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Public Works Maintenance Division City of Eugene 1820 Roosevelt Blvd. MEMORANDUM Eugene, Oregon 97402 (541) 682-4808 (541) 682-4882 FAX carlos.a.davis@ci.eugene.or.us DATE: March 23, 2004 TO: Executive Managers FROM: Fleet Advisory Board; Carlos Davis, Fleet & Radio Communication Services Manager SUBJECT:. 5-Year Fleet Equipment Replacement Plan and General Fund/Non-General Fund Replacement Reserve Summary Objective: Propose the FY05 Fleet Replacement Plan, the FY05 General Fund Transfer, and General Fund Fleet Reserve Plan Overview Every year, the Fleet Advisory Board submits a long term Fleet Replacement plan to Executive Managers. This plan and the General Fund Replacement Reserve Summary serve to determine the General Fund Transfer for the upcoming budget year. The first year of the proposed plan is incorporated into the budget to establish spending authority for equipment replacement. The remaining years of the proposed plan are incorporated into the six year forecast to estimate future equipment replacement. Fleet Services, in conjunction with the using departments, evaluates the need to replace equipment during the year targeted for replacement. Delay or advancement of replacement may occur due to available funding, equipment condition, and/or customer needs. New for FY05, Fleet Services compiled the proposed replacement forecast schedule using a life cycle cost method. This compilation includes some anticipated in-service preparation costs such as a more completely equipped Police Interceptor than those purchased in past years. Fleet is analyzing the cost of vehicle specification, registration, and licensing to provide for a total. cost replacement model. This methodology will be reviewed and presented for consideration in future years. General Fund Replacement Reserve Back rg ound The City of Eugene's Fleet is valued at $25 Million; The General Fund portion is $12.6 Million. General Fund vehicles use a `pay as you go' model which means that replacement vehicles are purchased using funds from the replacement reserve and the annual transfer from the General Fund. The fleet trend over the past five years reflects significant increases in vehicle acquisition and in-service preparation costs. Previous General Fund replacement schedules were based on the initial purchase price alone rather than the projected replacement cost plus in-service preparation. The schedule also did not include costs for vehicle specification, registration and licensing. Fleet has historically covered these associated costs from its O&M budget instead of allocating it to replacement. Fleet is analyzing the cost of vehicle specification, registration, and licensing to provide a `total cost replacement' model for future years. The City of Eugene is a self insured entity and therefore must fund vehicle acquisition costs due to accident totals or internal catastrophic damage. Risk Services carries a policy for vehicle damage resulting from a disaster within city buildings, but not in the function of normal operations or accidents. Risk Services has investigated private insurance plans but found their costs prohibitive for city-wide coverage. The General Fund Fleet Reserve historically provided a safety net for these contingencies before the rising equipment costs beyond the General Fund transfer significantly reduced General Fund Fleet Reserve levels. It also provided departments some equipment purchase flexibility for unexpected equipment technology changes. .Page 1 of 2 "FY04 Fleet Replacement Forecast"