CITY REPLACES 1500TH VEHICLE USING NEW FLEET FINANCING MODEL
Tuesday Nov 21st, 2017
BALTIMORE, MD, October 12, 2017 — The City of Baltimore and the Department of General Services (DGS) celebrated the 1,500th vehicle purchased through the City’s new vehicle purchasing model. Referred to as the “Master Lease” vehicle replacement process, the City’s new approach modernizes the City’s fleet of vehicles and ultimately reducing the costs associated with vehicle ownership. Mayor Catherine E. Pugh prioritized the continuation of the new lease financing model to both modernize and reduce the cost of the City’s fleet, which is managed by the Department of General Services.
To date, the City has replaced 1,500 vehicles, which accounts for approximately 1/3 of the vehicle fleet. Under this lease financing approach, the purchase of every vehicle in the fleet is financed over several years. One major result, through investment in fleet renewal, has been a reduction of the backlog by $25.5 million, and an avoidance of over $18 million on related maintenance and repair expenses.
“An aging fleet requires a much higher investment in maintenance and repair costs, and is also associated with higher fuel costs due to older, less fuel-efficient vehicles,” explained Mayor Catherine E. Pugh. “Additionally, an aging fleet experiences substantially more breakdowns, which affects service delivery and requires a large reserve fleet for core operations. All this translates to City agencies having vehicles and equipment that are more reliable and available, allowing them to better provide the services that the residents of Baltimore City deserve.”
Based on the results of a 2012 comprehensive study into the replacement of vehicles, the City determined that it was facing a replacement backlog—the value of assets which have reached or exceeded their useful life—of approximately $125 million. In Fiscal 2014, in order to break away from this counterproductive condition, the City adopted a lease financing strategy, known as the Master Lease Program. Previously, the entire capital cost of each asset in the fleet was paid at the beginning of the asset’s service life.
“This new approach has allowed the City to modernize its fleet more rapidly than the previous model would have allowed,” said DGS Director Steve Sharkey. “Had the Master Lease Program not been created, the replacement backlog today would be at or close to $200 million, 90% of the total value of the fleet.”
In addition, the transition to a debt financing model for vehicle purchases allowed for a one-time appropriation of $30 million from the City’s Mobile Equipment Fund in the Fiscal 2014 Capital budget. These funds were used for transportation projects ($10M), blight elimination ($10M), MOIT upgrades ($5M), and recreation centers ($5M).