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CR 98-124 Adopt Equipment Replacement Plan 1999-2003July 16, 1998 Lori Yager Finance Director Council Report 98 -124 ADOPT EQUIPMENT REPLACEMENT PLAN 1999 -2003 Proposed Action Staff recommends adoption of the following: Move to adopt the 1999 -2003 Equipment Replacement Plan. Overview The equipment replacement plan is a detailed summary of the next five years of a twenty year replacement schedule, for most equipment of the City of Hopkins. General fund equipment items on the replacement schedule are placed in the Equipment Replacement Fund #202 budget which derives its revenues from tax levies, equipment sales and interest earnings. The other equipment is placed in the individual fund budgets which will be using the equipment. Primary Issues to Consider Is the twenty year schedule, especially the first five years, on target? Should the annual levy be increased? What changes have occurred in the equipment replacement plan since last year? Staff Recommendation Finance recommends adoption of the 1999 - 2003 Equipment Replacement Plan. Supporting Information • Equipment Replacement Plan 1999 -2003 Background The Equipment Replacement Plan is a twenty year forecast of equipment needs in the City of Hopkins. It is intended to alert the Council and citizens to the major equipment needs on the horizon. The first year of the plan becomes an adopted equipment budget and relates almost completely to the operating budget of the equipment replacement fund, which is approved on a yearly 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 more even levy year by year, the twenty year schedule is projected with a 3% inflation factor and a yearly average dollar need for the equipment replacement fund is presently $601,000. 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 increase through the year 2001 and then the funds will fluctuate substantially for the next 17 years. The current levy amount of $485,000 is sufficient to carry us through 2003. 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: Finance: The city hall main copy machine is being leased instead of purchased and the costs have been allocated to reflect this. The total costs have increased by $14,200 over the projected costs of $64,800. The projected costs were low. Purchasing this quality of a copier would have cost the city approximately $30,000 more than projected. The city hall small copy machine costs have been broken out from the main copier and it is scheduled to be replaced in the year 2000. The amount allocated to this item from the old plan is $10,000. The estimated costs of purchasing this copier are approximately $20,000. Staff will look at leasing as another option for this also. The upgrading and replacement of Novell network pieces may occur every year. The costs for this have been allocated to $5,000 ever year instead of $10,000 every other year. This will allow for continued upgrades to the network every year as needed. Finance: Currently it is the responsibility of department heads to budget for computers and upgrades within their individual departments on a needed basis. These amounts of budget requests will vary every year by quite a bit causing major increases or decreases in departments budgets. There is also the chance of some employees going without the necessary tools to perform their jobs efficiently and effectively because departments are unable to stay within guidelines established for budgeting with added computer costs. In an attempt to centralize the process of replacing computers we have established an amount of $24,000 a year to go for personal computer replacement. Currently there are over 80 computers being used in the city. At $24,000 a year we could replace approximately eight computers a year. That means that the useful life of a computer is expected to be ten years. Employees are at different levels and needs as far as computer use. Purchasing eight new computers a year and filtering newer computers to various users and rotating out very old computers should compliment this plan. Cable TV: $32,000 of camera equipment and control systems for the council chambers has been added to the replacement plan with an eight year replacement schedule. Utilities: The utility billing system is being added to the equipment replacement plan out of necessity. We will no longer have support for our current utility billing system beginning in the year 2000. Our current system will not be upgraded to be year 2000 compliant therefore it is mandatory that we replace this system. Estimated useful life is eight years. Cost is estimated to be about $40,000, (this is the most likely the worst case scenario). Fire: A fire vehicle was added to the replacement plan during 1998 and shows up in the year 2003 as the first time it will be replaced. Police: The radio system was moved from 2001 to 2003 and the amount changed from $470,800 to $477,000, and increase of $6,200. Public Works: The cost of a Y2 ton pickup increased from $15,900 to $17,900. Comm Serv: The election equipment scheduled for purchase in 1999 is no longer needed. The projected cost of this equipment was $68,000. Hennepin County is in the process of purchasing the necessary equipment for the entire county. Comm Serv: The optical scanner equipment has been eliminated from the equipment replacement schedule. This was a $6,000 item.