SR-202-001 (74)
June 14, 2001 Santa Monica, California
INFORMATION ITEM
TO: Mayor and City Council
FROM: City Staff
SUBJECT: Vehicle and Computer Replacement Programs
Introduction
This information item will provide background and information on the City’s Vehicle
Replacement Program and Computer Replacement Program.
Vehicle Replacement Program
In the late 1980’s an organizational development initiative, “Visions and Values”, was
undertaken in all City of Santa Monica operating and internal service departments.
The program encouraged and achieved identification of barriers to achieving the full
potential of employees and work groups. Among the most frequently cited barriers was
the age and condition of City equipment.
In the ensuing years, improvements were made in the Fleet Maintenance division’s
repair capacity and procedures. Although a recession delayed initiation of an
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aggressive vehicle replacement program, it provided time to conduct a reassessment of
the vehicle budgeting process. Lower value vehicles had customarily been purchased
and replaced through the capital outlay operating budgets while higher value vehicles
competed with other priorities as part of the Capital Improvement Program. Vehicle
purchase and replacement consequently led to significant swings in budget allocations
and pitted vehicle replacement against other worthy needs.
The Vehicle Replacement Program was started in FY 96/97 and covers approximately
585 vehicles and pieces of equipment (generators, compressors, sign boards, etc.)
The total number changes as vehicles are retired from service without being replaced
or vehicles are added through enhancements to operating divisions.
A review of vehicle budgeting practices at that time identified the following:
1. 241 vehicles or 41% of the fleet used in the City’s daily operations were being
maintained past their normal recommended replacement cycles.
2. 85 vehicles had repair costs in excess of $5,000. Of this group, 25 vehicles had
repair costs in excess of $10,000. In many cases, the cost of repairs was equal to
or in excess of the cost to replace the vehicle.
3. The age of the fleet caused excessive downtime leading to significantly reduced
productivity and raised serious concerns over safety. Fleet Maintenance staff were
working in a reactive mode with little time available to concentrate on preventive
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maintenance.
4. Only 15% of the fleet was operating on alternative fuels. This was considerably
lower than the Sustainable City Program goal of 75% of the fleet being alternative
fuel powered by year 2000.
5. Justification and analysis of vehicle replacement decisions were taking an
inordinate amount of department head and city management time. Given competing
priorities, replacement of vehicles was often deferred.
To address these problems, the City initiated a vehicle replacement program consisting
of the following components:
1. An economic life cycle was established for each class of vehicle based on the City’s
utilization and maintenance history. The replacement point in this cycle is where
annual repairs exceed the present value of the vehicle.
2. A master replacement schedule was prepared for the initial replacement of each
vehicle in the fleet at the time the program was established. Age, annual repair
costs and annual utilization were factored into the development of this schedule.
This schedule is updated as vehicles are added to the fleet.
3. A current replacement cost was computed for each class of vehicle. Future
replacement costs were computed based on inflation and the estimated useful life of
the vehicle.
4. The Divisions responsible for control and operation of the vehicles are not only
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required to provide sufficient funds for the initial purchase of a vehicle, but are also
required to make annual contributions so that the full replacement cost will be
available in the year in which it is scheduled for replacement.
5. The annual contribution for future replacement is based on the estimated
replacement cost divided by the number of years of scheduled useful life of the
vehicle and assumed interest generated by the contribution. This funding
mechanism ensures that sufficient funds will be accumulated to replace each
vehicle when it has reached the end of its useful life.
6. A vehicle may not be automatically replaced at the end of its useful life cycle. If the
vehicle has experienced lower than normal use or has minimal wear and repair cost
or can be re-assigned to another use, then replacement could be postponed. Fleet
Maintenance and the operating Division make this assessment on a vehicle by
vehicle basis.
7. New vehicles purchased from the fund are alternative-fuel powered wherever
possible. If a Division has operational considerations where the use of alternative
powered vehicles is not appropriate, a written waiver must be obtained from the
Director of Environmental and Public Works Management before the purchase of a
non-alternative-fuel powered vehicle is initiated.
Timing of the initiation of the Vehicle Management Program proved fortuitous in that the
Governmental Accounting Standards Board (GASB) has established new standards for
municipal financial reporting in regard to infrastructure and other assets, which are
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effective July 1, 2001. Until now, the value of such assets and their future replacement
costs had not been carried on fund balance sheets except for enterprise funds.
Starting in FY 2001-02, such information must be disclosed for all funds. The Vehicle
Management Program exemplifies the City’s prudent protection of the value of its
assets.
The status of the Vehicle Replacement Program, by fund, for the three-year capital
improvement cycle can be found at page III-17 of the Proposed Capital Improvement
Program Budget 2001-02/2003-04 (the smallest of the three budget volumes.) These
amounts primarily represent the annual, additional amounts still required to fund future
vehicle replacements. The current estimated balance in the fund available for future
replacements is about $10.6 million. Further contributions to “build up” the fund will be
necessary for six to seven more years. At that future point, on-going, annual
contributions should be about equal to expenditures for the replacement of all fleet
vehicles.
Computer Equipment Replacement Program
Like the Vehicle Replacement Program, the City operates a program to replace
computer equipment. Implemented four years ago, the program provides scheduled
replacement of server, desktop computer and printer equipment for all City operations.
There are 51 servers, 920 desktop computers and 376 printers in the program.
The program provides for upgrades to server, desktop and printer equipment, which is
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important given that new releases of software continue to require faster computers with
more memory and larger hard disks. The standards change yearly and after three
years, the desktop computer is no longer able to support advances in software
technology. The same applies for printers, and after four years, for servers.
The status of the Computer Equipment Replacement Program, by fund, for the three-
year capital improvement cycle can be found at page III-13 of the Proposed Capital
Improvement Program Budget 2001-02/2003.
Other Replacement Programs
A systemic approach for replacing City facilities and equipment is under discussion by
the City’s Capital Improvement Program Working Group. Like vehicles and computer
equipment, the scheduled replacement of facilities and equipment that have reached
their useful lives is essential for the maintenance of quality public services. Staff’s goal
is to present for Council approval a facilities and equipment replacement program as
part of the FY 2002-03 budget.
Conclusion
These replacement programs, established to correct serious deficiencies in prior
policies and procedures, are an intelligent approach to management of sizable City
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assets. Since the inception of the Vehicle Replacement Program, the City’s vehicle
fleet has been modernized, fuel efficiencies have been improved, vehicle emissions
have been reduced through the purchase of alternative fueled vehicles, employee
morale/pride has been positively affected, productivity has been increased and
employee/public safety has been enhanced. The Computer Replacement Program has
allowed the City to maintain up-to-date computer equipment in a constantly evolving
technology environment, preserving the integrity and reliability of the City’s operations
and public services. As long as the City uses and maintains vehicles and computer
equipment, these programs will need to continue.
Prepared by: Craig Perkins, Environmental & Public Works Management Director
Renee Cowhig, Maintenance Manager
Jory Wolf, Chief Information Officer
Mike Dennis, Finance Director
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