Page 250 - City of Westlake FY20 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 cost 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.

Funding for vehicle/equipment replacement should be incrementally allocated from department
operating funds to a restricted Capital Maintenance and Replacement Fund, subject to funding
availability on an annual basis. Future vehicle/equipment replacements should be funded from this
restricted fund, which receives accumulated operating fund transfers based upon the Vehicle and
Equipment Depreciation Schedule. Funding will consist of an annual set-aside based upon a straight-line
depreciation for each vehicle over the course of its useful life and budgeted as part of the annual budget
development process.

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