BUDGET WORKING PAPER
TO: Mayor and Council
FROM: W. Calvin Horton, Town Manager
SUBJECT: Funding for Vehicle Replacement and Computer Replacements in the
Recommended 2000-2001 Budget
DATE: May 17, 2000
This memo provides information about funding included in the Manager’s Recommended Budget for 2000-2001 allocated for the replacement of vehicles and computers for General Fund departments. The attached report provides brief background information on the establishment of a vehicle replacement program approved by the Council in 1998 and a three-year computer replacement program approved the Council last year.
The recommended budget for next year includes a transfer of $800,000 for lease purchase payments on vehicle replacements and $100,000 for lease-purchase payments for the replacement of desktop computers next year.
In 1998, we contracted with a consulting firm, David M. Griffith, Inc., to develop a long- range vehicle replacement plan that would allow the Town to replace vehicles and related capital equipment in the General Fund in accord with the normal useful life of each vehicle. Similar capital equipment replaced plans were established in prior years for the Transportation Fund and the Landfill Fund.
For the General Fund, the consultants recommended that the Town change its vehicle replacement practices from a cash purchase plan to an annual lease-purchase program. (See attached initial recommendations) The primary benefit of this plan is that it allows the Town to replace capital equipment in accord with the equipment's useful life, while retaining more cash and taking advantage of the Town's ability to borrow funds at tax-exempt rates.
We began this program in 1998, and continued the second year of implementation in the current year 1999-2000 budget. For the 2000-2001 budget, funding to continue this program as originally planned would require $800,000 from the General Fund, and $157,000 in fund balance from the Vehicle Replacement Fund that was transferred in prior years from the General Fund). This would allow the scheduled replacement of vehicles in accord with the original recommendations of the consultant.
Based on recommendations of the Town’s Technology Committee last year, the Council also approved a plan to replace desktop computers on a three-year cycle so that the computer network would be compatible with rapidly changing technology. This plan was implemented in the current year also using a lease-purchase program with desktop computer purchases of $150,000 and lease-purchase payments of about $50,000.
The 2000-2001 Recommended Budget includes $100,000 to continue this program. This funding would allow the second year purchase of desktops totaling $150,000, with additional lease payments of $50,000, for total payments of $100,000 in 2000-2001.
We strongly recommend that the Council continue these two programs as originally planned. We have made progress in the last two years in replacing older vehicular equipment and have improved our computer network with the replacement of more desktop computers.
However, if the Council wishes to adjust these programs in order to reduce the overall budget, a portion of the proposed costs for each program could be reduced by reducing the number of vehicles and computers to be replaced in 2000-2001. We would need to include funding to continue the lease purchase payments on items already purchased, but could reduce future payments by postponing a portion of both the vehicle and computer replacements scheduled for 2000-2001.