Fleet Vehicle and Equipment Replacement Plan Update

Fleet Vehicle and Equipment Replacement Plan Update

RECOMMENDATION:

THAT the report titled “Vehicle Fleet Replacement Plan Update” from the Manager of Accounting be received for information.

PURPOSE:

To provide Council with updated information regarding the resource requirement for vehicle and equipment replacements at the Town of View Royal for the next twenty years (2024-2043). This report provides the updated inventory of fleet vehicles, their respective age and condition, planned renewal year, replacement estimates and funding requirements. Vehicle and equipment replacements, and associated funding scheduled for 2024-2028 will be incorporated into the draft five-year financial plan to be deliberated in February 2024.

TIME CRITICAL:

As part of the preparation of the five-year financial plan, in advance of financial plan workshops in February.

EXECUTIVE SUMMARY:

This plan provides for replacement of the vehicle fleet within each vehicle’s useful life, and the replacement of major equipment funded by the fire department machinery and equipment reserve, ensuring the safety of staff and the public while desired levels of service are maintained. This replacement plan will inform the 2024-2028 Financial Plan and includes an annual $24,000 increase to the fire department machinery and equipment reserve to meet replacement targets while maintaining the reserve at a sustainable level. The financial impact of “greening” the vehicle fleet where practicable has been incorporated into this plan as staff continue to integrate environmental sustainability into their decision making. This plan will inform discussions during the 2024-2028 financial plan workshops to be held in February 2024.

BACKGROUND:

At its November 6, 2018, meeting the Committee received the inaugural Fleet Vehicle Replacement Plan which was subsequently included in the approved five-year financial plan. As an important component of View Royal’s asset management program, this plan is instrumental in establishing replacement cycles for fleet vehicles and in determining the funding requirements for input into the five-year financial plan.

Reserves for municipal and fire vehicles, machinery and equipment were established by bylaws and included in Reserves and Surplus Policy (1600-020). The policy provides for reserve funds to be used for replacement of Town fleet vehicles and equipment. Funding for reserves is provided through annual budget allocations and proceeds from sale of vehicles and equipment. By utilizing reserve funding for vehicle and equipment replacements, the plan spreads costs evenly over time and has a stabilizing effect on the overall financial plan.

This report has been prepared under the assumption that the planned vehicle replacements for 2023 are completed before the end of the year. If any planned replacements are not completed in 2023, any remaining balance will be carried forward and reflected in the 2024 budget proposal.

The vehicle fleet consists of vehicles and heavy mobile equipment owned and operated by the Town. The current fleet inventory as shown on Appendix A (attached) comprises 25 vehicles, ranging in age from 1 to 32 years. Condition assessments were established relative to reliability, maintenance requirements, and other operating cost drivers; 24% of the fleet have condition ratings of fair or poor (2022 – 16%). Replacement costs are projected based on historical costs, industry knowledge and inflation. Where staff can reasonably expect an alternative fuel vehicle (hybrid or electric) will be a viable option for replacement, the planned replacement cost includes an estimate of the additional cost associated with this upgrade.

Like fire vehicles, fire hose and SCBA replacements are funded from the fire department machinery and equipment reserve. Cost of replacement is significant, and advance planning helps ensure that yearly reserve levels are sufficient to replace aging equipment before failures cause a reduction in service availability or capacity.

DISCUSSION:

Fire Apparatus

Underwriters of Canada (ULC) sets out standards for the replacement of fire engines. A fire engine may be used for first response to an emergency event for the first 15 years of its useful life. From age 16 to 20 years, it becomes a second responder unit and at 20 years it goes into backup status, with retirement no later than 25 years of age. Consideration of these parameters, in addition to condition assessments undertaken by the Director of Protective Services has resulted in the replacement timeline shown in the plan.

In the case of large Fire apparatus replacement (>$250,000), the current level of reserve funding is not sufficient to sustain the long-term replacement plan. In the recent past, Council has chosen to fund these purchases through Casino reserve, since the volatile nature of Casino revenue lends itself well to funding large one-time purchases. Alternatively, debt is a funding option but comes at a higher cost due to the cost of borrowing. The Vehicle Fleet Replacement Plan assumes that the Casino reserve is the funding source in 2024. As economic conditions change and are considered, funding decisions will be at Council’s discretion as determined through each year’s budget process.

In 2023, staff experienced increased breakdowns of the 1991 Navistar International Brush Truck Unit #32. This event was unforeseen and due to the cost of further maintenance and risk of ownership, staff have expedited the planned replacement to occur in 2024 at a budgeted total cost of $350,000. The 2002 Chevrolet Venture Unit #300, serving Emergency Services, was planned to be replaced by the 2009 Chevy Tahoe but staff feel the Tahoe is best utilized as part of the Protective Services fleet, thus the plan includes a 2025 replacement of the Venture at a value of $55,000.

Municipal Vehicles

Planned replacement dates for municipal vehicles have been determined through a careful review of current condition assessments with the Director of Engineering and Parks Supervisor, as well an analysis of servicing needs. Whether a vehicle is heavy duty or light duty has an impact on its replacement timeline for purposes of this report.

The 1996 Kubota has been permanently replaced by purchasing equivalent parts that are attachable to the Town’s John Deere Compact Tractor. Doing so provided a capital cost savings to the Town (as a replacement Kubota would have rendered the project over budget). Furthermore, removal of the Kubota will increase usable space in the parks yard to improve operational efficiencies. It is expected the tractor attachments will be next replaced in 2030. At this time the Fire Department may repurpose the Kubota for their use and staff are coordinating with their department accordingly. If the Kubota is added to the Fire fleet as a permanent requirement, future replacement plans will need to include the future replacement of this unit.

Engineering and Parks continue to seek opportunities to replace vehicles with an EV fleet, where possible. Staff must take careful consideration in determining when an EV vehicle is suitable for its intended use. For example, the 2010 Nissan Frontier replacement (scheduled for 2024) would likely be an optimal candidate for an EV truck: payload capacity and storage space are comparable between current EV truck options and the Nissan Frontier.

Conversely, there are challenges in replacing the 2007 Chevrolet 1-ton pickup and the 2003 Ford F350 Dually Dump with an EV equivalent. Current EV models do not match the payload and storage space requirements of Parks. Given that EV trucks are still relatively new releases, there is a lack of bona-fide data and there exists mixed reviews in EV truck payload-to-mileage range: the reduction in mileage range due to increased towing / payload weight. Staff are continuing to research the release of new EV trucks to determine if future models can meet the payload and and storage needs for future fleet replacements.

This plan assumes full funding from the Machinery & Equipment Depreciation Reserve for municipal vehicles, as these replacements are typically at lower relative costs such that the reserve can accommodate the replacement plan through stable annual contributions.

The Town Hall is currently at capacity with EV fleet charging stations (2 chargers). Future budgeting may see increased capital and maintenance costs to the Town Hall building to account for at least two more charging stations to accommodate potential EV replacements to the 2010 Nissan Frontier (replacement in 2024) and the 2013 Honda Fit (replacement in 2027).

SCBA and fire hose inventory

The Town has an inventory of 60 SCBAs, which have a life span of 15 years. Based on the age of the current inventory, the plan allows for replacement of twenty SCBAs in 2023 and 2028, with replacement scheduled every five years thereafter. This will ensure that no units will be in use for longer than 15 years.

Fire hoses in a variety of diameters and lengths are used by our first responders. Generally, this hose has an expected useful life of ten years and is maintained and tested annually. Like SCBAs, the replacement of hose supply costs between $30,000 and $40,000 every five years. Funding these replacements from the Fire Department Machinery and Equipment reserve increases financial sustainability by smoothing the demand evenly over the long term.

SUSTAINABILITY/CLIMATE CHANGE IMPACTS:

Notwithstanding the commentary on the electrification of fleet vehicles noted above, where appropriate and effective, the plan includes the financial impact of “greening” the vehicle fleet, where the market offers similar vehicle models with reduced GHG or emissions ratings, such as electric or hybrid vehicles. Generally, an electric or hybrid vehicle may cost about 20% more, however this premium would likely be somewhat offset by lifecycle cost savings from lower maintenance and fuel costs. Moving toward a “greener” vehicle fleet could help achieve View Royal’s goal of carbon neutrality.

Suitability of electric or hybrid fleet vehicles is dictated by many factors including fuel efficiency and practicality. Currently, the market predominantly offers a greater number of electrified options for commuter vehicles than work or emergency vehicles. As a result, staff will continue to research future EV vehicle models to balance practical needs of the Town with market availability. Where electric or hybrid options are impractical or not available, the purchase of a gas-powered vehicle may still support “green” objectives, as newer vehicles are more likely to have improved technology and lower greenhouse gas emissions.

FINANCIAL IMPLICATIONS:

As the community grows, resources required to maintain established service levels may increase. The fleet replacement plan does not contemplate adding additional vehicles to the fleet; however, the value of this plan is maximized by updating it annually as part of the greater asset management plan. This vehicle plan is a living document, providing the basis for future long-term financial plans. When large capital expenditures are planned and not reactive, and when reserves or debt are used as funding mechanisms, the result is a smoothing of the annual cost to the taxpayer, which moves the Town closer to its strategic objective of financial sustainability.

Based on the draft fleet replacement plan as outlined in Appendix B, Tables 1 and 2 below demonstrate that maintaining annual contributions to the Fire Department Machinery & Equipment Depreciation Reserve and the Machinery & Equipment Depreciation Reserve of $56,000 (2023 – $32,000) and $63,500 (2023 – $63,500) respectively will sustain positive reserve balances during next 20-year planning horizon.

As indicated above, if vehicles or other equipment not contemplated by this plan were to be added to the fleet, and as we continue to include the impacts of “greening” the fleet (where possible or economical) annual planned contributions may increase to maintain the sufficiency of reserves to meet plan funding requirements. Having a bit of a buffer in the reserves offsets potential negative impacts that might result if realized costs are higher or interest earnings are lower than anticipated.

ALTERNATIVES:

Council may choose to increase or decrease planned annual reserve contributions that support the Vehicle Fleet Replacement Plan. Staff would then analyse the effect to the plan and the downstream likely effects to service delivery and return with an adjusted plan.

CONCLUSION:

The Vehicle Fleet Replacement Plan as presented indicates that a $24,000 increase in annual contributions to the Fire department machinery and equipment reserve is required to support the long-term plan. The plan includes replacement of vehicles and equipment timed to support sustainable service delivery, minimizing risk of failure or gaps in service while smoothing the financial impact to taxpayers.

ATTACHMENTS:

• Appendix A – Current Fleet Vehicle Listing
• Appendix B – Fleet Replacement Plan – 5-year excerpt