SR-205-003 (636)
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Santa Monica$
Supplemental
City Council Report
City Council Meeting: December 5, 2006
Agenda Item: 1-A
To:
Mayor and City Council
From:
Craig Perkins, Environmental and Public Works Management
Subject:
Supplemental Information on Purchase of Refuse Trucks
Introduction
At the November 28 Council Meeting, staff was directed to review the cost/benefit of
purchasing trucks at this time considering the potential franchising of commercial
collections. This report provides supplemental information on the purchase of four new
CNG powered front-loading refuse trucks to replace three existing City CNG refuse
trucks and one diesel powered rental refuse truck. Staff recommends the purchase of all
four trucks at a total cost of $884,497.76 as the most cost-effective and operationally
sound approach for the Refuse Fund.
Discussion
Staff recommends replacing four Solid Waste trucks at a cost of $221,124.44 per truck.
Three of the vehicles being replaced are seven years old and the other vehicle replaces
one the vehicles destroyed in the August, 2005 fire. The City currently rents one vehicle
at a cost of $6,750 per month. The front-loading refuse trucks are the only vehicles in
the City's fleet that can service the rectangular metal bins that are used in the
commercial sector, in a number of larger multi-family buildings and for some of the
City's recycling programs. Two of the new vehicles will be used to service multi-family
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bins and recycling bins and the other two trucks will be used to service the commercial
waste that is collected by the City. The new trucks will be delivered to the City by
September 2007.
The City is currently drafting a Request for Proposals (RFP) for commercial operations.
This RFP presents various options to handle the collection of commercial solid waste
and recyclables. Options include City-only, private-only, and one or two private
companies and city competition. Additional options include franchising of the Downtown
and Main Street districts only or franchising of commercial operations city-wide. These
policy decisions will be presented to Council in May 2007.
If the City Council decides to franchise the collection of all commercial waste to a
private refuse company, the City would no longer collect any of its existing commercial
accounts. In this scenario, it is estimated that the period of time that would be needed to
complete public review, Council actions, contract negotiation and execution, purchase
and delivery of new equipment and containers by the private company (the RFP will
require the use of new CNG-powered trucks by the selected company/companies), and
transition of all commercial accounts to the private company/companies would not be
completed until September 1, 2008. Therefore, if the City purchased all four front-loader
trucks, took delivery in September 2007 and ceased all its commercial waste collection
activities by September 2008, it would have derived only one year of full use from two of
the new vehicles. Under this scenario and based on consultations with outside refuse
truck vendors, it is estimated that the City could sell the trucks after September 2008 at
an approximate 25% discount over the original purchase price. However, the City would
have derived one full year's value from the use of the vehicles which, based on a seven
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year replacement cycle, represents 14.3% of the original vehicle cost (100% divided by
7 = 14.3%). This results in a potential resale loss of 10.7% (25% - 14.3%) amounting to
$22,590 per vehicle or $45,180 total for both vehicles. Alternatively, the City could
include the purchase of the two vehicles as a requirement in the agreement negotiated
with the franchise refuse company/companies at a price not less than 85.7% (100%-
14.3%) of the original purchase price, which would ensure that the Refuse Fund
incurred no financial loss whatsoever. The City's current solid waste consultants, GBB,
have advised staff that such purchases of surplus equipment from municipalities are a
standard component of many franchise agreements.
Alternatives
One alternative option for Council to consider would be to only replace two of the
vehicles and delay replacement of the other two vehicles used for commercial
collections until a Council decision on citywide commercial franchising is made in May
2007. If this option is selected and the City Council ultimately decided to continue City
collection of commercial waste, it is estimated that the new vehicle purchase price will
have increased by $15,479 per vehicle by the time a new order could be placed in
August 2007 (this figure assumes a 10% price increase after January 1, 2007 that has
been communicated to the City by the vehicle vendor less interest earnings from the
delay in use of vehicle replacement funds until May 2007 for a net 7% cost increase). In
addition, the City would incur approximately $23,000 per vehicle in increased repair
costs for the period between September 2007 and delivery of the vehicles in May 2008.
The total potential cost to the Refuse Fund from the delayed purchase of the two trucks
under this alternative option would therefore be approximately $76,958. There would
also be the added risk of significant additional repair costs from an engine or
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transmission failure as well as the additional vehicle downtime associated with the
prolonged use of increasingly unreliable vehicles.
If only two refuse trucks are purchased and the City Council decides to discontinue City
collection of commercial waste the financial impact on the Solid Waste Fund would be
limited to the continued operation of the two vehicles that are beyond their replacement
schedule for an additional year (September 2006 to September 2007) at an estimated
increased repair and maintenance cost of $30,500 per vehicle or a total cost of $61,000
for both vehicles. There would also be the added risk of significant additional repair
costs from an engine or transmission failure as well as the additional vehicle downtime
associated with the prolonged use of increasingly unreliable vehicles.
Conclusion
In summary, the analysis presented above demonstrates that the most advantageous
approach from the standpoint of both financial benefit to the Solid Waste Fund and the
reliability and effectiveness of solid waste operations is the immediate purchase of all
four CNG powered front-loading refuse trucks as recommended tin the staff report.
Prepared by:
Craig Perkins, Director of Environmental and Public Works Management
Approved:
Forwarded to Council:
C; 1JL
Craig Per. s
Director - Environmental and Public
Works Management Department
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