Saturday, December 14, 2024
The city of Granbury has approved an agreement with a fleet management company that will assist in managing and replacing its older vehicles.
During a Granbury City Council meeting Nov. 19, the council unanimously signed an agreement with Enterprise Fleet Management Inc. & Enterprise Fleet Trust to provide fleet management services to the city.
“For many years, the city of Granbury has faced the challenge of managing our aging fleet, which has resulted in consistently high maintenance and repair costs,” Deputy City Manager Michael Ross explained during the meeting. “Our current fleet of 107 vehicles has an average age of 12-and-a-half years, leading to frequent and unexpected maintenance issues as well as inefficient fuel consumption.”
Due to this issue, Ross explained that the city has been working for almost a year to identify a solution that would fit within the city’s budget but would also address the need for effective vehicle replacement and cost savings.
The city began to consider if outsourcing the fleet management services to Enterprise would be the best path forward.
According to the city’s agenda report, Enterprise offers a “proactive, streamlined approach” for buying and selling fleet vehicles that should bring the city up to the proper industry standard for fleet replacement.
The report also states that in 2022, Enterprise sold more than 600,000 client vehicles at an average of 107% above the Black Book value.
“Enterprise has a proven track record,” Ross said, adding that the company currently serves nearly 250 cities across Texas.
Ross added that the city had also explored alternative solutions, like an in-house leasing and financing option. However, after thorough review, it was determined that Enterprise offers the best value and solution at this time.
“This evaluation is complete and staff is prepared to recommend Enterprise as our fleet management service provider,” Ross said. “Staff recommends moving forward with replacing all vehicles older than 10 years in the first year of this program in addition to the four police vehicles and three airport courtesy vehicles.”
While this option will replace 45 vehicles in its first year, a more aggressive option, Ross said, was also considered, which would have replaced 70 vehicles in the first year. A more slightly conservative seven-year plan was on the table as well and would have replaced 65 vehicles.
“After careful consideration, we believe the 10-year plan replacing 45 vehicles in year one strikes the best balance for the city's needs and budget,” he added.
Ross highlighted that there will also be some expected additional benefits in using this particular fleet management solution — like newer vehicles and reduced expenses.
“The new vehicles will be more fuel efficient and require less maintenance, which translates into additional long-term savings for the city,” he explained. “With Enterprise, the city will be able to integrate newer, safer and more reliable vehicles into our fleet. Staff will also benefit from a dedicated account team equipped with cutting edge technology that will proactively manage our fleet and ensure a high level of service tailored to the city's day-to-day needs.”
The city had originally allocated $640,000 in the current fiscal year budget to replace seven vehicles, including four police vehicles and three airport courtesy vehicles.
Under the Enterprise leasing program, Ross said it is estimated that the budget will cover the replacement of the aging 45 vehicles, plus the seven planned replacements — but the city will also receive funds through this process.
Ross explained that by selling the 45 vehicles that are scheduled to be replaced, the city is expected to receive about $322,755 in revenue, which will result in a net cost to the city of approximately $327,245.
Bruce Wadley, place 3 on the council, asked if the cost savings from the fleet management program take into account the vehicles’ depreciation over time.
"Traditionally, we'll buy a police vehicle, and police drive it ‘til the doors fall off, and then we give it to one of the other departments to use until the doors literally fall off,” he said. “Oftentimes, you buy a new vehicle and it depreciates an awful lot, and then it gets to a point where there's almost no depreciation, so it's basically like driving it, excluding the maintenance costs, which I'm sure you're going to address ... Is all that taken into account with this cost savings?”
"We didn't try to actually factor in the fuel savings and the maintenance savings,” Ross explained. “We just left that out, knowing that that's going to come as well. All we factored was the cost of the vehicle lease when we leased them, the up charge, the upfit to any police cars, and then the equity at the end that we sell them for, and that's where you get the net $327,000 — which is the estimate for the year — and we'd have $640,000 in the budget for this year.”
Place 4 council member Skip Overdier also asked if the “right person” would get the “right vehicle,” adding that he wanted to make sure everyone would be driving the appropriate vehicle for their needs and department.
"We're not going to be taking any of the old vehicles and then passing them down, like, say, for example, taking one of the old squad cars and taking that out to the airport?” he asked. “An appropriately sized vehicle will be out at the airport, rather than passing a vehicle down that we'd sell and make more money on it, right?”
“Yes sir,” Ross said. “That’s the primary benefit of this program.”
Ross also explained that a comprehensive cost analysis has been completed, and every vehicle in the fleet has now been carefully evaluated.
Using this data, he noted that the most “suitable replacement vehicles” had been selected for each unit, as they have taken into account the expected workload and appropriate responsibilities for that vehicle.
City Manager Chris Coffman explained that the city actually had the option to outsource maintenance on its vehicles to Enterprise, but said that it “consciously made the decision,” to maintain its current staff in the fleet department.
"We maintain control at all times. If we decide that we need to keep these vehicles longer, we can do that,” Coffman added. “This is not a closed-end lease, like you or I would go down to a car dealer and lease a car. With that, you can only have so many miles on it before they penalize you (and) you're dedicated for that entire lease, and then you take it back at the end of three years, and you end up with zero equity.
“This is an open-ended lease where we can control what we do. We're not worried about the number of miles or the idle time of the engine or all the other factors that go into what we do with vehicles. We can determine, we've only got X amount of miles on this vehicle right now, we can go ahead and lease it for another year instead of replace it, if that's the best thing in the current market situation for resale.”
With guidance from Enterprise, Coffman explained that the city may be instructed not to replace a vehicle at that time, adding that the city would then listen to the advice and make a decision.
“It's not a closed lease,” he added. "It has plenty of flexibility to allow us to make decisions and control our own destiny.”
Place 6 council member Greg Corrigan asked what other options the city had considered before ultimately deciding to go with Enterprise.
Ross responded that the city’s primary goal was to see if it could do something similar from a lease financing perspective, but explained that the city doesn’t have the “depth and breadth” of that ability nationwide like Enterprise does.
"This is why we're here tonight,” Ross said. “We think this is the overall best solution, along with 250 other cities in the state of Texas.”
Corrigan also posed a hypothetical question and asked what the parameters were for getting out of the agreement if the city ended up deciding that it wasn’t working out with Enterprise.
Ross explained that the city currently does not have a contractual term with Enterprise, so if the city wants to back out, it would only be responsible for the vehicle replacements that were already underway.
“We can back out anytime,” he said. “We just have the obligation of finishing what we started with — any vehicle that we've already put in place.”
Coffman reiterated that the open-ended lease allows the city to do anything, anytime that it deems necessary.
"If we were upset with them and didn't want to work with them anymore ... you make that decision. We never want to do something that will cause us to lose money, but you do have that ability to do that, if that's what you want,” Coffman said. “There's going to be some additional work internally for us that we've never done before, because we've never taken on this many new vehicles and procured this many vehicles all at once. It's going to cause some growing pains internally, but we're going to try to provide the additional help where we need to help those folks that are bringing these in ... to make sure they have a smooth transition.”
Overdier made a motion to approve the agreement between the city of Granbury and Enterprise Fleet Management Inc. & Enterprise Fleet Trust to provide fleet management services and to authorize Coffman to finalize and execute the contract. Following a second from Wadley, the motion passed unanimously.
