HomeMy WebLinkAboutExplanationEXPLANATION
Background
Objective #2 of National City's 2013-2018 Strategic Plan is to "Achieve Fiscal Sustainability".
One of the key initiatives (Item 2d) proposed in the Strategic Plan to achieve this object is to
"Fund replacement reserves, or create financing plans, for fleet, facilities and other City assets."
This report and subsequent presentation will focus on the fleet management and financing
component of this initiative.
National City's fleet consists of over 200 vehicles and heavy equipment, which supports all City
departments in delivering municipal services to residents, local businesses and visitors. Much
of the fleet is aging and in need of replacement. For example, the average life cycle for National
City vehicles is approximately 17 years, while some vehicles have been in operation since the
1980's.
The City currently owns approximately 120 light and medium duty vehicles, of which
approximately 25% are Police Department Patrol vehicles ("black & whites"). Light duty
vehicles include sedans, vans, SUVs, and small pick-up trucks. Medium duty vehicles include
'/ ton to 1 1/2 ton trucks. Currently, the entire fleet is City -owned and maintenance is handled by
the City's Vehicle / Equipment Maintenance Division, which consists of one lead mechanic and
two equipment mechanics (one of the equipment mechanic positions was recently vacated and
will be filled within the next few months). Specialized and extensive maintenance and repairs, as
well as 'overflow" work, is primarily sent to local mechanic shops in National City.
The typical vehicle holding pattern for National City is to purchase the vehicle, operate it until it
is obsolete, then sell it at auction. In comparison to an industry standard of five to seven years
of cost-effective life for the categories of vehicles described above, over two-thirds of National
City's vehicles are below this standard. Traditionally, aging vehicles have not been replaced at
the cost-effective point in their lifecycles due to limited capital resources and challenging
economic times. The result has been significantly higher maintenance costs (older vehicles
result in more frequent "big ticket" repairs), excessive downtime (which results in reliance on
more spare vehicles and poor fleet utilization), poor fuel economy, poor service availability,
decreased "curbside appeal," and increased greenhouse gas emissions.
Evaluation of Light and Medium Duty Vehicle Fleet
Beginning in the Fall of 2013, staff began the process of evaluating the City's fleet as it relates
to management, maintenance and operations. Staff from the Vehicle i Equipment iviaintenance
Division were consulted to assist with the evaluation and recommendations. The following
provides a summary of findings as it relates to the City's light and medium duty vehicles (based
on review of 77 vehicles, excluding Police Patrol vehicles):
• Average vehicle life cycle of 17 years, with some vehicles in operation since the 1980s;
• Aging vehicles are not being replaced based on the industry standard of five to seven
years of cost-effective life due to limited capital resources, lack of a formal fleet
management and financing program, and challenging economic times;
• Average monthly maintenance cost per vehicle of approximately $565, which translates
to approximately $522,000 annually;
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i. Average annual fuel costs of approximately $200,000;
• Outside support services are frequently used to supplement fleet maintenance in order
to keep up with demands for service;
3 Public safety vehicle repairs (Police and Fire Department) require faster turnaround
times, which places a strain or: Vehicle / Equipment Maintenance staff;
• Excessive downtime for repairs has resulted in reliance on more "spare" vehicles and
inefficient fleet utilization.
Staff has established the following goals based on the results of the evaluation:
• Reduce maintenance and operations expenses, and enhance workforce productivity and
community services through improved vehicle reliability — achieved by modernizing the
fleet and moving to a five-year vehicle life cycle for replacement;
Provide safe, dependable, cost-effective and energy -efficient vehicles;
• Utilize smart cash flow management to replace more vehicles with less capital;
• Review current maintenance and inspection procedures to ensure environmental
compliance;
• Provide access to alternative fuel technology.
!n order to achieve these goals, staff recommends the following:
• Partner with an experienced fleet management company to establish a vehicle leasing,
maintenance and management program for National Citv's light and medium duty
vehicle fleet;
• Restore the Vehicle 1 Equipment Maintenance Division to full staffing levels — staff
proposed re -instating and funding the Equipment Maintenance Supervisor position as
part of the FY 2015 budget (position was previously frozen several years ago due to
employee retirement).
Enterprise Fleet Management
Research & Analysis
After reaching out to local businesses (such as the Mile of Cars) and exploring joint -use
opportunities with other agencies such as the City of Chula Vista, staff has determined that
Enterprise Fleet Management offers the most comprehensive services and flexible options to
supplement fleet operations for light and medium duty vehicles (excluding Police Patrol
vehicles). Enterprise Fleet Management will support the City's Vehicle / Equipment Maintenance
Division by allowing staff to provide a higher level of service for the remainder of the fleet.
including public safety vehicles (Police and Fire Department) and heavy duty vehicles l
equipment. independent of the light and medium duty vehicles, these components of the fleet
provide a substantial amount of work to keep staff busy.
On December 17, 2013, at the regularly scheduied meeting of the City Council, City staff and
representatives from Enterprise Fleet Management presented an overview of services available
through their leasing, maintenance and fleet management programs. The presentation also
included the results of a comprehensive fleet planning analysis for the City's light and medium
duty vehicles (excluding Police Patrol vehicles), which compared the City's current fleet
management program and expenses to establishing a 60-month lease and maintenance
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program through Enterprise Fleet Management for replacing and modernizing the fleet over a
10-year period. After discussion on the presentation, Council directed staff to return to Council
with additional details on Enterprise Fleet Management's leasing, maintenance and fleet
management programs, provide a revised analysis after revisiting the fleet replacement
schedule, and explore other opportunities for management and financing of the fleet.
Based on direction from Council, staff spent the past five months working with staff from all
departments that utilize the City's light and medium duty vehicles to finalize the five-year
replacement schedule. Staff then had Enterprise Fleet Management perform a new fleet
planning analysis, which indicates an estimated 10-year savings of over $2.6 million. See
attached "Fleet Planning Analysis" summary table and chart.
Staff also assessed the option of purchasing new vehicles. While monthly payments and
financing are comparable to leasing, vehicle purchases typically require a larger downpayment,
and will require a significant investment in staff time to manage these assets. In addition,
extended maintenance programs are not typically offered by dealerships, and sending vehicles
to local mechanics tends to be more expensive than servicing vehicles in-house. Therefore, City
staff will have added pressure to regularly maintain these vehicles in order to ensure proper re-
sale values.
Staff also reviewed similar leasing, maintenance and fleet management contracts with other
public agencies that resulted from competitive bidding processes. The results of staff's research
indicates that Enterprise Fleet Management, as compared to other companies that competed for
the contracts, offers a more comprehensive scope of services with flexible options, more cost-
effective pricing and programs, and extensive experience and qualifications in fleet
management. See attached "Summary of Services" and "Contracts and Awards" for Enterprise
Fleet Management.
Contract and Scope of Services
Per Section 2.60.260 of the National City Municipal Code (NCMC) regarding cooperative
purchasing, the City has an opportunity to piggyback the West Contra Costa Unified School
District's RFP Contract #1112-03 Vehicle Fleet Management Services with Enterprise Fleet
Management, inc. to establish a vehicle leasing, maintenance and management program for
National City's light and medium duty vehicle fleet, estimated at ?a vehicles over a 10-year
period.
NCMC Section 2.60.260 provides authority to the purchasing agent to join with other public
jurisdictions to take advantage of cooperative purchasing opportunities, including but not limited
to any federal, state or local agency pricing program or structure that is determined by the
purchasing agent to allow a procurement that is in the best interests of the City. The purchasing
agent may buy directly from a vendor at a price established through competitive bidding by
another public agency whose procedures have been determined by the purchasing agent to be
in substantial compliance with the City's procurement procedures, irrespective of the contracting
limits of that jurisdiction or agency, even if the City had not initially joined with that public agency
in the cooperative purchase.
Staff has confirmed that the West Contra Costa Unified School District's RFP Contract
#1112-03 Vehicle Fleet Management Services with Enterprise Fleet Management, Inc. was
competitively bid through a Request for Proposals (RFP) process, and that the West Contra
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Costa Unified School District's procurement procedures are in substantial compliance with those
of National City.
The Open-ended, Equity Lease Program allows the City to move to a more efficient fleet profile
and stay on a life -cycle plan, within the constraints of the City's limited capita! budget. This
structure provides leasing leverage with all rights of ownership, including flexible funding options
and a strong resale market that can increase the City's equity.
Under this program, the City would retain ability to select the vehicles and features that allow
staff to do their jobs most effectively. Enterprise Fleet Management will also help coordinate
any aftermarket equipment needed, and deliver the vehicles "turnkey" to the City.
The attached letter from Enterprise Fleet Management summarizes the End of Lease Term
Options as follows:
Pay the reduced book value and take full ownership of the vehicle;
Roll the equity over into a new lease;
Have Enterprise Fleet Management sell the vehicle and give the City the difference
between the selling price and Reduced Book Value (RSV).
The Full Maintenance Program includes a fixed monthly cost guaranteed for the term of the
lease. This covers all routine, preventative, unscheduied, and common repairs such as oil
changes, starter, alternator, engines, and transmission issues, etc. By having a fixed cost, the
City will no longer be responsible for the unexpected maintenance costs associated with using
other service providers (as is the present case when "overflow" work is sent to local mechanics
shops). With the steady flow of newer vehicles, the City's fleet age would come down from
seventeen years to five years, based on the replacement schedule, which is in line with industry
standards.
The true savings is having a fixed price maintenance contract. With a fixed price contract,
Enterprise has a tremendous incentive to contain costs. They do this through two means. First,
Enterprise maintains a large network of automotive repair providers with whom they have
contractual relationships at steep discounts at the national level involving hundreds of millions of
dollars. Second, Enterprise constantly monitors the maintenance costs of the vehicles and their
conditions, suggesting changes to contain costs. Certified local mechanics shops in National
City may be used to provide regularly scheduled maintenance, while the fixed price via the
maintenance contract is passed through to the City. See attached list of local mechanics shops.
Utilizing the Full Maintenance Program will have no adverse impact to Vehicle ; Equipment
Maintenance Division staffing levels. The Program will allow staff to Provide a higher level of
service for the remainder of the fleet, including public safety vehicles (Police and Fire
Department) and heavy duty vehicles / equipment. Furthermore, if a need for more work arises,
the Full Maintenance Program allows the City to remove vehicles from the Program and direct
maintenance activities back to City staff.
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In summary, the vehicle leasing, maintenance and management programs offered by Enterprise
Fleet Management are intended to assist City staff in improving service levels, modernizing the
fleet, and more efficiently and effectively managing resources.
Staff Recommendation
Staff recommends adopting the Resolution authorizing the City to piggyback the West Contra
Costa Unified School District's RFP Contract #1112-03 Vehicle Fleet Management Services
with Enterprise Fleet Management, Inc:, consistent with Section 2.60.260 of the National City
cooperative purchasing, and author izin- the Mayor- _. �.i the
Code regarding Q.r:y � .=. :_ ��..::'�::.:t�'-'
following agreements and corresponding documents to establish a vehicle leasing, maintenance
and management program for National City's light and medium duty vehicle fleet, estimated at
74 vehicles over a 10-year period: 1) Master Equity Lease Agreement with Enterprise FM Trust,
including corresponding Amendment, Indemnity Agreement, Self -Insurance Addendum and
Officer Certificate, 2) a Maintenance Agreement with Enterprise Fleet Management, Inc.,
including corresponding Amendment, and 3) a Service Agreement referencing the piggyback
contract and establishing not to exceed amounts of $1,500,000 and $163,000 for the Lease and
Maintenance Agreements, respectively.
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