Summary
To: Town Commission
From: Stefan Massol, Director of Support Services
Date: 6/15/2021
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Subject:
Title
Vehicle Replacements Approval
Summary:
Town staff is recommending replacement of several vehicles in multiple departments using funding previously set-aside for vehicle and equipment replacement.
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Body
Background/Problem Discussion: For some time the Town has budgeted for funds to be set-aside for future vehicle replacements. In the General Fund, these amounts are transferred each year into the Capital Equipment Replacement Fund while in Water and Solid Waste Funds the vehicles are depreciated each year and the funds are carried into reserves.
In July 2019 the Town began leasing two vehicles through Enterprise Fleet Financing. Enterprise is able to provide analytics to help the Town select those vehicles with the greatest government rebate incentives and highest resale value. They also assist with reselling the Town’s vehicles through their large network of secondary market suppliers.
Working with Enterprise Fleet, Town staff identified several vehicles that were previously approved by Town Commission in January 2021. However, due to a shortage of vehicles our order was among the many that General Motors decided to cancel. As GM will begin taking orders in July 2021 for the next model year staff is seeking approval again so that the Town can place orders as early as possible. We hope to acquire vehicles at the optimal price point, however because GM and others are yet to release their pricing or incentives we may choose to substitute manufacturer, limit the order to the half-ton vehicles, or alternatively look for better pricing through dealer stock.
It is likely that factory incentives or government pricing will evaporate for next year, due to the low supply and high demand from a backlog of 18 months’ worth of orders. Our strategy that we’re proposing to the Commission is that where we can find vehicles and if we can get them with today’s incentives or desirable FSA pricing we will try to execute those sales ahead of what is likely to be a sharp incline of pricing.
The list of vehicles is provided in the attachment. The fleet size would be growing by one vehicle in the Public Works Department to avoid situations where employees are traveling together in the cab. Where possible, the Town will be purchasing vehicles using favorable pricing through either the Florida Sheriff’s Association (FSA) contract or other piggyback government pricing.
Financial Implications: The net financial impacts of the vehicles purchase is unknown at this time as we have not received the new factory-order pricing, however the attachment provided shows the estimated implications as measured in December 2020. These vehicles can be leased at a rate of 3% + current 3-Year Treasury Note, or 3.31% per year as of 6/9/2021. Including all interest charges and other related financing fees with Enterprise Fleet, the Town previously estimated a net annual cost of less than $25,000 for leasing these 12 vehicles, valued at just over $322,000. While most of the trucks to be ordered were estimated to be cost neutral with a 12-month hold time, we expect there to be fewer incentives this year for government due to vehicle shortages which would impact the total cost of ownership.
The General Fund’s Capital Equipment reserves are roughly $540,000. Additionally, the Town expects to receive roughly $100,000 in auction proceeds from sale of the existing vehicles. Given the low cost of borrowing Town staff recommends using the lease model rather than purchasing vehicles outright.
Recommendation: Approval of vehicle replacements and leases of up to five-year terms based on alternative purchasing method of best available price.
Proposed Motion: I move approval of vehicle replacements and leases of up to five-year terms based on alternative purchasing method of best available price.