FROM: Mary Lou Kuschatka, Transportation Director
SUBJECT: Report on Cost Effectiveness of Remanufacturing Buses
DATE: April 2, 2003
This report responds to a question raised at the February 28 Budget Work Session regarding the cost effectiveness of remanufacturing thirteen 1990 RTS buses vs. purchasing new buses.
The State’s Draft Transportation Improvement Program and the Metropolitan Improvement Program include 13 expansion buses for the Town of Chapel Hill in 2004. The Transportation Department’s current bus fleet includes thirteen 1990 GMC RTS buses that are scheduled to be sold or placed in a contingency fleet. Federal Transit Administration regulations stipulate that buses have a service life of 12 years and that they may be replaced or sold at the end of that time. The regulations also allow that a bus may be remanufactured at the end of its normal service life.
The estimated cost of a new bus is $275,000. The estimated cost of remanufacturing the 1990 GMC RTS buses is $150,000 to $170,000. The remanufacture would include replacement of the power train with an ultra clean low emission engine and new transmission as well as replacement of other mechanical systems and vehicle interiors. They would also be equipped with wheelchair lifts. FTA regulations state that the cost of rebuilding a bus cannot exceed the yearly amortized value (straight line method) of a new bus multiplied by the number of years of useful life to be added to the rebuilt bus. The service life of the rebuilt bus would be extended by eight years. In our case, a bus that costs $275,000 with a 12-year useful life would have an amortized value of $22,917 per year. The cost for remanufacture of our 1990 bus would have to be less than $183,336 to be eligible for federal and State funding. The $150,000 - $170,000 estimated cost would be less than the regulations require.
The staff supports remanufacturing the 1990 RTS. They were designed and built by GMC on a stainless steel frame. GMC designed them structurally for a 25-year life and they are nationally known to be a superior bus. Our mechanics are familiar with working with them and we have parts inventory already in stock. The parts for the 1990 buses are less expensive than for the 2002 buses.
CONCLUSION
Remanufacture of the 1990 buses is a cost effective option when compared to replacement of the 13 buses. Securing funding for remanufacture of these buses may be easier as we would be seeking $2,210,000 instead of $3,575,000. Once funding is in place for the remanufacture of the buses we would send them 3 buses at a time with the entire remanufacture completed in approximately one year as opposed to the 18 month average wait for a new bus.