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Memo- 2009 - 2028 ERP ReviewCITY OF HOPKINS MEMORANDUM Date: August 21, 2008 To: Mayor & City Council From: Christine Harkess, Finance DirectorC Subject: 2009 -2028 Equipment Replacement Plan FINANCE DEPARTMENT We will continue our discussion and review of the 2009 -2013 ERP that was begun August 12, 2009. At that meeting we reviewed the various department requests and addressed the majority of the council's questions, however several Fire Department items needed further research. Dale Specken, Fire Chief will be present at this work session to address the concerns raised on Fire Department items and we will take another look at the 2009 -2013 ERP in preparation for the September 2 council meeting presentation. Attached for your reference are the ERP background memo, cash flow, and 20 -year equipment replacement listing. Background EQUIPMENT REPLACEMENT PLAN 2009 - 2013 The Equipment Replacement Plan is a twenty -year forecast and a five -year plan of equipment needs in the City of Hopkins. It is intended to inform the Council and citizens of the major equipment needs on the horizon. The first year of the plan becomes an adopted equipment budget and relates to the operating budget of the equipment replacement fund, which is approved on an annual basis. The remaining nineteen years represent an estimate of equipment needs and funding capabilities of the City. Funding requirements vary from year to year. In order to maintain a fairly consistent levy each year, the twenty -year schedule is projected with a 3% inflation factor for operating expenses and a yearly average dollar capital expenditure of $772,900. The cash flow requirements to fund the equipment needs in the equipment replacement fund, will experience a roller coaster effect over the next 20 years given the projected equipment needs and 3% inflation rate. Available funds will remain about the same through the year 2012, and decrease each year thereafter.. It is anticipated that the intragovernmental charge to the general fund will need to increase each year to replace funds lost when charges to city funds was reduced in 2003 in response to aid cuts. If the rate increases proposed are implemented, revenues in 2017 will have returned to 2002 levels. The charges after 2017 will continue to increase each year, but at a slower pace. The future increases in charges to the general fund will not provide sufficient funds to carry us through 2027 with the current replacement schedule. Each year staff reevaluates the equipment needs and adjusts the schedule accordingly. Changes to the plan are reflected in the document. Refurbishments, extended life expectancy and closer cost estimates of replacements have been incorporated into the plan. The equipment replacement charges in the general fund represent approximately 3% of total general fund expenditures. Future increases each year are needed to fund the equipment replacement plan without issuing debt. The Equipment Replacement Plan's basic premise is scheduled replacement of present equipment. A new item must, in the year proposed, be presented in the annual operating budget with a stipulation that replacement will be necessary in the future. Flexibility of the Equipment Replacement Plan is established through annual review and revision, if necessary. Highlights of changes from last year's equipment replacement plan for the years 2009 -2013: City Hall: Election booths were added at a cost of $6,400. In 2008 the city replaced approximately %2 of the voting booths currently in use. The remaining booths are over 25 years old, many no longer have functioning lights and each year a few are taken out of use as they can no longer be repaired. Fire: A lite rescue truck originally scheduled for replacement in 2009 at a cost of $40,000 has been eliminated and replaced with a Quick Attack Pumper/Rescue, a new item scheduled for purchase in 2012 at a cost of $234,000. This new vehicle will be used for responding to medical calls and small fires and will allow the department to reduce the number of personnel responding to small fires. It will also allow the fire department drop one engine in 2022 while maintaining our ISO rating. In addition, the Heavy Rescue truck totaling $491,000 and the Pirsch Pumper totaling $563,100 were eliminated from the ERP as these vehicles are no longer needed in the Fire Equipment Fleet. Together these two vehicles will save over $1,000,000 in the ERP. A duty chief vehicle originally scheduled for replacement in 2013 at a cost of $34,600 has been moved to 2009 and the 7 -year replacement changed to 5 years with the vehicle being replaced again in 2015 at a cost of $42,200. Fitness Center — the elliptical machine originally scheduled for replacement in 2009 has been eliminated and dumb bells added which is cost neutral at $5,000. Police: The police utility 4x4 vehicle was evaluated and the replacement moved from 2009 to 2014. Digital squad car cameras purchased in 2006 with police department funds have a life expectancy of 5 years. They were added to the ERP in 2008 for replacement in 2011 at a cost of $42,600. Future replacement costs were left at $42,600 as technology prices have historically been going down. Mobile Data Computers installed in all squad cars and used to receive calls from dispatch, query information and communicate from car to car was scheduled for replacement in 2012 at a cost of $54,500. The cost has been increased to $62,700 to more accurately reflect the actual cost of the computers and docking stations. Future replacement costs were left at $62,700 as technology prices have historically been going down. The police computer system budgeted at $700,000 in previous ERP's was reduced to $500,000 in 2008 to better fit within the overall ERP plan. The replacement cost was returned to $700,000 for the current ERP plan, again reduced and funded over a two year period at $200,000 per year in 2013 and 2014. Previously this item has been scheduled for replacement in 2011. The exact cost of the replacement is unknown and our best estimate was used in placing this item in the ERP. Cable TV: Activity Center: Public Works: All items preciously in the ERP have been moved to the CIP. Previously scheduled for replacement in 2013 the refrigerator /freezer has been moved up to 2010 due to increasing maintenance issues and the age of the unit (has been in service since the Activity Center opened in 1980) The lives of the equipment are annually reviewed by the public works department and over the past 10 years they have extended the lives of the 1 -ton trucks from 8 to 12 years and the dump trucks from 13 to 15 years. Extending the lives of major equipment comes with the risk of increased maintenance costs. When maintenance costs become unmanageable the equipment will be put on the schedule for earlier replacement. Streets /Traffic The water truck scheduled for replacement in 2010 at a cost of $133,700 has been restructured. The tank only will be replaced in 2010 at a cost of $45,000 extending the life of the vehicle. In 2017 the entire vehicle — tanker, cab & chassis will be replaced at a cost of $150,000 and the life of the vehicle changed to a 22 year replacement. Parks/Forestry The cost of the aerial lift vehicle was increased from $110,000 to $130,000 to reflect actual cost. The vehicle is scheduled for replacement in 2009. The large turf mower originally scheduled for replacement in 2013 has been moved to 2011 based on maintenance experience and lowest overall cost. This mower is required to efficiently mow the large parks. Two tractors currently on a 20 year replacement plan will be changed to one at 20 years replacement and one at 30 years replacement. The 20 -year tractor scheduled for replacement in 2009 remains as scheduled and the 30 -year tractor scheduled for replacement in 2012 will be moved to 2014. Water No changes to items scheduled in the previous 5 -year plan. Sewer No changes to items scheduled in the previous 5 -year plan. Refuse No changes to items scheduled in the previous 5 -year plan. 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