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2.01.008_Vehicle and Equipment Replacement Policy CITY OF ROHNERT PARK CITY COUNCIL POLICY SUBJECT/TITLE: POLICY NO: APPROVED BY: APPROVAL DATE: FISCAL POLICY: VEHICLE/EQUIPMENT REPLACEMENT 2.01.008 ☐ RESO NO: 2024-089 ☐ MINUTE ORDER OCTOBER 8, 2024 Page 1 of 4 1. PURPOSE The purpose of the Vehicle Replacement Policy is to establish a Vehicle Replacement Fund and criteria for a Vehicle Replacement Schedule, which will ensure vehicles are funded and replaced according to their anticipated lifecycle, reduce maintenance costs, and eliminate reliance on the operating budget and large cash outlays for vehicle purchases. 2. SCOPE The scope of this policy is limited to determining eligibility of purchases to be included the policy, the method of calculating the annual set-aside amount, the treatment of retired vehicles and surplus property, and the source and use of funds to purchase replacement vehicles and equipment. 3. BACKGROUND DEFINITIONS Depreciation: means the decrease in value over the useful life of a capital asset due to wear and tear, decay, decline in price, etc. Vehicle/Equipment Replacement Fund: means a fund established to plan for future capital expenditures and the means of financing them, with costs to be incurred each year over a fixed period of years, to meet capital needs arising from long-term vehicle and equipment uses. Director of Public Works: means the person responsible for managing the repair, replacement, and maintenance of the City’s vehicle fleet and equipment inventory. The Director of Public Works may delegate tasks to a designee as necessary. Operating Fund: means a programmatic, financial, and organizational plan for furthering the goals of the City Council through departments of the City, which does not include capital improvement projects. Straight-Line Depreciation: means the depreciation of an asset by a fixed percentage of its original cost based on its estimated useful life. CITY OF ROHNERT PARK CITY COUNCIL POLICY SUBJECT/TITLE: POLICY NO: APPROVED BY: APPROVAL DATE: FISCAL POLICY: VEHICLE/EQUIPMENT REPLACEMENT 2.01.008 ☐ RESO NO: 2024-089 ☐ MINUTE ORDER OCTOBER 8, 2024 Page 2 of 4 Vehicle Depreciation Schedule: means the programmatic plan used to calculate the replacement of City vehicles and equipment. POLICY Vehicle/Equipment Replacement The City of Rohnert Park’s vehicle/equipment replacement and depreciation schedule is maintained by the Department of Public Works and specifically managed by the Director of Public Works. Vehicle Replacement criteria are determined by the expected useful service life. Typically, this is based upon the type of vehicle/equipment and its usage. A vehicle will be replaced according to these established criteria unless the Department Head(s) and Director of Public Works 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. Vehicle/Equipment Replacement Fund Departments using the vehicle/equipment in its operations shall be charged and the revenue generated shall be deposited into a restricted capital replacement fund, known as the Vehicle/Equipment Replacement Fund. Enterprise and Internal Service Funds shall participate in the replacement program when qualifying assets are purchased, each keeping its own separate balance. These funds are not to be co-mingled with the General Fund dollars and be identified separately for their own use. If sufficient funds are available, future vehicle or equipment replacements will be funded by the Vehicle/Equipment Replacement Fund. Funding for the Vehicle/Equipment Replacement will be generated by an annual Vehicle Replacement Expense charge to users based upon a straight-line depreciation calculation plus an accelerator for each vehicle or piece of equipment over the course of its lifecycle and budgeted as part of the annual budget development process. The revenue from the vehicle replacement expense shall be collected as charges for services in the Vehicle/Equipment Replacement Fund. The charges shall commence in either the same fiscal year as the purchase of each new and replacement purchase or when the vehicle is placed into service. Charges for services shall continue through the service life of the new vehicle and shall cease upon retirement of said vehicle. CITY OF ROHNERT PARK CITY COUNCIL POLICY SUBJECT/TITLE: POLICY NO: APPROVED BY: APPROVAL DATE: FISCAL POLICY: VEHICLE/EQUIPMENT REPLACEMENT 2.01.008 ☐ RESO NO: 2024-089 ☐ MINUTE ORDER OCTOBER 8, 2024 Page 3 of 4 The City may from time to time transfer additional funds to the Vehicle Replacement Fund at its discretion. This shall be done if recommended by the City Manager, and authorized by the City Council. Allowable Uses The first-time purchase of new vehicles or equipment is an allowable use of the vehicle replacement fund if recommended by the City Manager, and authorized by the City Council. A review of available funds will be made by the Finance Director prior to any use of the funds for a new purchase not previously included on the replacement schedule. Allowable uses will include purchase of vehicles and equipment necessary for the City to perform its functions. Emerging technology, environmental concerns, and legislation may require the City to make purchases of new types of equipment such as charging stations to operate a modern Fleet. Calculating the Annual Set-aside The annual set-aside is calculated by determining the future value of a vehicle and using straight-line depreciation as the initial baseline. This method determines the dollar amount that will be set aside each year throughout the vehicle’s lifecycle. The Finance Department is responsible for calculating the set-aside, preparing the budget, transferring the funds, and maintaining the separate balances of each fund. For example, a vehicle costing $45,000 in 2024 has a useful life of 8 years. It is scheduled to be replaced in 2032 and is estimated to cost approximately $57,000. The annual set-aside amount for this vehicle would be $7,126. Funding will be allocated to the Vehicle Replacement Fund each year and will be used to purchase the new vehicle when it reaches the end of its lifecycle. Retired Vehicles All replaced vehicles shall be removed from the Vehicle Depreciation Schedule and removed from the active City Fleet. Retired Vehicles shall be disposed of through surplus sale by Resolution of the City Council of the City of Rohnert Park. Surplus Property Funds received through the resale of any vehicle removed from City services shall be deposited in the Vehicle Replacement Fund to help defray unanticipated new vehicle CITY OF ROHNERT PARK CITY COUNCIL POLICY SUBJECT/TITLE: POLICY NO: APPROVED BY: APPROVAL DATE: FISCAL POLICY: VEHICLE/EQUIPMENT REPLACEMENT 2.01.008 ☐ RESO NO: 2024-089 ☐ MINUTE ORDER OCTOBER 8, 2024 Page 4 of 4 cost increases. Funds shall be deposited in such a way that General Funds are kept separate from each Enterprise or Internal Service Fund. Financial Crisis The City has a Financial Crisis Response Plan, that outlines several remedies should the City suffer a Financial Crisis. One such remedy is to stop annual transfers to the Vehicle Replacement Fund. Another remedy, not included in the Financial Crisis Plan, would be to withdraw funds from the Vehicle Replacement Fund and redirect them to more urgent needs. Both these actions would require recommendation by the City Manager and authorization by the City Council. REVISION HISTORY: POLICY NO 415.37 RESOLUTION 2011-56 06/28/2011 REVISED BY RESOLUTION 2024-089 ADOPTED ON 10/8/24