Workshop Item Alison Bong, Deputy Finance Director
Title
Title
2023 Capital Equipment
end
Background
Capital equipment requests were submitted by departments in the second quarter of 2022 and were vetted by finance in third quarter of 2022. Council received a high-level look at the capital equipment requests at the September 19 council workshop. At the workshop, council members expressed a desire to see more information on the fleet rightsizing study (FRS) as it relates to this year’s capital equipment requests.
Staff program requests using the processes outlined below.
• Computers - replaced on a 4 to 5-year schedule, which is 1 to 2-years later than industry standards. As of the 2023 requests, computer replacement dollars are being centralized within the information technology (IT) capital equipment budget to better track expenses in preparation of creating an IT internal service fund.
• Software - as of 2023 first-year software implementation and annual fees will be centralized within the information technology (IT) capital equipment budget to better track expenses in preparation of creating an IT internal service fund.
• Vehicles and Equipment - replaced on a varying schedule depending on the class and/or type of the vehicle or equipment. A fleet rightsizing study was completed in 2021 which evaluated the city’s “rolling stock” of vehicles of equipment. The study analyzed all motorized vehicles and equipment as well as a portion equipment attachments and non-motorized equipment. The information outlined in the following sections of the packet focuses on the fleet rightsizing study findings and implementation proposals.
Fleet Rightsizing Study (FRS)
Management Partners was engaged in 2021 to evaluate Blaine’s vehicle maintenance operation and to develop a plan to make improvements to the program. Blaine has a vehicle and equipment fleet of 591 units. The FRS analyzed 344 of those units. The units excluded from the study consisted of attachments and non-motorized equipment. Details on Blaine’s current fleet is below.
Table 1. Fleet Inventory Summary (FRS, p. 3-4)
|
Equipment Type |
# of City Units |
|
Law Enforcement Patrol |
41 |
|
Sedans (including undercover units) |
8 |
|
Light-Duty (class 1 through 3) |
118 |
|
Medium-Duty Trucks (class 4 through 6) |
21 |
|
Heavy-Duty Trucks (class 7 and 8) |
37 |
|
Motor-Driven Const. Equip (e.g., loaders, dozers, graders, pavers) |
23 |
|
Misc. Equipment (e.g., trailers, compressors, landscape equip) |
343 |
|
TOTAL FLEET UNITS |
591 |
The FRS includes data that Blaine can use to evaluate the equipment it currently owns. Staff used the 2021 fleet condition assessment rating assigned by Management Partners to evaluate the 2023 equipment requests. The 2021 fleet condition assessment rating “used the Optimal Economic Life Point System to evaluate the overall condition of each fleet unit taking into account age, utilization, physical condition, maintenance and repair costs, reliability and downtime” (FRS, p. 5). Additional details on the rating system and Management Partners’ evaluation are included in the next section.
Fleet Condition Assessment Rating Excerpt from FRS
Management Partners conducted an assessment of the City’s fleet using a point system that takes into account six factors: 1) age, 2) utilization (miles/hours), 3) maintenance/repair costs, 4) physical condition, 5) reliability, and 6) downtime. Each of these factors is based on a 1 to 5-point scale. When these points are totaled, and a unit has attained 23 or more points, the vehicle or piece of equipment becomes a candidate for replacement or disposal.
This type of system is used by many public agencies today and is typically referred to as the Optimal Economic Life Point as illustrated below.
Optimal Economic Life Point
Points are assigned to each set of criteria as follows:
• Age. One point for each year of chronological age, based on the date it was put in service.
• Miles/Hours. One point for each 10,000 miles or 750 hours of service.
• Maintenance/Repair Costs. One to five points based on total life-to-date maintenance and repair costs (not including accident damage repairs) as a percentage of the vehicle’s original purchase price. For example, a vehicle whose total maintenance and repair costs equal the unit’s original purchase price would receive a score of five while a unit whose maintenance and repair costs equal 20% or less of the vehicle’s original purchase price would receive a score of one, and any costs equal to or greater than the original purchase price would receive a score of five.
• Condition. This takes into account a unit’s body condition, interior condition, accident history, rust, and anticipated repairs. A five-point scale is used with one being excellent condition and five being poor condition.
• Reliability. Operators assigned to the vehicle are typically asked to assess the reliability of the various components, systems and equipment of each vehicle. A five-point scale is used with one being excellent and five being poor. Another means to measure reliability is to assign one, three, or five points depending on the frequency the unit is in for repair. A rating of five would be assigned to a vehicle that is in the shop two or more times per month on average, while one point would be assigned to a vehicle in the shop an average of once every three months or less.
• Downtime. Typically, this category would take into consideration the amount of time that a unit is out of service. A five-point scale is used with five indicating excessive downtime (20% or more) and a score of one indicating little downtime (6% or less). In cases where downtime is not tracked, the average number of repair work orders per month for each unit can be substituted. Those units with two or more work orders per month would be assigned a score of five, while units with less than one work order per month would be assigned a score of one.
Points for all six criteria are then totaled for each unit and compared with the point ranges found in Table 12.
Table 12. Scoring System for Evaluating Vehicle Condition and Replacement Need
|
Point Range |
Condition |
|
Under 18 points |
Excellent condition |
|
18 to 22 points |
Good condition |
|
23 to 27 points |
Qualifies for replacement |
|
28 or more points |
Needs immediate consideration for replacement |
The results of our condition assessment found that about 33% of the fleet (115 units) should be considered for immediate replacement. Five of them are currently scheduled for replacement according to Vehicle Maintenance.
It should be noted that data we compiled from Dossier fleet software reports titled “life-to-date costs per unit” and “number of repair orders per unit” may be understated due to several factors. The lack of repair orders being generated, and mechanics’ time not being recorded accurately. Additionally, the shop labor rate of $43.15 per hour used to price work orders is far less than the rate we have computed at $130.27 per hour. This again demonstrates the need to compile accurate and up-to-date fleet information to properly perform life cycle analysis.
|
Point Range |
Condition |
Number of Units |
|
Under 18 points |
Excellent condition |
161 |
|
18 to 22 points |
Good condition |
29 |
|
23 to 27 points |
Qualifies for replacement |
39 |
|
28 or more points |
Needs immediate consideration for replacement |
115 |
One of the primary factors contributing to the overall condition of the 115 units requiring immediate consideration for replacement is their age. Ninety-three of these units are between 10 and 36 years old. Three units are more than 48 years old. Most of these units far exceed the average age that government agencies keep their vehicles and equipment. Thirty-one of the 115 units were rated in “poor” condition due to rust and body damage.
Table 10. Fleet Age
|
Fleet Age |
Number of Units |
Percent |
|
5 Years or Less |
143 |
42% |
|
6 to 10 Years |
69 |
20% |
|
11 to 15 Years |
36 |
10% |
|
16 to 20 Years |
59 |
17% |
|
More than 20 Years |
37 |
11% |
|
TOTAL |
344 |
100% |
As shown above, the age of all rolling stock units is significantly older than we recommend as a best practice. The average age is 9.4 years, a number that corresponds to an average computed replacement cycle of 18.8 years. This is almost double the 10-year average replacement cycle that is common for municipal fleets. An older fleet has consequences, because it requires more maintenance, vehicles are out of service for longer periods of time and are more costly to repair, and more mechanics are required to keep them in service. (FRS, p. 35-36)
The FRS also analyzed Blaine’s vehicle replacement cycles and states
The City does not have established vehicle replacement criteria (cycles) for vehicle types. We took a cursory review of the age of various fleet units and compared them with standard life cycles practiced by well-run fleet agencies. In many cases the City is keeping vehicles beyond their typical life cycles. This is quite evident among sedans, pickups, vans and SUVs that are kept between 15 and 20 years. By keeping these aged vehicles in service, the City may be sacrificing safety features, improved gas mileage, and lower emissions, all of which are found on newer models. (FRS, p. 33)
Management Partners developed replacement intervals for some of the major classes of vehicles and equipment using best practice data. Blaine’s current replacement intervals range from 5 years to 36 years or 100,000 to 200,000 miles; the recommended replacement intervals range from 4 years to 20 years or 100,000 to 150,000 miles (FRS, p. 34)
Applying the FRS
At the September 19 council workshop there were questions around the quantity of capital equipment requests with a fleet rating of NA and on the pieces of equipment with a rating that did not indicate a need for replacement (rated under 23 points).
There were 35 requests with a rating of NA. Of those requests
• 18 are categorized as new or addition, meaning the equipment does not exist in Blaine’s fleet yet and no fleet rating was assigned in the 2021 study
• 2 are categorized as other as they do not fit into another category - these requests include the capital contribution for SBM Fire and the establishment of a contingency budget for unforeseen computer expenditures
• 14 are for replacements of equipment that were excluded from the 2021 study
• 1 of the requests was mistakenly marked as NA and will have a rating added on the next capital equipment listing
There were 6 requests with a rating under 23 points. Of those requests
• 4 of the requests are for police vehicles which have an expedited replacement schedule due to the wear and tear placed on those vehicles; the included vehicles are expected to reach 100,000 miles in 2023, which would then qualify those vehicles for replacement based on the FRS guidelines
• 1 of the requests is to upgrade a skid steer to better meet the needs of the department
• 1 of the requests is to repurpose a vehicle for seasonal use and then purchase a new vehicle to better meet the department’s needs
Blaine is now in a position where a balanced approach that addresses both maintaining the current fleet and ensuring the fleet is expanding sufficiently to meet the city’s growth will be required.
The FRS provides a comprehensive set of recommendations for improving the city’s vehicle maintenance operation and fleet management process. Finance Director Huss is leading a Fleet Rightsizing Implementation Team that is currently evaluating the study’s recommendations and what it may look like to implement them. To date, the implementation team has separated the FRS recommendations into various categories and assigned the implantation of those recommendations to separate team groups. Some of the 63 recommendations have already been implemented including the sale or disposal of a number of vehicles and pieces of equipment that were identified in the FRS for disposal.
Ongoing Capital Equipment Updates
• Capital equipment requests are being updated to reflect inflationary costs which will bring the budget numbers closer to anticipated purchase prices
• Public works is in the process of compiling a rough 10-year equipment replacement schedule to further evaluate the capital requests
• The police department has requested removal of a few capital requests
Staff Recommendation
Staff welcomes council questions and feedback on the 2023 capital equipment.
Attachment List
Capital equipment listing provided for September 19 council workshop
Capital equipment updated listing
Presentation