CC 2017-01-24_12c FCFA Replacement Fire Engine
MEMORANDUM
TO: ARROYO GRANDE CITY COUNCIL
FROM: STEPHEN C. LIEBERMAN, FIRE CHIEF/EXECUTIVE OFFICER
SUBJECT: CONSIDERATION OF PURCHASE OF REPLACEMENT FIRE ENGINE
DATE: JANUARY 24, 2017
RECOMMENDATION:
It is recommended the City Council provide direction to Councilmember/Five Cities Fire
Authority (FCFA) Board Vice-Chair Barbara Harmon to authorize the Fire
Chief/Executive Officer to issue a purchase order to Pierce Manufacturing for a second
replacement fire engine prior to February 1, 2017, and direct the City Manager to
incorporate the City’s annual cost in the 2017-18 budget development process.
IMPACT ON FINANCIAL AND PERSONNEL RESOURCES:
Pierce Manufacturing has quoted a full cost of $554,274.64 if the FCFA executes a
purchase order prior to February 1, 2017. The City of Arroyo Grande would be
responsible for a portion of the total cost based on the FCFA Joint Powers Authority
funding formula.
The replacement fire engine could either be purchased using cash by each of the
jurisdictions or financed on a 10-year lease purchase program similar to the first
replacement fire engine which is in final production. At this time, a 10-year lease
purchase agreement is recommended.
Interest rates are unpredictable until the final financing agreement is executed;
however, based on an assumed interest rate of 5% and the City’s current allocation of
47% of FCFA expenses, annual payments for this replacement engine are estimated at
$33,000 - $34,000.
BACKGROUND:
The first replacement fire engine was authorized by the FCFA Board in 2016 and
incorporated into the budgets of the respective members of the Joint Powers Authority
(Arroyo Grande, Grover Beach, and the Oceano Community Services District). This
engine is currently in final production at the Pierce manufacturing plant and FCFA is
expected to take delivery in March 2017.
CITY COUNCIL
CONSIDERATION OF PURCHASE OF REPLACEMENT FIRE ENGINE
JANUARY 24, 2017
PAGE 2
As previously shared with the City Council, the fire suppression fleet operated by the
FCFA is aging, with several vehicles exceeding industry standards for service life
expectancy. Vehicle repair costs have significantly increased with the age and
obsolescence of the vehicles. FCFA incurred over $90,000 in vehicle maintenance
costs each year for the past two fiscal years, as compared to just $54,000 in 2013-14.
The current 2016-17 budget of $100,000 is already 60% expended and is expected to
be depleted before the end of the year. One of the manufacturers is no longer in
business, and replacement parts are proprietary in design making them difficult to
source and expensive to purchase.
At a special meeting held on Friday, January 13, 2017, the Board of the Five Cities Fire
Authority discussed the need to order a second replacement fire engine. Pierce
Manufacturing has offered a $50,277.15 (9%) discount if the second engine is ordered
on or before February 1, 2017. At this meeting, the Board directed staff to initiate the
discovery of financing options which would be dependent on final board approval after
each Board representative brought this matter to their individual communities.
ANALYSIS OF ISSUES:
With the exception of Truck 5 (the 100-foot ladder truck), the remainder of the fleet
consists of the original vehicles that were in service with each of the member
communities at the time of the formation of the Fire Authority in 2010. Industry
standards for life cycle are 15 years in front line service and 5 years as a reserve
resource. Two fire engines are currently over 20 years old, and a third engine while 13
years old has significant electrical issues that remain unresolved. The current state of
the fleet has only a single reserve fire engine. Unfortunately, this vehicle is 13 years old
and, as mentioned above, has significant electrical issues.
The FCFA Board directed its members to approach their respective Councils/Board
about this purchase in time to meet the February 1st deadline. Councilmember Harmon
is the City’s representative on the FCFA Board and can provide further information to
the Council along with Fire Chief Lieberman. Pending Council direction, staff would
incorporate the annual payment amount in the City’s 2017-18 budget development
process as part of the Council’s goals to improve the conditions of equipment and
facilities and provide for a cost-effective Fire Department.
ALTERNATIVES:
The following alternatives are provided for the Council’s consideration:
1. It is recommended that the City Council direct Councilmember/FCFA Board Vice
Chair Harmon to authorize the Fire Chief/Executive Officer to issue a purchase
order to Pierce Manufacturing prior to February 1, 2017 and direct the City
Manager to incorporate the City’s annual cost into the 2017-18 budget;
2. Direct Councilmember/FCFA Board Vice Chair Harmon to defer the purchase,
which would forfeit the discount and have the vehicle funded in the FY 2017-18
budget cycle; or
CITY COUNCIL
CONSIDERATION OF PURCHASE OF REPLACEMENT FIRE ENGINE
JANUARY 24, 2017
PAGE 3
3. Provide other direction to Councilmember/FCFA Board Vice Chair Harmon.
ADVANTAGES:
The City has the responsibility to provide its citizens, business owners and visitors an
appropriate emergency response capability to situations including vehicle accidents,
medical emergencies, structure fires and wildland fires. The Fire Department must have
needed resources to accomplish this mission. By issuing a purchase order for the
replacement fire engine prior to February 1, 2017, the communities served by the Five
Cities Fire Authority will be able to take advantage of a $50,000 discount.
DISADVANTAGES:
The cost of a replacement fire engine is significant. A cash purchase would likely impact
General Fund Reserves, and the consideration of a 10-year lease purchase financing
plan would result in additional cost to the General Fund.
ENVIRONMENTAL REVIEW:
No environmental review is required for this item.
PUBLIC NOTIFICATION AND COMMENTS:
The Agenda was posted at City Hall and on the City’s website in accordance with
Government Code Section 54954.2.
Attachments:
1. Five Cities Fire Authority Staff Report dated January 13, 2017
STAFF REPORT___________________________________________________
REVISED January 13, 2017
TO:Chair and Board Members MEETING DATE:January 13, 2017
FROM:Stephen C. Lieberman, Fire Chief
SUBJECT:Consideration of the Purchase of a Second Replacement Fire Engine
___________________________________________________________________________
RECOMMENDATION
Pierce Manufacturing has offered a discount of an additional fire engineif the order is placed byFebruary
1, 2017. It is staff’s recommendation that the Board discuss this opportunity and if there is consensus,
that Board members present this opportunity to their council/board and City/District Managers to
determine whether to move forward with this capital purchase.
___________________________________________________________________________________
BACKGROUND
As previously discussed with the Board, the fire engines in service with the Five Cities Fire Authority
(FCFA)are the original apparatus that were contributed to the FCFA at the inception of the Joint Powers
Agreement (JPA) in June 2010. Three of the fire engines are in need of immediate replacement, and one
new replacement engine is in manufacturing with an estimated delivery in March 2017. The JPA was
created withoutan apparatus replacement funding mechanism. The current budget includes $55,000 in
dedicated reserves for apparatus replacement which was established by the Board utilizing
reimbursement funds from the California Master Mutual Aid system.
Pierce Manufacturing is the vendor building the current fire engine. A representative of Pierce has offered
a discount of $50,000.00 should the FCFA order a “clone” of the engine currently in production no later
than February 1, 2017. The discount being offered is approximately a 9% discount off of the purchase
price of approximately $580,000.00.
Staff acknowledges that this deadline affords a very compressed timeline for the needed discussions and
deliberations with the member communities. The fire engine is a critical need, and will be included in the
Fiscal Year 2017/2018 budget requests.
Financing strategies for the purchase include the following options:
Pay for the fire engine using general fund reservesfrom the member communities
Enter into a similar lease purchase agreement (10 years) with a financing institution
Select a “hybrid” model based on a cash down payment supplemented with financing
Staff is working on conceptual timelines that would define the needed requirements to potentially issue a
Purchase Order to Pierce Manufacturing by February 1, 2017. This will include needed time to secure
financing if directed by the Board.
FISCAL IMPACT
Listed below are estimated costs for the secondfire engine. The first column reflects the discount if
ordered by February 1, 2017. The second column reflects the cost after February 1, 2017.
Pre 2/1/17 Post 2/1/17
List Price $558,655.71 $578,208.63
2/1/17 Discount ($20,000.00)
Pre-Payment Discount ($20,000.00) ($20,000.00)
Trip Reductions, misc.($7,000.00)
Sub-Total $511,655.71 $558,208.63
8% Sales Tax $40,932.46 $44,656.69
Performance Bond $1,675.97 $1,675.97
California Tire Fee $10.50 $10.50
Grand Total $554,274.64 $604,551.79
Projected Savings ($50,277.15)
Cash Payment by
Community
Arroyo Grande 47.0% $260,509.08
Grover Beach 34.0% $188,453.38
Oceano19.0% $105,312.18
Staff has not made formal requests for financing scenarios at this time. Initial discussions with Chase
have indicated that current interest rates could range from 2% to 5%.As reflected on the attached
payment schedule for the previously ordered fire engine, the rate was 2.5%, and the annual payment will
be $66,366.40. Based on a rate of 5.0%, the estimated payment on the second engine would be
approximately $xx.xxx.xx.Utilizing the budget allocation percentages from the current budget cycle, the
ten (10)annual payments would be split among the communities as detailed below:
Arroyo
Interest Annual Grande Grover Oceano
RatePayment (47%) Beach (34%) (19%)
2.50%$66,366.40 $31,192.21 $22,564.58 $12,609.62
5.00%$71,781.10 $33,737.12$24,405.57$13,638.41
ALTERNATIVES
The following alternatives are provided for the Board’s consideration:
1.Board members place this opportunity on community agendas for discussion and guidance,
returning to a potential special meeting to provide direction to the Fire Chief.
2.Direct staff to delay the order of the replacement fire engine until the 2017/2018 budget cycle.
3.Provide other directionto staff.
___________________________________________________________________________________
Staff Report: Page 2
January 7, 2017
Revised January 13, 2017
ATTACHMENTS
1.Payment Schedule for initial Fire Engine - Chase
PREPARED BY
S. Lieberman