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CITY OF CORTEZ 123 ROGER SMITH AVENUE CORTEZ, CO 81321 |
April 12, 2022 |
Agenda Item: 7.c. |
MEMO TO: |
Honorable Mayor and City Council |
FROM: |
Vern Knuckles, Chief of Police |
SUBJECT: |
Ordinance No. 1299, Series 2022 |
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BACKGROUND |
Generally, the City of Cortez has purchased four new police vehicles per year. The problem currently facing the police department is that our agency did not receive replacement vehicles for two consecutive years (2020 and 2021) due to a budget freeze implemented in anticipation of a revenue shortage caused by COVID-19. This circumstance has resulted in increasing vehicle maintenance costs and lengthy vehicle repair times for our rapidly aging fleet. · In 2021, two patrol vehicles required substantial repairs. Unit #488 began having engine problems in May 2021. After three trips to the Ford dealership in Cortez, one trip to the Ford dealership in Durango, numerous trips to the service center, and a used engine that had to be picked up in New Mexico. Unit #488 went out of service in October 2021 and remains out of service. · In 2021, Unit #487 experienced similar issues as unit #488. After numerous trips to the Ford dealership in Cortez and the service center, unit #487 went out of service in December 2021 to replace the top end of the motor. Unit #487 was recently brought back into service at the end of February 2022. These two cases are the worst case. However, many other police vehicles are experiencing mechanical issues that require them to be out of service for several days for repairs. In 2022, the vehicle manufacturer canceled the order for three new police vehicles we expected to receive in 2022. The cancelation left the police department two vehicles short in the Patrol Division and will delay the replacement of our evidence van. Combined with the two vehicles that were out of service, the police department was looking at being forced to share vehicles and exacerbating the high mileage problem (which results in increased maintenance frequency and higher costs). To help, the City moved two 2019 Dodge 1500 Special Service Vehicles (SSV) into the police department patrol fleet. One vehicle came from Public Works and the other from the police department Administration Division. The City then purchased two non-police-rated vehicles locally to replace the Public Works and Police Administration vehicles, helping prevent further replacement issues. However, the police department needs to replace six vehicles with mileage ranging from 80,000 to 97,000 miles. Currently, 20% of the police department fleet has over 80,000 miles, and 40% of the fleet has over 60,000 miles. The police department has reached a point wherein the condition of our fleet is creating a substantial maintenance issue. Besides increased maintenance costs associated with an aging fleet, employee safety concerns exist. Police vehicles are often operated under what the manufacturers term “extreme” conditions due to expedited responses to in-progress crimes, catching up to violators to conduct traffic stops, sudden acceleration and stopping, making sharp U-turns, and the realities of driving in an urban environment. By not purchasing police vehicles for two years in a row, we find ourselves in critical need of replacement vehicles. |
ISSUES |
The City of Cortez has typically allotted the police department at least three police vehicles annually, approximately $135,000.00 for vehicles alone. However, we need to replace six vehicles in 2023 and 13 by 2024. To accomplish this, staff recommends that the City lease the new vehicles, including the cost of up-fitting them with emergency equipment. However, there is an ongoing cost for the lease option, which will require a commitment from the Council to fund the lease for a designated term of 3, 4, or 5 years, depending on the specific lease option selected. However, after speaking with the City Manager and City Finance Director, the consensus is that a lease program would be feasible and preferable under our current circumstances. The staff has sought input from other governments currently leasing police vehicles and several financing and leasing companies to obtain quotes and financing options. Below is a brief breakdown of the vehicle costs and payment options from the three preferred finance companies (also attached to the Council packet). The agency will replace four (4) patrol vehicles and two (2) investigation vehicles. The total cost for all six (6) vehicles, including up-fit, is $358,642.02. Below is the cost breakdown for one (1) vehicle.
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Vehicle Base Price |
Up-fit Cost |
Discount |
Total |
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Patrol Vehicle |
$49,616.00 |
$24,538.37 |
-$9,656.00 |
$64,498.37 |
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Investigations Vehicle |
$49,872.00 |
$10,139.27 |
-$9,687.00 |
$50,324.27 |
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Below are the Annual, semi-annual, and quarterly payments and Annual Percentage Rate (APR) charged based on four-year lease terms.
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Annual |
Semi-annual |
Quarterly |
APR |
Kansas State Bank |
$92,251.69 |
$46,125.84 |
$23,062.92 |
2.89% |
GM Financial |
$93,684.46 |
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$23,421.11 |
4.488% |
Republic First National |
$92,341.35 |
$46,170.67 |
$23,085.33 |
2.99% |
At the end of the lease period, the City of Cortez can sell the vehicle back to the leasing company, retain the vehicle for other City use, or sell the vehicle to another entity. There is no mileage or use restrictions. FISCAL IMPACTS When you compare annual lease payments of $92,251.69 to a one time purchase of $358,642.02 the City will save $266,390.33 in up front costs. In 2021 the Police Department also paid $86,842.22 in vehicle repairs to the Shop Fund. This does not count additional repair costs paid to other dealerships in the area. Leasing new vehicles will virtually eliminate these repair costs. Leasing new vehicles will also ensure the vehicles will be available in a timely manner, thus eliminating supply chain issues and year long delays associated with purchasing vehicles. By combining the up front cost savings with the savings in equipment repairs the City will defer cost of $353,232.55 in the first year. |
RECOMMENDATION |
Staff recommends that the City Council approve on first reading Ordinance No. 1299, Series 2022, approving Built Year Agreement with Kansas State Bank (Government Obligation Contract with Attachments) and Vehicle Lease, and set for public hearing on April 26, 2022. |
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