HomeMy WebLinkAboutCC AG PKT 2008-04-14#DDAGENDA STAFF REPORT
•
DATE: April 14, 2008
TO: Honorable Mayor and City Council
THRU: David Carmany, City Manager
FROM: Vince Mastrosimone, Director of Public Works
SUBJECT: Financing Option for City Fleet Replacement
SUMMARY OF REQUEST:
This report outlines for the City Council a long term financing option for
replacement of vehicles and equipment in the City fleet.
BACKGROUND:
For the past several years, the City has opted to appropriate funds each year for
vehicle and equipment replacement. Fortunately, funds have been available anc
needed equipment has been purchased. Inevitably, the City will experience
funding issues that will require choices to be made to balance the budget.
Confronted with this situation many agencies opt to delay or eliminate the
replacement of vital vehicles and equipment to the detriment of the departments
trying to provide citizens with the best possible service.
The Police, Lifeguard and Public Works Departments have missions impacting the
health and safety of residents, businesses and visitors in the City of Seal Beach.
It is critical to have good equipment to provide these services. Some cities have
created an Equipment Replacement Fund to insure money is available when
needed to replace vehicles and equipment. By doing so, they have recognized
these future obligations and developed an orderly plan to meet them.
An Equipment Replacement Fund would segregate moneys from the General
Fund, Water Fund and Sewer Fund and design them for equipment replacement.
The estimated replacement cost of all City owned vehicles and equipment is $3.9
million. The purchase price for each piece of equipment and each vehicle along
with the cost to outfit the vehicle for service is entered into the system. The
replacement cost is established based on the initial cost, service life and an
inflation factor. Each year the various departments would recognize the cost of
using the vehicles and equipment by budgeting an incremental amount for their
future replacement. It could be thought of as a rental cost of sorts. In this way,
when the time comes to replace the equipment, funds would be available from the
Equipment Replacement Fund to do so. Funding would be tracked individually for
each vehicle and piece of equipment. The Equipment Replacement Fund could
be developed in several ways.
Agenda Item .D.D
The City could recognize the future obligation and fully fund it by transferring
money from the General Fund, Water Fund and Sewer Fund reserves to the
• Equipment Replacement Fund. It is estimated the General Fund would need to
transfer $2.26 million, the Water Fund $282k and the Sewer Fund $369k to
implement an Equipment Replacement Fund immediately. Future department
budgets would include a line item for equipment replacement. This will smooth
out annual expenditures.
Another option would be to just start budgeting for vehicle and equipment
replacement based on the Equipment Replacement Fund program. This avoids
the large initial outlay. It will take 7-12 years to fully fund the replacement of
most individual pieces. In the interim, the City would still need to budget each
year to replace items on the replacement schedule for that year.
FINANCIAL IMPACT:
Establishing a long term financing plan for vehicle and equipment replacement
will regulate annual expenditures for this purpose while allowing for the orderly
replacement of these assets.
RECOMMENDATION:
It is recommended that the City Council
staff regarding City Council intent.
review the information herein and direct
•
SUBMI ~D BY:
Vince Mastros' one, Director of Public Works
Attachments:
NOTED AND APPROVED:
~~~
David Carmany, C y Manager
A. City Vehicle Inventory
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