Title
Procurement of Village Fleet - Approval
History
Historically, the Village has purchased vehicles each year based on the amount included in the annual budget. Although the amount budgeted each year has been significant, averaging $949,800 over the last five (5) years, reduced overall Village revenues and higher acquisition costs have caused us to budget an amount less than needed to purchase new vehicles for all that have been due for replacement. The Village's current fleet includes 186 vehicles ranging in size from a small compact sedan to large Class 8 trucks. The average age of the Village's fleet is seven (7) years, with the oldest being nineteen (19) years old. Maintenance on the older vehicles is becoming difficult as it is hard to find parts and equipment necessary to make repairs, especially for the 13 - 16 year old large plow trucks (Class 8). The replacement of large plow trucks will consume a significant portion of the funding allocation over the next three years, costing approximately $180,000 each, potentially causing the replacement of the remainder of the Village's fleet to be deferred. This in turn will spike higher costs of ownership, as well as lower reliability and resale value.
Over the last several months, staff has been analyzing vehicle leasing programs available for the Village's vehicle fleet. Three (3) companies - Enterprise Fleet Management, Leopardo Companies, Inc. and Mike Albert Fleet Solutions - met with staff to discuss their leasing programs and to identify the pros and cons of leasing vs. purchasing, as outlined below.
Pros -
--Implementing a vehicle leasing program will provide for a fleet with a lower average age and provide for more fuel efficient and less costly to maintain vehicles
--Leasing will allow the Village to smooth out its cash flow, especially in years when larger, more expensive trucks are due for replacement. The Village will be able to replace more vehicles within a year with new fuel efficient, environmentally friendly vehicles that include new and improved equipment. Reducing the amount of cash needed to purchase vehicles could free up funds for other Village capital projects.
--At the end of the lease term, Enterprise will auction the vehicle (unless the Village decides to keep the vehicle). Any amount over and above the residual value factored into the lease payment will be returned to the Village.
Cons -
--Monthly lease payments include an interest factor, which will be determined at date of delivery, subject to a floor. This interest factor increases the overall cost of purchasing a vehicle. The monthly lease payment does not include a maintenance factor; although overall maintenance demands should decrease, staff will still be required to provide standard maintenance on the Village's fleet.
--When we purchase vehicles, the purchase is recorded on our financial statements as a capital asset. No offsetting liability is recorded; therefore, we see an increase to the Village's net assets. If we lease vehicles, we are required to record the value of the lease (plus any down payment) as a lease asset on our financial statements, and are also required to record a lease liability on our financials statements equal to the present value of the lease payments expected to be made for the term of the lease. Recording this liability negates most, if not all, of the increase to net assets.
--The lease of larger vehicles will require a down payment, increasing our cash outlay in year one of the lease. In addition, large vehicles may not be available for lease thru Enterprise; the ability to lease will be considered on a case by case basis.
--If we choose to keep a vehicle at the end of the intitial period, we will not receive any residual value payment. Instead, we will need to pay Enterprise the residual value factored into the lease payment, resulting in a total cost of the vehicle that is greater than it would have been if we had purchased the vehicle outright.
After meeting with each company and reviewing their leasing programs in detail, should the Board choose to implement a leasing program, staff recommends that we enter into an agreement with Enterprise Fleet Management to lease the Village's fleet going forward. Enterprise will provide a dedicated account manager supported by fleet coordinators who will assist the Village with the initial rollout of the leasing program and continue to provide support each year related to all aspects of the leasing program. Enterprise provides the lease financing, so the Village does not have to obtain lease credit elsewehere. Enterprise has identified a local dealer to negotiate directly with manufacturers to maximize incentive programs and pricing. Leased vehicles will be delivered directly to this dealer for the installation of all aftermarket equipment. See attached for a more detailed explanation of the services that will be provided by Enterprise.
Enterprise is a preferred vendor of TIPS, The Interlocal Purchasing System, a national purchasing cooperative that offers its members access to competitively procured purchasing contracts. Enterprise was selected through a competitive bid process that satisfies the Village's bid/RFP requirements for purchases over $20,000. There is no cost to be a member of TIPS.
Should the decision be made to not pursue the leasing option, an alernate motion is included below to facilitate the purchase of nine (9) police interceptors (eight (8) budgeted and one (1) accident replacement). Staff has received notification that the window for ordering 2020 model year police interceptors will close in February 2019, at the latest. We are also aware that a ninety (90) day scheduled shutdown of the manufacturing plant for retooling should be expected. Any delay in ordering the replacement vehicles will significantly impact the deliver date.
In 2018, the bid for replacement police interceptors was rejected and the purchase was made through the Suburban Purchasing Cooperative (SPC). The SPC awarded contract #152 to Currie Motors of Frankfort, Illinois at a cost which was $1,063 below the lowest bid price. In 2019, the SPC contract #152 remains with Currie Motors, at a cost of $32,976 each. The total cost to purchse nine (9) Ford AWD Utility Police Interceptors utilizing the SPC thru Currie Motors is $296,784.
I move to approve entering into a three (3) year agreement with Enterprise Fleet Management for the leasing of the Village's fleet in an amount not to exceed the annual budget for the purchase and/or lease of vehicles.
or
Financial Impact
The FY2019 budget includes a total of $1,010,500 for the purchase of vehicles; $641,500 is budgeted in the General Fund for the purchase two (2) dump trucks with plow and spreader for Parks, two (2) passenger vans for Recreation, one (1) pick-up truck for Parks, one (1) animal control van for Police and nine (9) patrol cars for Police and $369,000 is budgeted in the Water & Sewer Fund for the purchase of two (2) crew cab pickup trucks, one (1) meter installation van, one (1) engineering vehicle and one (1) dump truck with plow and spreader. The attached spreadsheet reflects an estimate of the cost of purchasing these vehicles vs. leasing these vehicles.
Recommended Action/Motion
I move to approve the purchase of ten (10) Ford AWD Police Interceptors utilizing the Suburban Purchasing Cooperative vendor, Currie Motors of Frankfort, Illinois in an amount not to exceed $329,760.