TO: Mayor and City Council
FROM: Philippe Eskandar, City Manager
BY: Amber Shah, Parks & Public Works Director
DATE: June 28, 2024
SUBJECT: APPROVAL OF A MASTER EQUITY LEASE AGREEMENT
WITH ENTERPRISE FLEET MANAGEMENT, INC. FOR THE
LEASING OF NEW FLEET VEHICLES, APPROVAL OF AN
ASSIGNMENT AGREEMENT WITH ENTERPRISE FLEET
MANAGEMENT, INC. FOR THE SALE OF CITY-OWNED
VEHICLES REPLACED THROUGH THIS PROGRAM,
AUTHORIZATION FOR THE CITY MANAGER TO EXECUTE
THE AGREEMENTS AND COMPLETE ANY NECESSARY
FORMS, AUTHORIZATION FOR THE CITY MANAGER TO
ADD, REMOVE, OR TRADE-IN FLEET VEHICLES AS
APPROPRIATE AND SURPLUS TO BE SOLD BY
ENTERPRISE FLEET MANAGEMENT, INC. PURSUANT TO
THE ASSIGNMENT AGREEMENT AND IN COMPLIANCE
WITH MUNICIPAL CODE SECTION 2.06.06, AND APPROVE
THE LEASING AND DISPOSITION OF NEW FLEET
VEHICLES AT THE CITY MANAGER’S DISCRETION
CONSISTENT WITH OPERATIONAL NEEDS AND BUDGET
ALLOCATION
STRATEGIC PLAN CRITICAL SUCCESS FACTORS
Efficient, Responsive, and Effective City Services
Fiscally Responsible and Transparent City Government
Safe Community
Well-Maintained Infrastructure
Steven W. Huang, DDS, Mayor
Gretchen Shepherd Romey, Vice Mayor
Tony Chou, Council Member
Calvin Lo, Council Member
Steve Talt, Council Member
BACKGROUND
The City maintains a fleet of vehicles and equipment for operational needs by nearly every City Department including Police, Fire, Parks and Public Works, Community Services, and Community Development. The fleet consists of forty-five (45) light, medium, and heavy-duty vehicles including specialized public safety vehicles such as fire engines and rescue ambulances. The City has historically purchased and owned all fleet vehicles and equipment. During each annual budget cycle, Departments have independently made requests for replacement vehicles. In recent years, the vehicles approved for replacement have primarily focused on critically needed public safety vehicles for the Police and Fire Departments. However, this process has not kept pace with replacing vehicles that have reached the end of their useful service life for Police, Fire or any of the other Departments on a consistent basis resulting in an aging, inefficient fleet without a long-term replacement plan for the entire fleet.
Thirty-four (34) vehicles of the City’s entire fleet of forty-five (45) vehicles are light-duty vehicles with an average age of 10 years and a number of these vehicles are approaching nearly 20 years old. The current age of the fleet is negatively affecting the overall budget and fleet operations as older vehicles have higher fuel, maintenance, and repair costs and tend to be unreliable.
Below is a snapshot of the age of the fleet.
Age of Vehicle Number of Vehicles
0-5 Years 10
5-10 Years 10
10-20 Years 14
In addition to the inefficiency and higher cost of maintaining an aging fleet, many vehicles lack standard safety features including:
• 22 vehicles pre-date Back-up Camera standardization (2018) • 6 vehicles pre-date Electronic Stability Control standardization (2012) • 2 vehicles pre-date Anti-Lock Brake standardization (2007) In order to improve fleet efficiency and safety, enhance service delivery, reduce operating costs (fuel, maintenance, and repairs), and modernize the City’s process for procuring vehicles, staff recommends that the City Council enter a Master Equity Lease Agreement for City vehicles with Enterprise Fleet Management, Inc.
DISCUSSION
The City has historically purchased all vehicles and outfitted Police, Fire, and Public Works vehicles with all required aftermarket equipment as operationally necessary for each vehicle before introducing the vehicles into the fleet. Since the Covid-19 pandemic, there have been nationwide shortages in the supply chain for vehicles, notably for many police vehicles. This has led to fluctuating vehicle costs and extended lead times when procuring vehicles. As such, in recent years the process of procuring vehicles has become more challenging, lengthy, expensive, and has required significant staff time to manage.
Additionally, the City has more than a dozen vehicles that are over a decade old and require frequent repairs.
In researching potential partners for vehicle leasing programs, staff identified that Enterprise Fleet Management Inc., has successfully partnered with over 1,000 government partners nationwide and numerous cities throughout Southern California, including nearby cities such as Azusa, Baldwin Park, Duarte, Rosemead, South Pasadena, and Temple City. In order to evaluate the feasibility of implementing a similar program in San Marino, staff has worked with Enterprise representatives over the past year to develop a viable, efficient, and suitable fleet replacement program. Under this plan, City vehicles acquired through this program will be leased for 5-year terms on an “open-end” basis that will allow the City to modernize its aging fleet and replace vehicles on a consistent basis with less upfront capital. It also enables the City to sell vehicles at optimal times to receive the highest resale value, which can be used as equity in leasing newer and more efficient vehicles. The City will also benefit from Enterprise’s ability to sell vehicles at an average of 112% above Commercial Value Index (auction).
The City’s Fleet Maintenance Division will continue to maintain the vehicles as they do now. Operating budget savings are projected to reduce fleet maintenance costs approximately 35% in the first year, and approximately 78% once fully implemented. It is estimated the City will also reduce its fuel costs by 21% based on more fuel-efficient vehicles alone, not including any additional reduction in fuel consumption through the transitioning of select vehicles to electric.
Additional advantages of leveraging an open-ended, municipal lease program through Enterprise include but are not limited to, the following:
• City will retain all rights of ownership and can equip vehicles with any aftermarket equipment (toolboxes, police equipment, etc.) on the vehicles.
• No mileage restrictions, abnormal wear and tear, or early termination penalties.
• “Open-end” lease structure allows the City to replace more vehicles with less up-front capital and maintain a manageable, more predictable yearover-year annual fleet budget. • Establish a more proactive, efficient fleet replacement plan to acquire vehicles on a more consistent basis and maintain a newer fleet. • Increase employee safety by enabling the City to replace outdated vehicles sooner, consistent with vehicle replacement industry standards. • Reduce vehicle fuel, maintenance and repair costs.
• Enhance service delivery to the community with a more reliable fleet and less vehicle downtime.
• Reduce staff time associated with procurement of vehicles. • Save more than $500,000 over the next 10 years.
In addition, Enterprise will provide an account team to assist the City in implementing and executing the vehicle leasing and replacement program at no additional cost. This team will make recommendations on the best time to order/sell vehicles, establish a proactive replacement plan, and make recommendations on the most cost-effective vehicles.
Furthermore, Enterprise is able to obtain Electric Vehicles to ensure the City is able to comply with State legislation requiring 10% of the City’s fleet be electric by 2025. While the City does not currently have infrastructure in place to support electric vehicles, the construction of electric vehicle charging stations was approved as a new Capital Improvement Project in FY 2024-25 and will be completed before the arrival of electric vehicles. The site assessment has already been completed and feasibility has been confirmed.
The ideal location for installation of electric chargers within the City Hall campus parking lot places the chargers near an existing transformer which alleviates the need for any long-lead electrical components. Additionally, the fleet leasing model allows for the flexibility to integrate electric vehicles without committing to long term ownership.
The transition to a multi-year fleet leasing program was proposed by staff as a Priority Initiative as part of the FY 2024-25 budget process. With the adoption of the FY 2024-25 budget approved by City Council on May 31, 2024, $165,000 was included in the Capital Equipment Budget to begin implementation of a fleet leasing program with replacement of 17 existing vehicles. The vehicles identified for replacement are shown in the table below:
Division Vehicle
Year
Vehicle
Make
Vehicle
Model
Community Development 2014 Ford Escape
Community Development 2014 Smart Fortwo
Community Services 2005 Chevrolet Silverado 2500
Community Services 2010 Chevrolet Tahoe
Fire Department 2017 Ford Explorer
Police Department 2014 Nissan Altima
Police Department 2014 Smart Fortwo
Police Department 2016 Ford Utility Interceptor
Police Department 2016 Ford Utility Interceptor
Parks & Public Works 2007 Chevrolet Silverado 2500
Parks & Public Works 2008 Ford F-250
Parks & Public Works 2010 Ford F-250
Parks & Public Works 2012 Ford F-250
Parks & Public Works 2013 Ford F-150
Parks & Public Works 2013 Ford F-150
Parks & Public Works 2014 Ford F-150
Parks & Public Works 2015 Ford F-250
Replacement vehicles will generally be selected on a like-for-like basis however, the following criteria will be taken into consideration as part of the assessment and determination of each vehicle’s replacement:
1. Cost efficiency
➢ Least expensive vehicle compatible with fleet maintenance operations that meets operational needs will be selected over more expensive alternatives.
2. Fuel efficiency
➢ Most fuel-efficient vehicle compatible with fleet maintenance operations that meets operational needs will be selected over less fuel-efficient options, and select vehicles will be transitioned to electric as operations allow.
3. Compatibility with fleet maintenance operations
➢ A minimum number of different vehicle manufacturers/models will be selected to maintain efficiency in the servicing of vehicles and reduce the amount of different types of parts necessary to be kept in stock for each vehicle in the fleet.
4. Operational needs and flexibility
➢ Vehicles that best meet the above criteria and provide the greatest flexibility in meeting operational needs will be selected.
Each year, staff will evaluate the program and make recommendations to the City Council regarding its continuation and upcoming schedule of vehicles for replacement as part of the annual budget process. Specialty vehicles and other equipment (fire engines, ambulances, backhoe, etc.) will not be included as part of this program, and will continue to be managed separately by staff.
FISCAL IMPACT & PROCUREMENT REVIEW
The estimated cost for the first year of the fleet leasing program to replace 17 vehicles is approximately $165,000, which is included in the City’s adopted FY 2024-25 Capital Improvement Program (CIP) budget in Account #591-42- 4613-0501. Operating budget savings are projected to reduce fleet maintenance costs approximately 35% in the first year, and approximately 78% once fully implemented. It is estimated the City will also reduce its fuel costs by 21% based on more fuel-efficient vehicles alone, not including any additional reduction in fuel consumption through the transitioning of select vehicles to electric. Future years of the program would be contingent on City Council appropriation.
The Master Lease Agreement with Enterprise is part of the Sourcewell Cooperative Purchasing Agreement. Sourcewell manages the solicitation process and awards contracts to suppliers on behalf of government and nonprofit agencies. Agencies that purchase supplies and equipment through a Sourcewell contract benefit from lower costs by combining the purchasing power of more than 50,000 government, education, and non-profit organizations. The City of San Marino is a current member of Sourcewell, and Enterprise has been awarded a contract with Sourcewell through a competitive process for Fleet Management Services. As such, the City may enter into an agreement with Enterprise in compliance with the City’s procurement policy SMCC 02.06.05.B.6
LEGAL REVIEW
The City Attorney's office has reviewed and approved as to form.
RECOMMENDATION
Staff recommends that the City Council 1) approve a Master Equity Lease Agreement with Enterprise Fleet Management Inc. for the leasing of new fleet vehicles, (2) approve an Assignment Agreement with Enterprise Fleet Management Inc. for the sale of City-owned vehicles replaced through this program, 3) authorize the City Manager to execute the agreement and complete any necessary forms, 4) authorize the City Manager to add, remove, or trade-in fleet vehicles as appropriate and surplus to be sold by Enterprise Fleet Management, Inc. pursuant to the Assignment Agreement and in compliance with Municipal Code Section 2.06.06, and 5) approve the leasing and disposition of new fleet vehicles at the City Manager’s discretion consistent with operational needs and budget allocation. If the City Council concurs with staff’s recommendation, an appropriate motion would be:
“I move to 1) approve a Master Equity Lease Agreement with Enterprise Fleet Management Inc. for the leasing of new fleet vehicles, (2) approve an Assignment Agreement with Enterprise Fleet Management Inc. for the sale of City owned vehicles replaced through this program, 3) authorize the City Manager to execute the agreement and complete any necessary forms, 4) authorize the City Manager to add, remove, or trade in fleet vehicles as appropriate and surplus to be sold by Enterprise Fleet Management, Inc. pursuant to the Assignment Agreement and in compliance with Municipal Code Section 2.06.06, and 5) approve the leasing and disposition of new fleet vehicles at the City Manager’s discretion consistent with operational needs and budget allocation.”
ATTACHMENTS
1. Draft Master Lease Equity Agreement with Enterprise Fleet Management
2. Draft Assignment Agreement with Enterprise Fleet Management