GLASGOW – Glasgow city government departments are expected to soon get an influx of roughly two dozen new vehicles, procured through open-ended lease agreements.
The deals will be negotiated through Enterprise Fleet Management, with which the city would contract not just to enter the leases, but to track all of the city’s vehicles – not just those newly leased ones – with regard to mileage, maintenance costs and more and then provide continual analysis of when they should be replaced. Because the company operates nationwide and does this kind of work for many other entities, it can get better pricing through bulk deals, its representatives told the Glasgow City Council Finance Committee last week. It also helps with resale of owned vehicles.
The fleet-management approach, and Enterprise specifically, was recommended to the city by Perfection Group, the company working with the city on a energy savings performance contract, which the council has authorized Doty to implement.
“Our fleet is much like our inventory of facilities, buildings. It’s old, it’s in great need of replacement, repairs, all of the above. Without breaking the piggy bank, this is an opportunity for us to upgrade that fleet, get a much more reliable, safer fleet …. It’s going to be actually a cost-savings measure for us – upgrade the fleet, maintain the fleet and save money doing it,” the mayor said.
Doty said he and other city officials have been meeting with the Enterprise representatives for months now, since the performance contract started getting underway, “and we believe it’s going to be something very beneficial for us.”
The police department would benefit the most, said the mayor, who added that he had recently been to a meeting of the Kentucky Law Enforcement Council, to which he was appointed by Gov. Matt Bevin in March, and one of the big focuses there was vehicle safety.
“What I heard that whole two days was you lose more police officers as a result of vehicles than you do weapons, anything else,” Doty said. “Driving and vehicles are the biggest issue police officers [have]. … So I think this is going to go a long way.”
Doty said after the meeting that he expects to initially lease approximately two dozen vehicles, with roughly half being for the police department and the rest scattered among the fire, parks and recreation, and pubic works departments.
The beauty of this program, he said, is that the company can break down the exact cost of operating each vehicle per mile and know when it’s in the city’s best interest to begin looking for a replacement.
Catherine Blazer, a senior account executive with the Louisville-based Kentucky Group of Enterprise Fleet Management, a sister entity under the same family-owned company umbrella as the car rental business bearing the same name, explained more to the committee members about how the program works in general and some of the observations made about the city’s vehicle fleet as it exists now across all departments.
More than half – 54 percent – of the fleet of 87 vehicles is older than 10 years, she said, and 45 percent has more than 100,000 miles, with the average mileage on “light-duty” vehicles being more than 90,000. Nearly 20 percent do not have airbags, required since 1998 for new passenger vehicles, and 80 percent do not have the electronic stability control mandated in 2012.
“The fleet’s very aged,” Blazer said. “And maintenance cost is high. Fuel cost is extremely high. There’s a safety factor that needs to be talked about. And also, the way the city’s set up, there are five different departments, and the departments aren’t communicating with each other, which, that’s normal but it doesn’t give [the administration] the true picture [of] what’s happening with the fleet.”
The average annual maintenance cost of the 24 considered to be light-duty vehicles not in the police department is $43,200, and the average annual fuel cost is $39,000.
“This is as big an issue to me as anything – the maintenance costs,” Doty said.
Being able look at long-term figures – 20 to 40 years out – the company could demonstrate how much the city is saving with this approach, Blazer said.
“I think the city recognizes they need to do something, but based on what they’re doing right now, it’s going to take them 25 years to catch up,” she said. “And that’s based on the city buying two to three vehicles per year, but that’s what the budget allows for.”
According to a graph in the information packet Enterprise provided, the only year since 2008, when 16 vehicles were purchased, that more than three were bought was 2014, when the number was 10. The other years in between, there were one, two or three.
“This is where I come in, where we want to replace vehicles but stay under your budget,” Blazer said.
The leasing program works for that, she said.
She listed several other governmental and private entities, including some in the area such as T.J. Samson, Scotty’s Contracting & Stone, and Stewart Richey, as references.
She discussed three financing options – open-end lease, self-funded or closed-end lease – and said they recommend the open-ended option, in which the vehicle is financed down to a balance, but the lessee keeps some equity at term. She said the payments could average $100 less per month per vehicle, and where the police department could maybe purchase three police utility vehicles for $90,000, a dozen could be leased through Enterprise because of the volume with which the company works.
“We are the biggest buyer and seller of vehicles in the United States,” she said, and the company works with thousands of police departments.
Adam Cline, finance director for Enterprise Fleet Management in Louisville, told the committee the city would have a localized contact for any time questions arise, and Blazer added later the city would have an account manager who will work with the administration and meet as often as quarterly, plus provide an annual review.
Blazer and Cline said the city’s contract with Enterprise would have no set amount of time, and it is not obligated for a specific amount of vehicles.
“We have a lot of accountability. … There is no solid plan for the city, so we’re going to implement a solid plan and have the proof to support it,” she said. “If, for some reason, we’re not saving the city money, you all can fire us at any point in time, and we go away, but we have a really good retention rate.”
The city can use whichever mechanic shop it chooses, but Enterprise’s mechanics set the expectations for when specific preventive maintenance is due and the company sends alerts, Cline said.
Ultimately, the company makes recommendations about when it’s best to buy or sell, based on the market and the operational costs, but it’s the city’s decision as to how to proceed, he said.
“If we’re going to save money, I mean, that’s what it’s all about,” said Councilman James “Happy” Neal.
“But we’re upgrading them, too,” Councilman Marlin Witcher said, with the mayor making a similar comment nearly simultaneously.
Doty said later the funding is in his proposed budget for the 2017-18 fiscal year that begins July 1, and he’s hoping to have the vehicles in service relatively soon after that.