Page 219 - 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

whether the vehicle is sold in un-repaired condition or restored to repaired condition.

However, replacement prior to the normal criteria for vehicles will result in an acceleration
of all future replacement cost cycles required to satisfy a continuing vehicle need. This
acceleration of cost cycles causes a sizable increase in the total present value cost of
all fixture cycles and should be avoided whenever possible. Major vehicle repairs should
always be made, with two exceptions:

1. Major expenditures for repair should not be made when the cost of the repair
plus the vehicle salvage in un-repaired condition exceeds its wholesale value in
repaired condition.

2. Major deferrable expenditures should not be made when a vehicle is in the final
six months of its retention cycle. During this period, the penalty for early
replacement is small and, therefore, the vehicle should be replaced rather than
repaired.

Depreciation Formula - Current acquisition price of each vehicle divided by the
utilization cycle mileage or total maintenance cost) will provide the yearly
depreciation allowance.

EXAMPLE A – Vehicles
Mileage: $30,000 vehicle divided by the target replacement cycle of 100,000
miles will give you a depreciation cost of $.30 per mile.
0.30 times the number of miles (20,000) the vehicle was driven the previous
year will give you the yearly depreciation amount $ 6,000.

EXAMPLE B – Small Equipment
Maintenance Cost: depreciate the original purchase price by 15% per year, for
power hand tools, trailers, etc. Replace the item only when the maintenance
cost reaches the original purchase price.

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