FOR THE COUNCIL MEETING OF APRIL 16, 2024
COUNCIL AGENDA REPORT
TO: City Council
FROM: Interim City Manager Alex Posada
BY: Department Director Public Works – Brett Fulgoni
SUBJECT: Adoption of a Resolution A pproving the Disposition of Older Transit Vehicles
Description:
The City Council will consider approving the disposition of older transit vehicles, bought with federal funding assistance, by declaring them surplus and sending them off to auction.
Environmental Notice: The activity is not a “Project” as defined under Section 15378 of the California Environmental Quality Act State Guidelines; therefore, pursuant to State Guidelines Section 15060(c)(3) no environmental review is required.
RECOMMENDATION:
Adopt a Resolution authorizing the City Manager, or designee, to sign sales agreements with a reputable auction company to surplus transit vehicles that have met the end of their Federal Transit Administration-defined useful life.
BACKGROUND:
The Transit Program purchases and uses a variety of motor vehicles and equipment to provide transportation services to riders of the City’s Santa Maria Regional Transit (SMRT) service. Often, this equipment is purchased with the assistance of Federal funding. At the conclusion of the fede rally defined useful life, these vehicle and assets are surplus through the methods that generates the highest sales return, typically through auction. As a Federally funded program, the disposal of federally funded assets is governed in accordance with the Code of Federal Regulations 200.
DISCUSSION:
Within the Transit Fleet Roster, there are (2) 40-foot 2011 and (1) 40-foot 2007 Low-Floor heavy-duty Gillig buses, which were purchased with Federal assistance, and have now met the end of their Federal Transit Administration (FTA) approved Useful-Life of 12 years and/or 500,000 miles.
Heavy Duty Vehicles:
2 Additionally, Transit has (1) 25-foot 2010 Dodge Caravan and (1) Ford 2015 Cutaway, which were also purchased with Federal assistance and that have also met the end of their FTA-approved Useful-Life of four years or 100,000 miles for the Dodge and 7 years or 200,000 miles for the Ford Cutaway.
Medium Duty Vehicle:
Light Duty Vehicle:
None of these vehicles have had repowering (major overhaul) work performed to their drivetrain, which would extend their FTA-defined useful life period.
Given the age, wear/tear, mechanical issues, and high cost of maintenance for these older vehicles, Transit sees it best to retire and surplus these six vehicles instead of continuing to heavily invest in trying to maintain their roadworthiness. Replacements for all five of these vehicles have been included in the proposed Fiscal Year 2024-26 budget.
The disposition of these assets is also in accordance with the City’s adopted Transit Asset Management Plan as the vehicles have received a condition rating of less than 2.0 (very poor condition) on the grading scale.
FTA Interest
Per FTA C 5010.1E, Chapter IV, Part 4(o), FTA retains a financial interest i n equipment with a unit value exceeding $5,000 and supplies with an aggregate value exceeding $5,000. Transit has determined the fair market value of these vehicles by using a straight- line depreciation whereby the value decreases each year by one-twelfth, or one-seventh correspondingly, of its original purchase price. Using this method, given the age of the vehicles, Transit calculates that the remaining Federal interest in these vehicles is $0.
With FTA concurrence that there is no federal interest in the previously funded assets, SMRT will surplus these vehicles.
3 SMRT will employ proper sales procedures that ensure the highest possible returns are achieved in the disposition of the Federally assisted assets by sending them to sell at auction. Further, records of this action will be retained for FTA inspection.
Sale of Vehicles
An analysis of similar vehicles sold at auction further confirms that the fair market value of each of these vehicles is anticipated to be less than $5,000. In such a case, FT A is aware that there is no obligation to proportionally share the proceeds with FTA.
Should the sales of one of these assets exceed the $5,000 threshold, Transit will reimburse FTA a proportionate amount by multiplying the total aggregate fair market value at the time of disposition, or the net sale proceeds, by the percentage of FTA’s participation in the original award (e.g., if FTA provided 80 percent of the vehicle purchase price, then FTA would receive 80 percent of the net proceeds).
Transit will record the receipt of the proceeds in the Transit budget accounting system, showing that the funds are restricted for use in a future capital project, and to reduce the liability as the proceeds are applied to one or more future FTA-approved Capital wards.
Auction Company
The City’s Fleet and Transit Divisions have utilized the various options to obtain the best economic results. In general, online auctions reach larger groups of buyers than do in - person auctions, which in turn yields more competitive bidding and better sales results.
The Transit Division, in conjunction with the City Fleet Services Division, has typically used various auction companies to sell its used vehicles and equipment, with the Fleet Services Supervisor authorized to sign the sa les agreements and set auction reserve prices. These companies have been secured based on several factors, including ease of use, qualifications, market research, and (source well) contracts available to the City.
The sale of items are advertised and dis played online with photographs, videos, and descriptions. In recent, the City’s Fleet and Transit Divisions have used an online auction company called GovDeal. In general, auction proceeds for this site have been better than with in-person auctions and it is recommended that the City continue with this method.
Alternative(s)
The City Council may choose not to surplus these vehicles. An alternative to replacing the buses is to send them off to a qualified retrofitter for a new power train. This is known as conducting a major overhaul and would extend the useful life of these vehicles.
However, this is not recommended, as overhauls, while they improve the roadworthiness of the vehicles, would not necessarily equip the vehicles with the latest bus technology that are now being delivered with each new electric bus the City is acquiring , but rather retain a dated interior and features.
Fiscal Considerations
There is no impact on the City’s General Fund. The City’s Transit Program is an Enterprise Fund with its own sources of revenue, along with requirements for compliance 4 with Federal regulations. The auctioning of older assets is being carried out in accordance with these regulations. Transit will record the receipt of the proceeds in the Transit budget accounting system, showing that the funds are restricted for use in a future Capital project, and to reduce the liability as the proceeds are applied to one or more future FTA-approved Capital Awards.
Impact to the Community
There is no impact on the community by this action as it is largely considered an administrative item. Net proceeds of the sale will be used, in accordance with FTA regulations, to help pay for other transit Capital projects.