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AGENDA #13
MEMORANDUM TO: Mayor and Town Council FROM: W. Calvin Horton, Town Manager SUBJECT: Staff Report: Front-loading Refuse Truck Replacement DATE: June 12, 2000 This staff report responds to questions from the Town Council regarding the replacement of one front-loading refuse truck in fiscal 1999/2000. The attached resolution would accept the bid of Tom Bailey Motors in the amount of $132,783.41 for a front-loading refuse truck for use in the Public Works Department's Sanitation Division. BACKGROUND On January 12, 1998 the Town entered into a consulting services contract with David M. Griffith & Associates, a fleet management-consulting firm, for the purpose of developing a long-term fleet replacement plan and to evaluate alternative approaches to financing fleet replacements. In fiscal 1998/1999, the Town Council authorized the Town Manager to implement a comprehensive Fleet Replacement Plan beginning in fiscal 1998/1999. The primary advantages of this plan are as follows:
The fiscal 1999/2000 Fleet Replacement Plan includes the replacement of one front-loading refuse truck. The estimated replacement cost of this vehicle is $ 134,000. The estimated lease-purchase payment stream is as follows: Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 $14,600 $29,200 $29,200 $29,200 $29,200 $14,600 On May 22, 2000, the Town Manager recommended that the Town Council adopt a resolution that would accept the bid of Tom Bailey Motors in the amount of $132,783.41 for a front-loading refuse truck. (The Town Manager’s memorandum of May 22, 2000 is attached.) The item was removed from the consent agenda for discussion. Because the Town Council is considering options for commercial refuse collection that may eliminate the service now being provided by the Public Works Department, the Council requested that the Manager provide information on the impact of deferring this replacement until the Town Council has made a decision on whether or not the Town will continue to provide in-house commercial refuse collection service. DISCUSSION Fleet Composition: The Sanitation Division currently has four front-loading refuse trucks in service. Three of these vehicles are used daily and one serves as an emergency back-up. The back-up vehicle is used to avoid service interruptions when one of the other vehicles is down for maintenance. Information on these four vehicles is provided below. Total Vehicle Model Current Maintenance Number Year Mileage Costs To Date 223 1998 26,200 $16,292 224 1998 18,000 $19,959 226 1992 76,600 $76,139 228 1993 63,200 $78,417 Benefits of Deferring Replacement: a. Deferring the replacement of this vehicle for one year would result in a debt service cost avoidance of about $14,600 in fiscal 1999/2000 and in fiscal 2000/2001; however, we expect that nearly all of the first year cost avoidance will be lost to increased maintenance costs. The average annual cost of maintenance for a front-loading refuse truck is about $10,000 for vehicles that are out of the warranty period and about $4,000 for vehicles that are still under warranty. Furthermore, the truck scheduled for replacement is currently out of service pending an $8,000 repair. Considering the increased cost of maintenance on older vehicles, we estimate that the net cost avoidance in the first year would be about $600:debt service reduction of $14,600 would be balanced by increased routine maintenance costs of $6,000 for maintaining the old vehicle plus the pending $8,000 repair that cannot be avoided if the truck will be retained for additional service. The cost avoidance in the second year would be about $20,600 because debt service is $14,600 less than expected and maintenance is $6,000 less than expected.. The debt service is reduced in the second year because, as noted above, the first year of our debt service payments is not a full year’s payment. Since deferring the purchase for a year delays the payment schedule, we are now making a smaller payment that expected in the second year. b. We believe that that there would be some savings associated with a decision not to replace a front-loader at this time if we are going to sell our front-loader assets within the next year; however, we cannot guarantee that this will be true. There are risks associated with running these maintenance-intensive vehicles beyond their expected service life of seven years. For example, the cost of replacing an engine in one of our older trucks would be about $28,000. Assuming that we could recoup about 75% of the value of a one-year-old front-loader, it may actually be less expensive to buy the new vehicle and avoid the high cost of maintaining the aging vehicle, even if we plan to stop providing this service next year. Impact of Deferring Replacement: a. The Town had an offer from Tom Bailey Motors for a front-loading refuse truck in the amount of $132,783.41; however the vendor agreed to honor this price only through the end of May 2000. Beginning June 1, 2000, this pricing is subject to availability of dealer stock. A truck that was being held in reserve for the Town is now being offered for sale on the open market. If the vendor sells his remaining inventory of this make and model before we make a decision to buy, we will lose this favorable pricing opportunity and it will become necessary to rebid the procurement. Based on current market prices, we believe that the cost of this vehicle will be about $140,000 if we must rebid the procurement.
b. If we elect to rebid this procurement, we can expect to delay delivery of the replacement vehicle for about six to nine months. Under the current offer, the vendor can deliver a vehicle in about 45 to 60 days. If we do not accept this offer on June 12, 2000, the next opportunity for the Council to consider bids will be in the fall of 2000, after the fiscal 2000/2001 budget is amended to reflect the carryover of funds from this year. We would not expect to take delivery until the 3rd quarter of fiscal 2000/2001. c. Vehicle number 226 is currently inoperative due to problems with the front suspension and steering system. The estimated cost of repairs to this vehicle is about $8,000. We have postponed these repairs in anticipation of replacing the vehicle. If we decide to defer replacement of the vehicle, then we will incur the cost of returning vehicle 226 to serviceable condition. d. If we replace vehicle 226 on schedule, we will sell it at auction this fall. Based on past experience, we would expect to realize about $10,000 on the sale of this truck. If we decide not to replace the truck, we will forgo that anticipated revenue in fiscal 2000/2001. e. Deferring the replacement of this vehicle may also have some negative impact on service delivery. While we do have some redundancy in our commercial fleet, retaining these vehicles beyond their service life increases the probability that we will experience occasions where we have more than one truck down for maintenance at the same time. In order to minimize the disruption of service when this occurs, it would be necessary to adjust routing and scheduling so that drivers could share the trucks remaining in service. Some service would be delivered late. Some service would be delivered during daytime hours when traffic conflicts reduce the safety and efficiency of refuse collection operations. Issues Regarding Purchasing a Used Vehicle: a. General. Historically, the Town has used this option from time to time; however, we have not done so in the past 16 years except for undercover police cars. In 1983 we purchased two used front-loaders from the City of Highpoint. Thesefront-loading sanitation trucks were not as heavy-duty as we normally specify and they had chronic maintenance problems while they were in service with the Town. b. Specification. We believe that the purchase of used vehicles can be a viable option if great care is taken to avoid compromising on the specifications. We would want to limit this option to trucks that fully meet the specification that we use when purchasing new vehicles. We would also recommend that this option be limited to trucks that are no more that two model years old and have accumulated less that 15,000 miles of service. c. Availability. We have concerns about the availability of suitable used vehicles in the market. Front-loading refuse trucks are very specialized vehicles and we believe that it would be very difficult, perhaps impossible, to find suitable low-mileage used vehicles on the market. Even if a suitable vehicle could be found, we would be competing in a “seller’s market” against commercial waste haulers with much more latitude in their purchasing practices. We believe that potential sellers would have little motivation to submit bids or price quotes to the Town. d. Financial Implications. Under our current fleet replacement budget, we have funds for debt service but not for outright purchase of vehicles. The terms of our loan for the fleet replacement program specify that we will purchase new equipment. We would need to pay cash for this vehicle or attempt to negotiate a separate loan for this purchase. e. Legal Considerations. The law allows private negotiation and purchase from another governmental unit. If there were a used vehicle available from another governmental unit that the Town believed met our needs, the Town could negotiate for the purchase. However, in order to purchase a used vehicle from the private sector we would need to follow statutory procedures for public bidding. Specifications the Town might use could include a limitation on the age or mileage, as well as standards regarding size and engine capacity. Thus, if the Town found a used vehicle owned by a private party that met its needs, it would be necessary for the Town to develop specifications and advertise its interest. The particular party as well as any other parties which might be able to provide a vehicle meeting the Town’s specifications would then submit bids. The Town could consider price as well as other relevant factors, such as condition of the vehicles, in deciding whether to accept a bid. RECOMMENDATION That the Council adopt the attached resolution awarding the front-loader bid to Tom Bailey Motors in the amount of $132,783.41.
A RESOLUTION ACCEPTING THE BID FOR THE PURCHASE OF A FRONT- LOADING REFUSE TRUCK (2000-06-12/R-19) WHEREAS, the Town of Chapel Hill has advertised notice of wavier of the formal bid process by legal notice in The Chapel Hill Herald on May 10, 2000, in accordance with G. S. 143-129-G for the purchase of a front-loading refuse truck loader; and WHEREAS, the following formal bids were received by the City of Greenville, N.C. on February 28, 2000 in accordance with G. S. 143-129: Tom Bailey Motors $132,783.41 Cavalier Equipment $136,543.95 Carolina Environmental $139,840.00 Charlotte Volvo/GMC $136,622.00 Amick Equipment Co. $143,643.00 Nu-Life Environmental $139,167.00 and; WHEREAS, the bid from Tom Bailey Motors was found to be the lowest bid responsive to the specifications; and WHEREAS, the Town Council has determined that doing this procurement under G.S. 143-129(g) is in the best interests of the Town; NOW, THEREFORE, BE IT RESOLVED by the Council of the Town of Chapel Hill that the Town implements the wavier of formal bid process in accordance with G. S. 143-129(g) and accepts the offer to sell of Tom Bailey Motors in the amount of $132,783.41 This the 12th day of June 2000. |