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HomeMy WebLinkAboutSupplemental Questions from Council Member Moore1 Gloria Harper From:Jill Ingram Sent:Monday, October 25, 2021 12:36 PM Cc:Executive Team; 'Craig A. Steele'; Dana Engstrom Subject:FW: Questions on Agenda for 10/25/2021 Attachments:Executive Summary, Enterprise Fleet Management Model.pdf; Vehicle Cost Comparison.pdf BCC: CITY COUNCIL Please see responses below and attachments regarding Councilman Moore’s questions related to Item F on the Consent Calendar (Enterprise Fleet Lease Agreement). Responses to questions regarding Item I (Solid Waste – AB 1826) below will be responded to separately. As always, please call if you have any additional questions. Also, I would appreciate it if you would please let me know as soon as possible if you plan to pull any Consent Calendar items from the agenda to ensure staff and the City Clerk are prepared for a Zoom presentation and there are hopefully no technical challenges on Zoom tonight. Thank you, Jill Jill R. Ingram, ICMA-CM City Manager City of Seal Beach - 211 Eighth Street, Seal Beach, CA 90740 (562) 431-2527, Ext. 1300 Civility Principles: 1. Treat everyone courteously; 2. Listen to others respectfully; 3. Exercise self-control; 4. Give open-minded consideration to all viewpoints; 5. Focus on the issues and avoid personalizing debate; and, 6. Embrace respectful disagreement and dissent as democratic rights, inherent components of an inclusive public process, and tools for forging sound decisions. For Information about Seal Beach, please see our city website: www.sealbeachca.gov NOTICE: This communication may contain privileged or other confidential information. If you are not the intended recipient of this communication, or an employee or agent responsible for delivering this communication to the intended recipient, please advise the sender by reply email and immediately delete the message and any attachments without copying or disclosing the contents. Thank you. From: Thomas Moore Sent: Monday, October 25, 2021 9:38 AM To: Jill Ingram Subject: Questions on Agenda for 10/25/2021 2 Here are a few questions for tonight's meeting. Thank you, -Tom ITEM F: It was presented that the City would save 30% on the costs of the vehicles, however the agreement states they would be purchased at invoice price. Can you explain that further? The language in the agreement is meant to reference the invoice Enterprise pays the manufacturer for the vehicle (without any additional markups). The City would plan to order vehicles directly from the manufacturer taking advantage of factory incentives and other discounts. The agreement indicates that all of the savings would be passed along to the City. We pay exactly what the car costs and no more. Currently we purchase our vehicles from dealerships who may have competitive pricing, but they may not. An example of this is shown in the attachment called “Vehicle Cost Comparison”. We asked Enterprise to price out a vehicle exactly like one we just purchased through our normal channels. The truck we purchased cost the City $37,987.62. When Enterprise built out the same vehicle apples to apples, they were able to get it at $35,546.00. These vehicles have the same functionality, but Enterprise was able to purchase it at a lower cost which would have saved the City $2,441.62. Also, much of the savings is in the fleet maintenance. With Enterprise’s assistance conducting a complete analysis of the fleet on an annual basis, development of the optimal fleet plan each year helps the City achieve the lowest total cost of ownership (vehicle cost, fuel cost and maintenance cost). This is further explained in the attachment “Executive Summary, Enterprise Fleet Management Model”. How much will the City be borrowing for each vehicle? What is the borrowing rate for Seal beach? Is there a risk of paying much higher interest than purchasing the vehicles if inflation continues and interest rates increase? The lease quotes for each of the vehicles is included in Attachment B of the Agenda Report and totals $370,733. We are proposing 5 Police Interceptors, so there is only one quote included, but we will order five of them. There is also one vehicle that Enterprise is unable to order from the manufacturer, and that one is a truck for Marine Safety. They estimate that vehicle to be available in the near term, so that lease would be signed when the pricing is finalized. The borrowing rate is the 3 year treasury bill + 3.5% based on the Sourcewell contract pricing plan. Currently that’s about 3.9% interest. The agreement makes it look like its variable but it locks in at the time we take delivery of the vehicle. Ultimately, if interest rates increase and it no longer makes sense to lease, we are not obligated to continue to purchase through Enterprise. Technically, we could lease this first round of vehicles and never o rder vehicles from them again. Could we see a real-world example of 2-3 cars that we need to replace and what that would save us in the long-term vs. buying the cars along with what the interest payments would cost the City? An example of this was included with the first question. Also, on Page 5 of Attachment C of the Agenda Report, you will see a real life example for the City of San Marcos. Their situation was very similar to ours in that their fleet was very old due to budget challenges that prevented them from replacing vehicles when they really should have. Their maintenance costs were continuing to rise and they ultimately had to do something to address the issues. Like many other agencies, they turned to Enterprise for help. By updating their fleet, they were able to achieve a 27% reduction in the costs of purchasing and maintaining vehicles. Our Public Works and Police Departments also called the City of Westminster and spoke with their Fleet department who confirmed similar results and how successful and effective the fleet lease program has been. The true 3 savings comes with the wrap-around services that Enterprise provides along with maximizing fuel efficiencies and reducing major maintenance costs. The fact of the matter is that we would need millions of dollars to get our fleet to the place it needs to be. Think of this like financing for a large CIP project….yes, you are going to incur interest costs, but its better to spread the payments over time at a reasonable interest rate than have a large one-time outflow of cash every 5 years. With the number of large CIP projects we have on our high-priority list, we need to keep as much capital as possible so we can complete projects and achieve a high bond rating when we do borrow money. ITEM I: In Exhibit 2c, the 7% Franchise fee of about 10K is subtracted each Month from the revenue Republic will be making from this item. Is Seal Beach getting $10K more each month for the additional costs? Was it considered to waive the franchise fee to reduce costs to businesses? Thank you, Tom Thomas Moore City Council Member, District 2 City of Seal Beach - 211 Eighth Street, Seal Beach, CA 90740 (562) 431-2527 x1502 Civility Principles: 1. Treat everyone courteously; 2. Listen to others respectfully; 3. Exercise self-control; 4 4. Give open-minded consideration to all viewpoints; 5. Focus on the issues and avoid personalizing debate; and, 6. Embrace respectful disagreement and dissent as democratic rights, inherent components of an inclusive public process, and tools for forging sound decisions. For Information about Seal Beach, please see our city website: www.sealbeachca.gov NOTICE: This communication may contain privileged or other confidential information. If you are not the intended recipient of this communication, or an employee or agent responsible for delivering this communication to the intended recipient, please advise the sender by reply email and immediately delete the message and any attachments without copying or disclosing the contents. Thank you. Executive Summary – The Enterprise Fleet Management Model Enterprise Fleet Management specializes in helping various Government Organizations develop a proactive fleet plan that identifies the lowest Total Cost of Ownership & optimal vehicle life cycle. The client has all rights of ownership and equity in the vehicle, but the benefit of flexible funding options through the municipal Open End Equity Lease structure. Key Benefits: 1. Total Cost of Ownership Model: Enterprise’s goal is to help you achieve the lowest Total Cost of Ownership of your fleet. This can best be articulated using the following… • Acquisition Costs + Maintenance Expenses + Fuel Cost – Resale Value = The Total Cost of Ownership i. Note: Additional soft cost factors such as administrative time reduction, reduced environmental emissions, and vehicle safety improvements are also important benefits but can be difficult to quantify in hard $, but they are highlighted below. • Applying the Total Cost Ownership Model: Enterprise provides Open End Leases for light duty vehicles that typically have a 3 – 5 year term. Open End Leases allow the client to fund/pay for the value of the vehicle that they use and sell the vehicle at the most appropriate time in order to capture the best resale $. The resale equity $ goes back to the client either in the form of a check or rolled into the new replacement vehicle. This establishes the discipline of cycling vehicles at the appropriate time to drive the lowe st total cost ownership, while also avoiding large sums of up front capital needed to purchase the vehicles outright. o Why it Works: Because Government Organizations receive such aggressive incentives from the manufacturers on their vehicles, the cost of vehicles to Government Organizations is significantly less than the retail public. Selling those vehicles at the right time through Enterprise will maximize the resale $ and the net effect is only a slight increase (sometimes neutral) in your depreciation cost per year. However, you dramatically reduce your maintenance expense with a 5 year or less lifecycle vs a 15+ year lifecycle, as well as your fuel expense by improving MPG. Ultimately this model lowers the Total Cost of Ownership vs the current plan. 2. Enterprise Resale/Disposal Services: Utilizing dealer trade-ins or auctions are the worst ways to dispose of vehicles. Because of this fact, Enterprise has an infrastructure of company owned Resale Facilities, staffed by Enterprise Employees to sell used vehicles. . As a company Enterprise sells over 800,000 vehicles per year and dramatically out paces Dealer Trade Ins and Auctions by hand selling used vehicles directly to used car retailers. 3. Reducing Administrative Time: By utilizing Enterprise’s Programs, clients will receive Consolidated Monthly Billing, License & Registration Management, Data Housing/On -Line Reporting, & Logistics Assistance. This helps clients reduce staff hours dedicated towards various fleet administrative functions related to vehicle acquisition, purchase orders & payments, data collection/tracking, etc. 4. Safety & Environmental Impact: By keep vehicles 15+ years, not only are they becoming less safe as they age/wear; but they are missing key safety features that are standard and/or mandated by law on new vehicles. Such as Anti-Lock Brakes, Electronic Stability Control, Side Air Bags, etc. The same holds true with respects to Emissions and the Environmental Impact. New vehicles have the latest emissions technology and meet current laws and mandates. 1 Kelly Telford From:Jenkins, Zechariah R <Zechariah.R.Jenkins@efleets.com> Sent:Friday, September 10, 2021 10:39 AM To:Kelly Telford Subject:RE: Quote for Truck, Dealer Purchase Price vs Enterprise Price Attachments:Sourcewell Quote ID#17516 - City of Seal Beach 7-19-21.pdf Hi Kelly, I’ve looked over the attached vehicle quote that Iris provided for a purchase you are doing on this specialty vehicle. While we don’t do that type of specialty vacuum equipment; we could order the F450 Truck Chassis. If you look at the attached document it does breakout all of the F450 Chassis info separately (see screen shots below) and the selling before tax is $37, 987.62. I built an Enterprise order the same F450 chassis with the same factory options to create an apples to apples comparison. The selling price from Enterprise before tax would be $35,546 (see screen shot below). So roughly $2,400 less. As always let me know if you have any questions, I’m happy to help! -Zeke 2 Zechariah R Jenkins Senior Account Executive Enterprise Fleet Management, Inc (714) 463-7610 Direct Zechariah.R.Jenkins@efleets.com From: Iris Lee <ilee@sealbeachca.gov> Sent: Thursday, September 9, 2021 7:30 AM To: Kelly Telford <KTelford@sealbeachca.gov>; Jenkins, Zechariah R <Zechariah.R.Jenkins@efleets.com> Subject: RE: Quote for Truck Hi Kelly and Zeke, Attached is the quote. Thanks! Iris 1 Gloria Harper From:Jill Ingram Sent:Monday, October 25, 2021 2:05 PM Cc:Executive Team; 'Craig A. Steele'; Dana Engstrom Subject:RE: Questions on Agenda for 10/25/2021 BCC: CITY COUNCIL In response to Councilman Moore’s questions below regarding Item I: In Exhibit 2c, the 7% Franchise fee of about 10K is subtracted each Month from the revenue Republic will be making from this item. Is Seal Beach getting $10K more each month for the additional costs? Was it considered to waive the franchise fee to reduce costs to businesses? There were discussions about whether to reduce the Franchise Fee instead of utilizing another funding source like the Act Implementation fund; however, we thought it might be in the City’s interest to hold off on this strategy until we learn more of the impacts of SB 1383 (another state unfunded mandate which has yet to be dealt with) that will also have impacts and will probably mean more financial obligations for the City. Additionally, there may be more state unfunded mandates to come (beyond SB 1383) given the disposition of Governor Newsom and the goals of the environmental community and advocates. Also, the franchise fee is generally deposited in the General Fund and thus is non-restrictive funding. Conversely, the Act Implementation fund is restrictive and used for solid waste and recycling objectives so utilizing these funds for the above purposes first would be optimal. That’s not to say we are not looking at the Franchise Fee to offset potential costs in the future related to future unfunded mandates (i.e. SB 1383). Once we calculate what impacts SB 1383 may have on our residents and businesses (which will take place after adoption of 1826 rates), it may mean utilizing the Franchise funds to pay for certain costs of the program. What does a “typical” restaurant pay and also a “non-restaurant” would pay to give them a sense of what the average increase will be for businesses. Impacts to the same businesses with the City covering year 1 of public outreach vs. year 2 when businesses begin to pay for the public outreach. Those enrolled in the 1826 program would pay the rates in the table shown below for organics service: Organic Materials Container Size Monthly Rate based on Collection Frequency per Week 1x 2x 3x 1 Cubic Yard Bin $132.46 $264.92 $397.38 65 Gallon Cart $43.27 $86.54 $129.81 35 Gallon Cart $23.30 $46.60 $69.90 If a business does not participate in the organics service, then they would not see a rate increase. There are some instances where a business can apply for a waiver to self-haul or waive fees altogether but they would need to meet certain qualifications outlined in the mandate. When the businesses have to pay for the outreach portion of the Amendment (starting on July 1, 2023) they will be paying on average an additional $2.99 per month (which is the 1.7% increase). 2 Your typical or large scale commercial establishment will be looking for a 1 yard or 64-gallon cart to meet their organics needs. We often see some restaurants have more than 1 x 64-gallon cart because they are easier to manage/store. For Seal Beach specifically, the vast majority of restaurants along Main Street will only be seeking 35- to 64-gallon carts due to the tight spaces behind their properties. The other restaurants in the West (PCH) and North (Seal Beach Blvd.) will most likely be more apt to the 1-yard bin option. For the non-restaurant customers who do not qualify for a waiver at this point will most likely only be interested in the 35-gallon cart option because that size is available to them and most cost effective solution to be in compliance. As always, please call if you have any additional questions. Also, I would appreciate it if you would please let me know as soon as possible if you plan to pull any Consent Calendar items from the agenda to ensure staff and the City Clerk are prepared for a Zoom presentation and there are hopefully no technical challenges on Zoom tonight. Thank you, Jill Jill R. Ingram, ICMA-CM City Manager City of Seal Beach - 211 Eighth Street, Seal Beach, CA 90740 (562) 431-2527, Ext. 1300 Civility Principles: 1. Treat everyone courteously; 2. Listen to others respectfully; 3. Exercise self-control; 4. Give open-minded consideration to all viewpoints; 5. Focus on the issues and avoid personalizing debate; and, 6. Embrace respectful disagreement and dissent as democratic rights, inherent components of an inclusive public process, and tools for forging sound decisions. For Information about Seal Beach, please see our city website: www.sealbeachca.gov NOTICE: This communication may contain privileged or other confidential information. If you are not the intended recipient of this communication, or an employee or agent responsible for delivering this communication to the intended recipient, please advise the sender by reply email and immediately delete the message and any attachments without copying or disclosing the contents. Thank you. From: Thomas Moore Sent: Monday, October 25, 2021 9:38 AM To: Jill Ingram Subject: Questions on Agenda for 10/25/2021 Here are a few questions for tonight's meeting. Thank you, -Tom ITEM F: It was presented that the City would save 30% on the costs of the vehicles, however the agreement states they would be purchased at invoice price. Can you explain that further? 3 How much will the City be borrowing for each vehicle? What is the borrowing rate for Seal beach? Is there a risk of paying much higher interest than purchasing the vehicles if inflation continues and interest rates increase? Could we see a real-world example of 2-3 cars that we need to replace and what that would save us in the long-term vs. buying the cars along with what the interest payments would cost the City? ITEM I: In Exhibit 2c, the 7% Franchise fee of about 10K is subtracted each Month from the revenue Republic will be making from this item. Is Seal Beach getting $10K more each month for the additional costs? Was it considered to waive the franchise fee to reduce costs to businesses? Thank you, Tom Thomas Moore City Council Member, District 2 City of Seal Beach - 211 Eighth Street, Seal Beach, CA 90740 (562) 431-2527 x1502 Civility Principles: 1. Treat everyone courteously; 2. Listen to others respectfully; 3. Exercise self-control; 4. Give open-minded consideration to all viewpoints; 5. Focus on the issues and avoid personalizing debate; and, 6. Embrace respectful disagreement and dissent as democratic rights, inherent components of an inclusive public process, and tools for forging sound decisions. For Information about Seal Beach, please see our city website: www.sealbeachca.gov NOTICE: This communication may contain privileged or other confidential information. If you are not the intended recipient of this communication, or an employee or agent responsible for delivering this communication to the intended recipient, please advise the sender by reply email and immediately delete the message and any attachments without copying or disclosing the contents. Thank you.