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_ P~sblic Works ~ Administration City of Eugene lYl 858 Pearl Street Eugene, Oregon 97401 Date: May 9, 2002 (541) 682-5262 (541) 682-6826 FAX To: Executive Managers www.ci.eugene.or.us From: Fleet Advisory Board;rCazlos Davis, Fleet Manager Subject: 7-Year Fleet Equipment Replacement Plan and the General Fund/Non-General Fund Replacement Reserves Summary Obiective: Propose the FY04 Fleet Replacement Plan and the FY04 General Fund Transfer Overview Every year, the Fleet Advisory Board submits a long term Fleet Replacement plan to Executive Managers. This plan and the General Fund Replacement Reserves Summary are used to determine the General Fund Transfer for the upcoming budget year. The first year of the proposed plan is incorporated into the proposed budget. During adoption of the City's annual budget, spending authority is established for equipment replacement. ' Fleet Services, in conjunction with the using department, evalua±es the need to replace individual equipment during the year targeted for replacement. Delay or advancement for replacement may occur due to available funding, equipment condition and/or customer needs. , General Fund Replacement Reserve Background The City of Eugene's Fleet is valued at $25 million; the General Fund portion is $12.6 million. General Fund replacement vehicles are purchased using funds from the replacement reserve and the annual transfer from the General Fund. The FY02 General Fund Reserve beginning balance was $1,949,884. The FY02 General Fund transfer was $793,603. During Ballot Measure 47/50 reductions, General Fund revenues decreased, and several priority special programs were added to the General Fund. These programs required vehicle additions, but funding was not provided for the acquisition ofnew vehicles. To initiate these programs, vehicles which were scheduled for replacement were kept in service. Using older vehicles results in higher maintenance costs, and adds vehicles to the fleet which will ultimately need to be replaced. These vehicles have now been included on the Fleet Replacement Plan. The trend over the past five yeazs reflect significant increases in vehicle acquisition costs. Previous General Fund replacement schedules were based on the initial purchase price, not the prof ected vehicle replacement cost. The schedule also did not include any associated costs for C.S.A., vehicle specification, registration /licensing, inspection or preparation. Fleet covers these associated costs from its O&M budget instead of allocating it to replacement. The initial methodology assumed that interest earnings on the General Fund Replacement Reserve would offset the cost difference between the initial purchase amount and the prof ected replacement value. Historically, price increases of vehicles have exceeded interest earnings, resulting in an accelerated depletion of General Fund Fleet Reserves. In past years, the General Fund Fleet Reserve did not include the sale of assets. To prevent reducing the General Fund Fleet Reserve below acceptable levels, the annual General Fund Transfer needs to be adjusted upward to keep pace with future vehicle purchases.