Page 216 - Ord 866 Adopting a revised Fiscal Year 17-18 and new proposed Fiscal Year 18-19 budget

Section 5 Internal Service Funds
Guidelines for Vehicle Maintenance & Replacement

BUDGETING FOR RECURRING CAPITAL EXPENDITURES

Planning for non-periodic recurring capital expenditures may at first glance seem like a
difficult endeavor, but in fact dealing with them can be as simple as setting aside a
small portion of revenue over time. For example, if a piece of necessary capital has
been estimated to have an operational life of 10 years and costs $10,000, the town
could set aside $1,000 toward the recurring capital expenditures account each year.
Then, when it comes time to replace the unit, there will be little, if any, disruption to the
town’s cash flow. Note that changing market forces, such as inflation, also need to be
accounted for in the calculation, since an item that cost $10,000 a decade ago likely
costs more today.

EXAMPLE OF RECURRING CAPITAL EXPENSE IN TRANSPORTATION

Municipalities that rely on motor vehicles for their livelihood face a recurring, though
sometimes unpredictable, capital expense in the form of vehicle repairs and
replacement. A few different approaches are available that can be used to deal with
the realities of this expense. The most common and simplest way is to make repairs as
vehicle damage crops up and replace the vehicles once they are completely
unusable, which under most circumstances is a reasonable policy. The Town has
approved guidelines for replacement based on a point system. Staff reviews each
vehicle annually to determine the feasibility of the service length of the vehicle based
on the total points.

VEHICLE MAINTENANCE AND REPLACEMENT

Annually, available funds will be evaluated during the budget process and a
percentage of each operating fund’ s budget will be recommended to the Council for
transfer. Upon approval by the Council, the recommended amount will be transferred
to the appropriate funds ( General or Utility Maintenance Replacement Fund) for major
maintenance/ replacement of street, building roof, flooring, air conditioning,
equipment, etc.

Vehicle and equipment replacement criteria will be developed according to each
item anticipated useful service life. Typically, this is based upon the type or “ category”
of the vehicle/ equipment and its usage. Each item will be surveyed annually and
assigned a score based upon the Point Range and Guideline document. A vehicle will
be replaced according to the established criteria unless the Department Head(s) and
the Town Manager’s office determine that: 1) mechanical failure or vehicle damage
warrants earlier replacement, or 2) the vehicle is still serviceable and may serve
additional years beyond its original anticipated service life.

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