Enterprise makes presentation, council tables vote
City Government
The city council is still considering a proposal from Enterprise Fleet Management to help manage of replacement of the city’s fleet of vehicles, but it was tabled at the July regular session of the city council.
“This is something we’ve talked and talked about, because they [police] are tired of dealing with maintenance,” finance director Lesa Smith told the council.
Rami Saad, a consultant for Enterprise of Dallas- Fort Worth, appeared before the council in July to give a presentation about the possible benefits of the city pairing with Enterprise to manage their fleet.
Saad said Enterprise is already operating in several East Texas cities, including Palestine and Commerce.
“You’re not having to be a pioneer in this,” Saad told the council. “This is a tried and tested program.”
Saad’s proposal outlined the city leasing their vehicles through Enterprise, which buys them at a discount through buyer Co-Ops, he said. When the value of the vehicle begins to depreciate due to the market and increasing maintenance costs, Enterprise sells the vehicle and leases the city a new vehicle, according to Saad.
Saad predicted an eight-year savings of $630,000. Smith told the News-Telegram she believes this is “absolutely possible.”
“Department heads are dealing with this day in and day out,” Smith said. Many of the city’s vehicles are over 10 years old, and seven of the city’s vehicles are over 19 years old.
“We’ve had to deal with things like air conditioning repair, rebuilding transmissions, even rebuilding engines,” Smith said. “Plus the older a vehicle gets, the more often you have to replace tires. Just general maintenance stuff.”
Smith said that the city immediately needs to replace six police carsm a non-functional code enforcement car and an investigator’s car that was “on its last leg.”
According to Saad, everything from acquisition of vehicles to resale would no longer be managed by the city itself, but by Enterprise.
Councilperson Doug Moore, however, had some reservations about the proposal. After enquiring how the buyers Co-Op determines their pricing, Saad asked Moore, “Might the question be, ‘Why can’t you just do this on your own?’”
“Yes, exactly,” Moore said, adding, “Obviously, leasing is a financing mechanism, I don’t care what we call it… I don’t doubt that upgrading our fleet is a good idea.”
“Everything else, I’m not really sold on,” Moore said. “I’ve turned down a lot of leases in my time… if I can go to the Co-Op and buy the same deal for the same price, I’m going to go with the cheapest money.”
Moore stated that Enterprise’s financing rate was calculated at 5.12%, but he asked, “Can I go to a local bank? I can probably get some pretty cheap money locally.”
Smith, however, is not confident in the city’s ability to levy selling vehicles — at least not right now.
“We could to an extent have our own fleet management, but it would be very difficult to get it started,” Smith told the News-Telegram. “We would have to borrow $1.8 million for the first three years… and we don’t want to dip into our savings account to pay our bills.”
For that reason, Smith said, she believes leasing is a more financially sound idea.
“Debt payments would be around $650,000 a year, and we don’t have the cash flow for that,” Smith told the News-Telegram. “Lease payments would be $376,000, which is doable.
City manager Marc Maxwell told Moore during the council session he has “been in exactly the same position [Moore is] in now, having doubts.”
“Two things persuaded me,” Maxwell said. “One, I think he [Saad] is being modest about the prices he can save us…The second reason is we’re about to begin our budget workshops next month, and we’re starting off with a $700,000 debt.”
“We need to cough up $300,000 to $400,000 in savings,” Maxwell told the council.
The city had originally planned to buy three new police cars but has not yet made the purchase due to a “mistake in the vehicles,” according to Maxwell. This leaves the city with $100,000 they had planned to use to buy the vehicles, Maxwell informed the council.
“If we lease instead, a big chunk of that can help us out with our little problem next year,” Maxwell said.
“I just have a lot of questions,” Moore said.
The council voted unanimously to table the issue until the August regular meeting.