The Little Falls City Council postponed a decision until Oct. 3, on a potential lease agreement for city vehicles with Enterprise.
Sept. 19, Enterprise Fleet Consultant Wong Nystrom told the Council the city could potentially save about $31,000 annually over the next 10 years by joining his company’s fleet program.
If the Council approves the plan, rather than purchasing new vehicles outright, as it does now, the city will lease vehicles from Enterprise. Once those vehicles reach a point where maintenance costs begin to increase, they will be swapped out. Enterprise will then sell the vehicle, with the city recouping the money from the sale.
“By turning these vehicles over in that three, four year timeframe, we’re able to get as much out of the vehicles as we possibly can,” said City Engineer Greg Kimman. “Otherwise, they start on the same path as a regular car would. That’s what we’re taking advantage of, is their fleet management software to be able to tell us when that point is to take and get as much out of these vehicles as possible in order to get the best bang for our buck with those vehicles.”
The Council elected to postpone the decision because they did not receive an updated analysis on the city’s fleet in relation to the program until the evening of the meeting. They wanted to take more time to look over the proposal before approving it.
“My concern is, I didn’t see anything until today,” said Council Member Frank Gosiak. “I hate making quick decisions, voting on it here in a half an hour. I’m not too sure what I’m voting on yet. I’ve heard that we can save ($31,000) a year. It would be nice to see it and understand it.”
Nystrom said he and his staff met with the city department heads to compile information on the city’s fleet, which includes 33 vehicles — excluding large equipment. To create a fleet profile for the city, they took into account the age of the vehicles, mileage, fuel and maintenance costs and how long the city kept a vehicle in use.
The fleet includes patrol vehicles, those used by Public Works and other departments within the city.
The average age per vehicle among the city’s current fleet is 8.2 years. They put on an average of 7,400 miles per year. The average model year is 2014, and the city uses each vehicle for an average of 8.25 years.
He found in the analysis that 11 of the city’s current vehicles are more than 10 years old and have more than 100,000 miles on them.
As such, he said they were recommending the replacement of 14 vehicles in 2023, two in 2024, six in 2025, three in 2026, six in 2027, and so on. The idea is, in part, to help the city cut down on maintenance and fuel costs by cycling through the leased vehicles in three or four years.
“We want to get rid of the oldest vehicles, the highest mileage, which are costing the city the most in operating costs of fuel and maintenance,” Nystrom said.
The cost to lease 14 vehicles from Enterprise in 2023 would be $165,650. However, the company will then sell the 14 vehicles it replaces. Nystrom estimated it will get $132,501 for those vehicles, which will then go back to the city.
He said, conservatively, the city could save more than $300,000 over 10 years by working with Enterprise.
“By working with Enterprise, due to the vehicle supply chain as well as working on the leases to get you the new vehicles, we feel very confident that I’ll save you a lot of money,” Nystrom said.
Following Nystrom’s original presentation, Council Member Leif Hanson asked him to give him the difference between what it would cost the city, per year, to go with Enterprise compared to the way it currently operates. Now, the city typically tries to replace three or four vehicles each year by purchasing them outright.
City Administrator Jon Radermacher said it was difficult to give an “apples to apples comparison” because the city would not normally be budgeting to replace 14 vehicles in a single year. He reiterated, however, that many of those vehicles that would be replaced through Enterprise are currently costing a lot in maintenance.
“Ten years for the total fleet budget that the city would be spending under Enterprise, it’s around $262,000 (per year),” Nystrom said. “That’s with fuel and maintenance costs, all-in.”
He said the cost to proceed as usual would be about $293,000 annually.
“To answer your question, on average, what are you saving? Roughly $31,000,” Nystrom said. “The city’s spending roughly $31,000 more annually and going out and buying just three or four vehicles each year, versus through Enterprise and getting a brand new fleet in the next five years.”
After a couple of the council members expressed concern about approving the proposal without having had a chance to more closely examine it, Chairman Brad Hircock asked if it needed to be acted on that night, or if a vote could be postponed until Oct. 3.
Radermacher said, perhaps, the biggest impact would be in the fact the city currently has a couple vehicles on order that it has not yet received. The cost of those vehicles could be converted into the lease program.
That, he said, would ultimately impact the current fleet profile analysis if the city receives those vehicles and cannot get them into the lease program.
He said it probably would not have an impact on the cost over 10 years, but it would certainly change the analysis because those vehicles on order were included.
Nystrom said, essentially, the city had already approved more than the $165,650 for 2023 in its regular vehicle replacement schedule. Approving the proposal that night, he said, would ensure they received the leased vehicles on the right cycle to maximize resale value, maintenance costs, etc.
He also said he was particularly specific on the 14 vehicles that would be replaced next year so as to replace the oldest — and therefore, most costly — vehicles in the fleet.
“This was a labor of a lot of tedious analyzing with your team — department heads as well as our team — to come up with these particular vehicles to save the city money,” Nystrom said. “I would hate to see that go away because we couldn’t approve $32,000 tonight. You’ve already approved a lot more than that.”
“What Wong is saying, we’ve budgeted for the vehicles that we’ve placed on order, that we’re waiting to receive,” Radermacher added. “Those funds are budgeted in previous years, so they can be converted into the lease payment versus the outright expense of where we are today.”
One other factor that plays into the timing, however, was the fact municipalities can usually purchase fleet vehicles at heavily discounted prices in comparison to an individual going to the car dealership.
However, the windows to do so are “extremely tight,” and the supply is often limited. Radermacher and Kimman believed the city’s access to vehicles would be much better if it partnered up with Enterprise.
“I kind of feel like I’m sitting in a car dealer here, sitting across the desk from a sales manager,” Hanson said. “‘You need to do this now or it’s going to be too late.’ They don’t want you walking out of that building and thinking about it. That’s kind of how I’m feeling right now.”
Ultimately, Nystrom said he believed two weeks would be OK if the city wanted to wait until its Oct. 3 meeting to make formal action.
“I was just hoping that we won’t lose any of those vehicles or any of the bang for our buck,” said Mayor Greg Zylka. “It sounds like that’s the direction the Council wants to go.”