LEGISLATIVE ANALYST REPORT

MEMORANDUM

TO: Budget Committee
FROM: The Office of the Legislative Analyst
RE: Fleet Management (revised copy)

Administrative Services, Central Shops, and all City departments - Make specific recommendation regarding fleet management budget request for FY 2002-03.

Summary of Request

The OLA evaluated the viability of several proposals that seek to centralize and make our fleets more efficient for direct cost savings in FY 2002-03.

Executive Summary

An analysis of the current fleet management system in the City and County of San Francisco demonstrates that the City should find ways to manage its fleets more effectively, both to reduce costs and to support efforts to improve air quality.¹ Unfortunately, insufficient data and information makes quantifying the potential savings impossible at this time.

Since 1999, the City Administrative Code has placed many of the responsibilities of managing the City"s fleet with the Director of Administrative Service. However, due to a decentralized fleet management staff, insufficient data and information, replacement cost barriers, and lack of incentives for departments to implement effective fleet management practices, the City"s fleets remain decentralized and under utilized.

We recommend that in FY 2002-03 the Board of Supervisors enable the application of existing codes by holding in reserve 40% of the maintenance and repair requests of General Fund departments for 6 months while Administrative Services works with departments to develop fleet management and vehicle retirement plans. This reserve will total approximately $5.4 million dollars. The Board of Supervisors may wish to hear a report back from Administrative Services to consider whether departments have demonstrated progress in implementing Chapter 85.7(1) - develop a plan to phase out highly polluting motor vehicles and motorized equipment over 12 years old, Administrative Code 4.10 - inspect vehicles over 60,000 miles and make recommendations for retention, transfer or replacement, and have begun to implement fleet management practices more generally before releasing the reserved funds. The Board of Supervisors may wish to begin this evaluation in January 2003.

We also recommend that the Board transfer a total of approximately $628,330 thousand from departments requesting new passenger vehicles to a centralized fund from which all new vehicles are purchased.² The administrator of this fund, likely Central Shops following the recommendation of the Director of Administrative Services, will develop and apply criteria Citywide before purchasing any new passenger vehicles. Whether to implement these recommendations is a policy matter for the Board of Supervisors.

Current Law and Practice

Since 1999, the San Francisco Administrative Code Chapter 85 directs the Director of Administrative Services to procure new alternative fuel and other low emission vehicles for the City"s fleet, to develop a plan to replace vehicles that have been in service for 12 years or more, and to investigate vehicle pools and car-sharing concepts as a means to reduce the size of the City"s fleet. Additionally, Administrative Code 4.10 and 4.11 centralize the approval of assigning vehicles to individuals and taking vehicles home, and direct Administrative Services to make recommendations as to retention, transfer and/or replacement of vehicles over 6 years old.

Administrative Code 85.7(I) - Phase Out of Highly Polluting Vehicles and Equipment. Each City department, with the cooperation of the Director of Administrative Services, shall develop and recommend to the Board a plan to phase out the use of highly polluting motor vehicles and motorized equipment that have been in service for twelve (12) or more years. Such plan shall include, but is not limited to, a study into the feasibility of centralizing the purchase and ownership of City motor vehicles within the Department of Administrative Services, which are leased to City Departments on an as-needed basis.

Status: Not yet implemented.

Administrative Code 4.10-1(b) - Each year the Purchaser shall inspect each vehicle which has been in service for six years or has been driven more than 60,000 miles and based upon condition, usage, and maintenance and repair history of the vehicle, recommend its retention, transfer or replacement.

Status: Not yet implemented.

Administrative Code 4.11 (a) - Head of department may not assign any vehicles to individual officers or employee unless a written request justifying the need for personal assignment has the approval of the Director of Administrative Services.

Status: Not yet implemented. In May of 2002 the Director of Administrative Services issued a memo requiring his approval before cars can be assigned to individuals. To date, the Director has received a request from Trent Rhorer, Executive Director of the Department of Human Services, requesting the use of a city vehicles 24 hours a day/7 days a week because Mr. Rhorer is on call as a member of the Emergency Response Policy Team.

According to Mr. Brooks, Administrative Services requested a list from all departments of vehicles that are assigned to individuals on April 15, 2002. As of the writing of this report, they have received responses from the Port, the Airport, the Ethics Commission, Public Utilities Commission, the Medical Examiner, and the City Attorney (please see Attachment 2 for a full list). Among these departments, 72 employees have cars personally assigned, most for emergency responses, according to the departments.

Administrative Code 4.11 (b)(6) - Head of department may permit City employees who reside in San Francisco to take the vehicle home solely for the purpose of garaging the vehicle, rather than require the City to garage the vehicle if public interest is best served in this manner. This requires the recommendation of the Director of Administrative Services and approval by resolution of the Board of Supervisors.

Status: Not yet implemented. At the time of the writing of this report, Administrative Services had not compiled a list of which employees take vehicles home for garaging purposes and/or to respond to emergencies.

The City currently has 2,079 cars/sport utility vehicles, 1,450 pick up trucks, and 700 vans (please see Attachment 1: List of Vehicles Department).³ According to the Mayor"s Budget Office, in FY 2002-03, the purchase of 26 passenger cars at a cost of approximately $628,330 thousand is within the Mayor"s Budget. In FY 2002-03, General Fund departments have worked ordered $13.45 million to Central Shops for maintenance and repair, and $3.6 million for fuel, according to Mr. Brooks. Despite Administrative Code 85.7(I), 4.10, and 4.11 (a), departments control their fleets in terms of purchasing, utilization and maintenance. While the City has made some progress implementing Chapter 85 (Administrative Code 85.7)⁴, particularly in expanding the City"s use of alternative fuel vehicles, the fleets can still be characterized as highly decentralized and under utilized.

According to the Director of Administrative Services, Ryan Brooks, departments do not have incentives to turn over older vehicles for which they have marginal need. Consequently, the fleets are comprised of older vehicles (among cars, 13% are over 12 years old), which are expensive to repair. These vehicles require more frequent and expensive repairs which lead to excess downtimes that encourages departments to retain more vehicles than are needed, according to Mr. Brooks. Central Shops calculated the maintenance cost of vehicles in the City"s fleets as they age. The results were quite staggering. For the 10-year-old vehicles, the total average ten year life cost came to $11,024, whereas the average life cost of the six year-old vehicles was $4,317.⁵

The decision to make new vehicle purchases is primarily left to individual departments. The Department of Environment reviews and Administrative Services approves requests for vehicles and equipment which are not low emissions and/or alternative fuel, according to Rick Ruvolo of the Department of the Environment. However, the City does not have a citywide set of criteria to determine whether the new vehicle is necessary considering our existing fleet resources, including vehicle pools. As noted above, the Administrative Codes that seek to centralize fleet management are not fully implemented.

Challenges⁶

1. Lack of Central Authority. Although the Administrative Code places many of the responsibilities of managing the City"s fleet with the Director of Administrative Service, staffing for fleet management is decentralized. Currently, four departments are involved in implementing Chapter 85:

Administrative Services. Manages the City Hall Vehicle Pool and makes recommendations to the Mayor and Board of Supervisors on how to make the fleets more efficient.

The Department of the Environment. Houses Clean Air Program staff (4 FTES) two of whom are responsible for reducing the City"s fleet by maximizing efficiency, reducing vehicle trips, replacing old vehicles and all other aspects of Chapter 85 implementation, as it relates to City fleet emissions reduction.

Central Shops. Provides maintenance and repair service to all City departments, excluding the Airport, MUNI, Port and the PUC who maintain their own vehicle maintenance operations. Central Shops also provides fuel and licensing services for all City vehicles and is responsible for the retirement process of the older and highly polluting vehicles.

Office of Contract Administration - responsible for vehicle procurement that is initiated at the request of City departments. Produce Citywide purchasing guide to facilitate purchases of clean air vehicles.

All City departments - manage their own fleet.

2. Insufficient Data and Information. According to the Controller"s Office (memo dated 3/14/02), decentralized fleet management has lead to inadequate data gathering about vehicle utilization, inefficient planning of vehicle maintenance and replacement, and duplicative capital improvements for maintenance facilities to just name a few. According to Mr. Brooks, there has not been any systematic review of vehicle usage Citywide and while the Mayor"s Budget staff and the Budget Analyst have required departments to submit information to support retention of their vehicles, the information has not been regularly provided and few vehicles have been removed from departments. As a result, estimating the amount of saving that could be achieved by department is impossible at this time.

3. Replacement cost barrier. According to the Controller"s Office (memo dated 3/14/02), replacing our vehicles that have been in service for twelve years or more (per Administrative Code 85.7) would create difficult budgetary situations. According to Central Shops, replacing the 263 cars in our fleet that are over twelve years old, would cost approximately $5.2 million. However, the City could review this inventory of cars and develop a long-term strategic plan to ensure such vehicles are removed in a systematic manner.

4. Lack of incentives for good behavior. For many years the City has provided director, deputy directors and managers with City cars. This has created an expectation on the part of these individuals that they ought to have access to a vehicle. Also, as noted above, departments do not have sufficient incentives to turn over older vehicles and implement car sharing strategies.

Recommendations

Potential Solutions. Several recommendations have emerged that seek to make our fleets more efficient. The Mayor"s Office with the help of the Controller"s Office and Administrative Services is (1) implementing a second vehicle pool (similar to the existing one at City Hall) in the Otis/Mission area, and (2) encouraging departments to follow the lead of the Department of Recreation and Parks to use non-profit car share programs to augment their fleet after consultation with the City"s fleet management programs. The Director of Administrative Services is also requesting funds to hire a consultant to study further centralization issues. Additionally, in response to the decentralized system, staff from the Department of Environment, Clean Air Program, Purchasing and Central Shops, in partnership with the Department of Administrative Services, initiated the "Green Fleets Team." This group has programs under way that could be expanded and has identified potential models that the City could implement to reduce the size and costs of the City"s fleets.

Short-term recommendations. The costs of the City fleets could be reduced if fleet management practices were improved. However, the City has inadequate data about vehicle utilization, maintenance and replacement, capital improvements for maintenance facilities, and the capacity of our vehicle pools. As a result, estimating the amount of savings that could be achieved for FY 2002-03 with certainty is impossible at this time.⁷ In the short term, we recommend the following:

1. The Board of Supervisors may consider enabling the application of existing codes by holding in reserve 40% of the maintenance and repair requests for 6 months while Administrative Services works will departments to develop fleet management and vehicle retirement plans. The fund will total approximately $5.4 million, according to Mr. Brooks. The Board of Supervisors may wish to hear a report back from Administrative Services and related departments at the committee level after six months and may wish to begin this evaluation in January 2003. We would recommend that the Committee consider whether departments have demonstrated progress in implementing Chapter 85.7(1) - develop a plan to phase out highly polluting motor vehicles and motorized equipment over 12 years old, Administrative Code 4.10 - inspect vehicles over 60,000 miles with recommendations for retention, transfer or replacement, and have begun to implement fleet management practices more generally before forwarding a recommendation to the full Board of Supervisors to release the aforementioned funds.

2. The Board of Supervisors may wish to transfer a total of approximately $628,330 thousand from departments requesting new passenger vehicles to a centralized fund from which all new vehicles are purchased. The administrator of this fund, likely Central Shops following the recommendation of the Director of Administrative Services, will develop and apply criteria Citywide before purchasing any new passenger vehicles.

Whether to implement the recommendations above is a policy matter for the Board of Supervisors.

Long term recommendations. Costs could be reduced more significantly if central administration and/or coordination of fleets and fleet maintenance were achieved. In concurrence with Mr. Brooks, we would recommend that the City contract with a fleet management specialist firm to conduct a feasibility study of centralizing fleet management functions. Grant funding for such a study may be available, according to Rick Ruvolo of the Clean Air Program. This study should help the City avoid maintenance duplication, streamline processes, and meet the goals of reducing its fleet. The cost will range from $50,000 to $75,000, according to Mr. Brooks. Within its scope, we would recommend that the study consider the following:

Streamlining staff for fleet management into one department and/or increasing coordination between the four departments responsible for the implementation of Chapter 85.

Criteria for use of City fleet resources (such as existing City vehicle pools) and nonprofit car share programs and for profit rental companies.

Expanding the authority of the "Green Fleet Team".

Implementing data gathering across departments about vehicle utilization, maintenance and replacement, and capital improvements for maintenance facilities.

Investigating process improvements at Central Shops and integrating and/or coordinating the five service yards.

CC: Supervisor Maxwell
Supervisor Peskin
Supervisor Yee
President Ammiano
Supervisor McGoldrick
Clerk of the Board
Controller
Budget Analyst
Ben Rosenfield
Ted Lakey

Attachment 2: Vehicles Assigned to Individuals

Source: Mayor"s Budget Office, June 17, 2002

¹ Administrative services with DMG/Maximus, the Department of the Environment and the Controller"s Office have conducted research on how to improve our fleets.

² This amount includes 26 new passenger vehicles requested from General Fund departments.

³ Source: Jim Johnson, Central Shops, March 14, 2002.

⁴ The City has one of the nation"s largest alternative fuel vehicle fleets and the Clean Air Program has raised millions of dollars in grant funds to subsidize this effort.

⁵ The present maintenance management system goes back to 1995. In order to calculate the first 3 missing years, and since all of the vehicles within these two groups came with a minimum three year 36,000 warranty, Central Shops ran a report for the first three years on the 1996 vehicles in group two, to get an average of what was spent on the first three warranty years. Central Shops took that average and applied it to the 1992-year vehicles.

⁶ Identified by the Controller"s Office in a March 14, 2002 memo to the Board of Supervisors.

⁷ According to Mr. Brooks, there has not been any systematic review of vehicle usage Citywide and while the Mayor"s budget staff and the Budget Analyst have required departments to submit information to support retention of their vehicles, the information has not been regularly provided and few vehicles have been removed from departments.