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HomeMy WebLinkAbout11A - Report Re: Vehicle and Equipment Purchasing MEETING DATE: AGENDA #: PREPARED BY: AGENDA ITEM: DISCUSSION: JANUARY 4,2010 11A AL FRIEDGES, PARKS AND FLEET MAINTENANCE SUPERVISOR CONSIDER APPROVAL OF A REPORT RELATING TO VEHICLE AND EQUIPMENT PURCHASING Introduction The purpose of this agenda is to consider approval of a report relating to vehicle and equipment purchasing strategies. Historv To effectively deliver services in all City departments including police, fire and public works, the City makes two key investments. The investments are: 1) employees who have the training, knowledge and motivation to accomplish the work; and 2) the equipment including vehicles, heavy equipment and hand tools to perform the work. The investment in both areas is critical to getting daily work done quickly, safely and correctly. The investment in one are or the lack thereof impacts the other. Fifteen years ago the City used to purchase vehicles and heavy equipment using four-year equipment bonds. Using this funding source, each vehicle had to be paid off within four years. As the City grew in its size and mainte- nance responsibilities, the number and types of equipment needed in- creased. The cost of the equipment increased as well. In the early 1990s the City found itself in a quandary. The four-year equipment bonds were not keeping up with replacement needs as demonstrated by the fact that about 70% of the equipment owned by the City was beyond its expected life span in hours and/or miles. The result was waste of staff time trying to start equip- ment and extensive breakdowns once the equipment was in service. Resi- dent frustration occurred as well because the undependable equipment in- creased the time it took for the City to get the job done on numerous fronts. To cope with these service and financial challenges, the Equipment Re- placement Program became a new element to our five-year Capital Im- provement Program in 1998. The Equipment Replacement Program identi- fies the City's equipment needs on a long-term basis (12 years) and provides a schedule for acquisition of replacement and new equipment. A revolving equipment fund was created that would fund the program and would elimi- nate the necessity to issue debt in the form of four year equipment certifi- cates. The Equipment Replacement Program is broken down by departments - Fire, Building, Engineering, Parks and Public Works, and includes a sum- mary sheet of expenditure and revenue totals with a running cumulative fund balance. Each piece of equipment has been assigned a life expectancy ranging from 6 - 20 years with the exception of generatol3which are identified for 30 years, and the Fire Department's equipment that does not experience typical usage. By establishing a regular replacement schedule, service costs R:\Council\2010 Agenda Reports\01 Of~ig~~g.~~ui~~Q~ p<J'rJi~n~~c1-245 www.cityofpriorlake.com and down time are reduced. Police equipment is shown in the program, but funding is from the General Fund Police Department Budget since the needs of service dictate relatively quick turnover to maintain dependability and safe- ty. Currently, there are 138 vehicles and pieces of equipment in the fleet. The total number of vehicles and pieces of equipment includes squad cars, fire equipment, pick up trucks, dump trucks, utility equipment, sweepers, mow- ers, loaders, skid loaders, trailers, tractors, street repair equipment, snow and anti-ice equipment, forestry equipment, utility vehicles, generators and staff cars. Current Circumstances The Equipment Replacement Program is a tool which provides funds which are likely to be needed for equipment acquisition and refurbishing but the de- cision about whether to expend the funds is based upon an objective evalua- tion which is subject to the city council's final approval. Prior to the recommendation for replacement or addition of vehicles and equipment the following analysis is completed to determine whether a vehi- cle/equipment should be replaced, how and with what type: 1. Vehicle and EauiDment Refurbishina Currently, the fleet division performs numerous refurbishing and body repair functions to the vehicles and equipment. For example, in 2009, the Fleet Department refurbished Unit #466, a 2000 Sterling 5 Ton Dump Truck and performed body work on Unit #547, a 2001 Dodge one ton dump. The repair and refurbishing conducted helps to keep our operating safely, extends life and keeps equipment looking good displaying a positive public image. The combination of an aggressive preventative maintenance program, the purchase of quality equipment sized for its intended purpose and refurbishing allows the City to maximize the life of equipment and minimize the cost to taxpayers. 2. Lease. Rental and Borrowina ODtions Lease: Currently, the Public Works Maintenance Divisions do not lease equipment. Long term leasing ultimately costs more than an outright purchase. Likewise, lease with the option to buy costs more than a purchase. There are two options that would make a lease more effective: 1. Leasing can be an asset if a piece of equipment was needed on a short term basis only and potentially never needed again. 2. Another option from a short term lease to be a benefit would be if a piece of equipment were to become obsolete because of rapidly changing technology. Rental: Typically, the equipment that the Public Works Maintenance Divisions rent are pieces of equipment that are not utilized enough, or the cost of the ma- chine is too high to justify purchasing. Examples of the rented equipment are R:\Council\2010 Agenda Reports\01 04 1 O\vehicle and equipment purchasing report.doc mini excavators, track hoes, milling machines and occasionally skid loaders when all the City owned skid loaders are being utilized. On the flip side staff also annually reviews rentals to see if a pattern of sustained use over a pe- riod of years may justify purchase of equipment at a lower cost to the taxpay- ers. Borrowina: When available the City also works with partners such as the SMSC and Savage to borrow equipment that is only needed for short durations during certain times of the year in non-emergency situations. Currently Prior Lake annually borrows equipment such as a road grader, brush hog and large air compressor from these partners and reciprocates with use of our crack seal- ing/patching equipment and boom mower. 3. Eauioment Zero Value Ooeration There are several specialized pieces of equipment that the City needs to pur- chase to maintain the utilities, streets and parks. This type of equipment is usually expensive and the purchase value of the equipment decreases rap- idly. Because of the specialized nature the trade-in values are generally mi- nimal and therefore maximizing useful life is recommended. The determination of when a piece of equipment has reached zero value will be subject to its year round and emergency needs. For example operating crack sealing equipment until it no longer operates does not put the City in a situation where emergency service is compromised. Whereas doing the same with a Jet-Vac Truck would be foolhardy as it provides emergency 24- hour service for lift station and sewer back-ups. In this case while a crack sealer can be operated until it no longer works the Jet-Vac can only be oper- ated until it no longer provides reliable emergency response service. Exam- ples of specialized equipment are: . Extend a jetter . Pavement router . Slide in sanders . Jet Vac . Bituminous crack sealing equipment . Anti-icing equipment . Top dresser . Valve exercisers . Large turf mowers 4. Alternative Fuels The City currently has gasoline with a blend of 10% ethanol and diesel fuel with a blend of 5% bio (B5) available in-house. Starting in the spring of 2010 our diesel fuel will be B10 (10% bio). As part of our new vehicle/equipment purchases staff analyzes fuel economy and alternative fuels for environmentally sensitive options. These options include E85 and electric. Lastly, we intend to increase the bio in our fuel to B12 in 2012 and B15 in 2015. 5. Vehicle and EauiDment Schedulina and ODerations Procedures Currently the supervisors in all the respective Public Works maintenance divi- sions meet each morning before delegating job tasks to employees. The R:\Council\2010 Agenda Reports\01 04 1 O\vehicle and equipment purchasing report.doc purpose of these short meetings is to discuss equipment needs for the day. This process assures that all available equipment in the fleet is being utilized to its maximum potential. An example of the City's scheduling effectiveness is the skid loaders. Pres- ently the City owns three skid loaders that range in hourly use from 500 to more than 700 hours per year. Current industry guidelines recommend hav- ing a skid loader for every 400 hours of needed use. By effectively schedul- ing and maintaining these loaders and using rental loaders to meet peak de- mand, the City is able to exceed existing guidelines and maximize value. The City is currently working on an idle reduction program to reduce the amount of idle time for equipment. The anticipated benefits of minimizing idling are expected to be a reduction in fuel consumption, reduction of emis- sions and extended equipment life. Staff recommends working closely with all Public Works maintenance divi- sions to create other alternatives to reduce vehicle shortages without neces- sarily purchasing additional vehicles and equipment. 6. Eauioment Partnershios The City has actively been pursuing partnerships with the SMSC, and cities of Savage and Burnsville to share the cost of purchasing certain vehicles, as well as sharing the cost to maintain and repair the vehicles and equipment. The "Purchase and Utilization Agreements" are consistent with the goal of building partnerships as provided in the 2030 Long Range and Strategic Plan. The equipment utilized by these governmental entities include: . A crack seal asphalt heater and applicator . A pavement router . A heated mobile asphalt unit . An infra red asphalt patch unit Additional avenues of partnerships are available through the Scott County Association for Leadership and Efficiency (SCALE) where numerous pieces of maintenance equipment are available from other Scott County cities, town- ships, school districts and the County at cost effective rates for both normal and emergency situations. Occasionally, new equipment purchases are dis- cussed for joint purchasing venture through the SCALE group members. Staff recommends continued utilization of joint purchasing and increased partnerships with other outside agencies for specialized repair or mainte- nance equipment. 7. Investiaation of Used vs. New There are opportunities when purchasing slightly used equipment that could be a cost savings to the City. For instance, purchasing used pick ups, used staff vehicles, demo mowers with low hours, enclosed trailers and backhoes. If available at the time of need use vehicles could be good alternatives to buying new. Staff has purchased used equipment in the past; the most re- cent is the purchase of an enclosed trailer and herbicide sprayer. Staff be- lieves that specifically the replacement of % ton pick-ups and build- ing/engineering inspection vehicles with low mileage used vehicles could pro- R:\Council\2010 Agenda Reports\01 04 10\vehicle and equipment purchasing report.doc ISSUES: FINANCIAL IMPACT: vide substantial savings to taxpayers. The biggest obstacle to purchasing used equipment is timing. For instance, if a used vehicle or piece of equipment is located, staff cannot give the vendor confirmation until it is approved by Council. The approval process can take as long as one month before staff has the opportunity to purchase the equipment. For this reason, many vendors are reluctant to retain or "hold on to equipment" until we have authority from the Council to purchase it. Staff believes that by identifying potential used equipment replacement in advance and providing the City Council the opportunity to pre-authorize the City Man- ager the City can take advantage of used vehicle and equipment opportuni- ties. Conclusion If Council members have additional suggestions which would make this proc- ess more effective, the staff would be pleased to incorporate them into the process outlined above to make it more cost effective. The Equipment Replacement Program has evolved over the years as a result of City Council direction and staff experience in evaluating equipment and the options available for its acquisition. As such the Council may wish to suggest additional considerations of processes that the staff should follow to further improve on this tool. The process outlined above has allowed the City to save money in various ways without eliminating the availability of essential equipment. . There are only a handful of gravel roads remaining in the City, but those that exist do need periodic grading. Rather than purchase a $50,000 road grader, we borrow one or rent short-term. . Pick-up truck and one-ton bodies and suspension are longer-lived than ever before so we increasingly look to replacing the drive train (engine, transmission and drive gear) rather than buy brand new equipment. . Vehicle Maintenance - simply keeping equipment protected, washing it and accomplishing preventive maintenance is allowing us to extend the useful life of our equipment to achieve a savings. . Among our highest cost vehicles are our fire trucks. We are looking into refurbishing this equipment in lieu of replacement. . Specialized equipment can be jointly purchased and shared. We have done this with the SMSC to have the capability to perform functions cost effectively. . When we do buy equipment, we bid in accordance with State laws and the City's purchasing policy. We will also use cooperative purchasing memberships and cross check the prices to be sure we are getting the best value. . Planning for equipment over a 12-year period allows us to program smaller increments of funding each year while maintaining the where- withal to keep our fleet safe, dependable and cost effective. ALTERNATIVES: 1. Accept the report affirming the process being used. 2. Direct staff to research other steps which might be taken to improve the cost effectiveness of the process. 3. Take no action. R:\Council\2010 Agenda Reports\01 04 10\vehicle and equipment purchasing report. doc RECOMMENDED MOTION: Alternative # 1. R:\Council\2010 Agenda Reports\01 04 1 O\vehicle and equipment purchasing report.doc