STAFF REPORT June 21, 2000 To: From: Subject: Policy and Finance Committee Chairman, Toronto Police Services Board and City Auditor Vehicle Replacement Policy - Toronto Police Service Purpose: The purpose of this report is to respond to the Budget Advisory Committee's requests to provide the annual amount required to maintain the Toronto Police Service fleet at a reasonable rate and to provide a policy for vehicle replacement for both marked and unmarked cars. Financial Implications and Impact Statement: The Toronto Police Services Board is requesting that a total of $5.36 million be approved for vehicle replacements in the year 2000. The Chief Financial Officer and Treasurer and the Acting Chief Administrative Officer, Policing, are currently reviewing the funding of vehicle replacements for the Toronto Police Service. The implications of the recommendations in this report are dependent on the results of that review. The Chief Financial Officer and Treasurer has reviewed this report and concurs with the financial impact statement. Recommendations: It is recommended that: (1) the amount of $5.36 million requested by the Toronto Police Services Board in connection with the replacement of vehicles for the year 2000 be approved; (2) the Budget Advisory Committee give consideration to the adoption of a policy which provides for the replacement of marked police vehicles after 150,000 kilometres and;
- 2 - (3) in reviewing future budget requests the Budget Advisory Committee give consideration to the information contained in this report which indicates that the optimum annual budgetary requirement amount for police vehicles, which takes into account vehicle costs, disposition proceeds and maintenance costs, is in the range of $7.2 million. Background: The Budget Advisory Committee, at its meeting on January 14, 2000, requested the Chairman of the Toronto Police Services Board and the City Auditor, in consultation with the Chief Financial Officer and Treasurer, to report to the Budget Advisory Committee: 1. providing the annual amount required to maintain the Toronto Police Service fleet at a reasonable rate; and 2. providing a policy for vehicle replacement for both marked and unmarked cars. Comments: Operating a fleet of vehicles requires balancing the costs of purchasing new vehicles against the repair costs and operational downtime that occur when vehicles are held for an extended period of time. As an additional factor as vehicles age, the residual value, the value that can be received on their eventual sale, declines. The purpose of this report is to set an optimum level for vehicle replacements, which minimizes the overall costs of operating the police fleet, while at the same time, ensuring that core policing functionality is not unnecessarily jeopardized. The Budget Advisory Committee requested we recommend a policy for vehicle replacement specifically for marked and unmarked cars. While we have addressed this specific issue, the recommended annual funding includes all vehicles under the service s control, with the exception of boats, which are funded separately in the capital budget. In performing this review, we have: - prepared a high level summary of the composition of the Toronto Police Service s fleet; - reviewed the history of vehicle replacements and repairs at the Toronto Police Service; - reviewed residual values realized at Toronto Police Service vehicle auctions for the years 1995 to 1999 and consulted with other police services on actual residual values obtained under their vehicle replacement policies; - compared Toronto Police Service new vehicle purchase prices with prices paid by other Canadian police services; - reviewed the current vehicle replacement policy along with actual vehicle replacement experience;
- 3 - - discussed fleet replacement with the fleet administrator of a major local commercial fleet; - extracted information on vehicle repair costs from the service s fleet system allowing for estimation of repair costs for varying replacement policies; - performed a modelling exercise on the costs of various fleet replacement policies on the overall cost of operating the service s fleet; and - benchmarked the vehicle replacement policy of the Toronto Police Service against 17 other North American police services; A critical component of the cost of operating a fleet is its size. The analysis in this review has been based on the existing fleet of the Toronto Police Service and we have not considered the effects of any potential or possible changes in the size of the fleet for the Toronto Police Service. Overview of Toronto Police Service Fleet To put some perspective on the number of vehicles in the Toronto Police Service s fleet, the following table shows the fleet establishment for the Toronto Police Service and the average annual mileage for each type of vehicle: Vehicle Type # of Vehicles Average Annual Mileage (kms) Marked Patrol 411 40,850 Marked Minivans/4WD 41 22,000 Marked Parking Enforcement 44 37,500 Motorcycles 130 8,000 Other marked vehicles 98 15,000 Total Marked Vehicles 724 Unmarked 683 22,250 Unmarked Parking Enforcement 41 22,000 Total Unmarked Vehicles 724 Trailers 32 N/A Boats 19 N/A Total Vehicles 1499 The actual fleet size fluctuates as new vehicles are received and old ones are sent to auction. As at the date of this review, the actual police fleet consisted of 1,511 vehicles with 12 of those vehicles awaiting auction. Excluding boats, the original cost of the fleet as at February 1, 2000 was $32.7 million with a replacement cost, based on actual invoices for vehicles purchased in 1999, estimated at $38.2 million.
- 4 - Replacement History From 1993 to 1997 inclusive, the Toronto Police Service spent a total of $13.6 million on vehicle replacements. When converted to year 2000 dollars using the increase in new vehicle prices during that period, this translates into a total of $16.9 million, or an average of $3.4 million per year. Given the current replacement value of the service s fleet of $38.2 million as noted above, a return to the 1993 to 1997 vehicle replacement rate would mean it would take approximately 11 years to fully replace the fleet. In other words, vehicles would not be sent to auction until they were, on average, 11 years old. In the years 1998 and 1999, the Toronto Police Service s approved vehicle replacement budget totalled $15 million. This replacement amount was in recognition of under funding in previous years and was meant to bring the police fleet to an average age and state of repair that was acceptable to the Toronto Police Service. Continuation of this funding level would completely replace the fleet approximately every five years. Repair History At the 1993 to 1997 level of vehicle replacement funding, the fleet began to age and downtime increased as did repair costs, which rose from $7,957.9 in 1993 to a total of $8,495.3 in 1997. Although the level of funding increased in 1998, the resulting replacements had little effect on the 1998 maintenance costs. The 1998 maintenance costs actually increased to $8,721.3 because of the timing of the new vehicle acquisitions and the overall age of the fleet. With the additional 1999 acquisitions, the maintenance costs are projected to decline by $265.3 from the 1998 level. Had the 2000 request for vehicle replacements been approved earlier, a further decrease of $131.8 was anticipated. Vehicle Replacements Actual Replacement versus Vehicle Replacement Policy In planning for the replacement of the fleet, the Toronto Police Service has established a fleet replacement policy as follows: Marked Patrol 2.5 years 150,000 km Unmarked 5 years 135,000 km Support 5 years 175,000 km Motorcycles 4 years N/A If the current policy, (in kilometres) were strictly followed, the service would require annual vehicle purchases totalling approximately $7.6 million. Although the established vehicle replacement policy may have been followed for critical front line vehicles, in reality, this was only accomplished by a system of vehicle rotation that shifted cars from high usage functions into lower usage functions. By doing this, the service has been able to maintain a reasonable standard for high demand vehicles while at the same time operating within approved vehicle replacement budgets.
- 5 - A review of mileage on auctioned vehicles over the past four years indicates how the service has been able to manage its fleet in order to accommodate the fiscal constraints of the period 1993 to 1997. The following information shows the average actual mileage on vehicles the Toronto Police Service has sent to auction over the past four years. Year Number of Marked Cars Average km Number of Unmarked Cars Average km 1996 81 192,800 12 160,800 1997 7 171,000 14 202,100 1998 77 211,200 71 170,100 1999 158 214,000 88 183,100 Total 323 207,100 185 178,100 The information in the table above shows clearly that the Toronto Police Service has been keeping its vehicles for longer than anticipated in the existing fleet replacement policy. While there is not a standard for how long a police vehicle should be kept, it is possible to compare mileage on police vehicles to passenger vehicles. The Ontario Road Safety Report suggests a passenger vehicle average kilometres of 24,000 km per year with a corresponding life expectancy of six years. This level of usage would result in passenger vehicles being disposed after six years with a total of 144,000 km on the odometer. This type of guideline, while useful for comparative purposes, is not necessarily appropriate for police vehicles as police vehicles are different from passenger vehicles in many ways. Police vehicles, for example, have specifications that include more durable mechanical components for certain parts of the vehicle. A second difference between police and passenger vehicles is in the way the vehicles are used. Police vehicles often sit with the engine idling for extended periods of time. Therefore, the actual engine usage is much higher than would be expected based on the number of kilometres on the odometer. Any replacement policy developed should subjectively consider that engine running time is far higher than indicated by the vehicle odometer reading. Modelling Information To determine the optimal replacement policy for the Toronto Police Service s fleet, we estimated the various annual replacement cost, residual values and repairs and maintenance costs for different replacement policies. Although the chart below only shows the mileage policy for marked vehicles, the underlying calculations include varying policies for all other service vehicles.
- 6 - The following is a summary of the complete modelling exercise: Mileage (kms) (Note 1) Annual Replacement Cost ($000 s) Residual Value ($000 s) Repairs and Maintenance Costs ($000 s) Total Net Annual Costs ($000 s) 120,000 8,597 2,858 6,921 12,660 150,000 7,242 1,937 7,215 12,520 170,000 6,441 1,318 7,532 12,655 190,000 5,792 880 8,020 12,932 210,000 5,236 576 8,456 13,116 230,000 4,809 350 8,849 13,308 Note 1 - Mileage on marked patrol cars In previous communications to the City s Budget Advisory Committee, the Toronto Police Service has indicated that annual vehicle replacement funding in the $5.2 million range, although not ideal, would be manageable. This funding level was determined during the budget process but did not result from a complete analysis of all costs to operate the fleet. In the table above, we have analysed the effects of differing policies on residual values and repairs and maintenance costs. The result of this analysis is a recommended policy, which replaces marked patrol cars at 150,000 km. One important factor to note regarding the above costs is that given the fleet turnover rate, it will take approximately five years of funding at the $7.242 million level before the residual values and repairs and maintenance cost levels indicated above can be achieved. Based on this information, we are confirming the existing policy which anticipated replacement of the Toronto Police Service s marked patrol cars once they reach 150,000 km and unmarked cars when they reach 135,000 km. The recommended guideline for all police vehicles is listed in the table below which also includes the current policy for comparative purposes. We have referred to this recommendation as a guideline, as it is important to allow a fleet administrator the flexibility to retain some vehicles beyond the recommended life, while at the same time, affording the opportunity to dispose of specific vehicles before they reach the recommended number of kilometres. The fleet administrator bases these decisions on the type of usage the vehicle has received, its repairs and maintenance history and, anticipated needs for major repairs. Making these guidelines a formal policy, which required strict adherence, would remove the opportunity for application of the fleet administrator s judgement and would undoubtedly increase the costs of vehicle replacement for the Toronto Police Service. Recommended Vehicle Replacement Guideline Vehicle Proposed Guideline Existing Guideline Age (years) Mileage (km) Age (years) Mileage (km) Marked Patrol 3.7 150,000 2.5 150,000 Unmarked 6.1 135,000 5.0 135,000 Support 6.0 to 11.7 160,000 220,000 5.0 175,000 Motorcycles 10.0 80,000 4.0 N/A
- 7 - Adopting this recommended guideline would provide the Toronto Police Service with $7.242 million per year commencing in the year 2001. In order to ensure the purchasing power of this allotment is not eroded, it is also recommended that this amount be increased annually for changes in new vehicle prices. Further, given the 2000 budget constraints and the significant funding received over the past two years, the Toronto Police Service maintain that, for the year 2000, the $5.36 million previously requested will allow them to effectively manage their fleet and begin the reductions in repairs and maintenance costs already projected in the 2000 operating budget. Replacement Policies of Other Police Services In assessing the guideline recommended above, it is useful to compare it to the policies used in other police services. Appendix 1 (attached) sets out the vehicle replacement policies of 17 other police services in North America. The graph below shows how Toronto Police Service s replacement policy compares with this selection of other police services. Comparison of Mileage Policies 300,000 250,000 200,000 150,000 100,000 50,000 0 Edmonton, AB Boston, MA Quebec City, PQ Vancouver, BC Peel Region, ON Winnipeg, MB Charlotte, NC Durham Region, ON New York City, NY Ottawa/Carleton, ON Thunder Bay, ON Halifax, NS Chicago, IL Toronto proposed Los Angeles, CA York Region, ON Calgary, AB Montreal, PQ These mileage policies have been in existence for a period of time at most of these police organizations and represent regular ongoing vehicle replacement policies, which are based on each organization s usage, maintenance practices and road conditions. This graphical presentation of vehicle replacement policies provides some assurance that the vehicle replacement policy recommended in this report is reasonable when compared to policies in existence at other North American police services.
- 8 - Other Items The type of vehicle chosen and the amount paid for these vehicles will clearly impact the annual funding required to replace the Toronto Police Service s fleet. The Toronto Police Service relies on several sources for guidance in the type of vehicle purchased. The two main sources for this guidance are standards set by the Solicitor General of Ontario and testing from the United States referred to as the Michigan State Police Trials. Vehicles selected by reference to these resources are then subject to approval by internal committees of the Toronto Police Service. In surveying the various police services, particularly in Canada, it was noted that the majority of services use the same vehicle as that used by the Toronto Police Service. In addition, the prices paid for these vehicles are very similar between the various Canadian police services. Therefore, it is reasonable to conclude that in general, the Toronto Police Service is purchasing the right vehicles at a fair price. The Toronto Police Service currently tests other vehicles as they become available and will continue to do so with a view to getting the best value for its vehicle replacement dollars. Conclusions: Funding for the replacement of the fleet of the Toronto Police Service has been erratic over the past seven or eight years. From 1993 to 1997, funding was severely restricted with 1998 and 1999 seeing significant increases in funding to compensate for the earlier restrictions. In previous communications to the City s Budget Advisory Committee, the Toronto Police Service has indicated that annual vehicle replacement funding in the $5.2 million range, although not ideal, would be manageable. This funding level was determined during the budget process but did not result from a complete analysis of all costs to operate the fleet. The more current and detailed analysis performed in the preparation of this report indicates that the fleet can best be managed, and the total cost to the City minimized, through a consistent funding for the Toronto Police Service s fleet. This report recommends annual funding $7.242 million for the Toronto Police Service s fleet. This recommendation is based on an analysis of actual usage of police vehicles and anticipated costs for operating the fleet under various replacement guidelines. The recommended guideline produces the lowest estimated net annual cost for the operation of the Toronto Police Service s fleet. The Chief Financial Officer and Treasurer and Chief of Police were consulted in the preparation of this report and concur with the recommendations, although the Chief Financial Officer and Treasurer has concerns about the funding of the recommended expenditure and will be providing a separate report on this issue to the Budget Advisory Committee. Although the Chairman of the Toronto Police Services Board has signed this report, the report has not yet been tabled with the Toronto Police Services Board. The Toronto Police Services Board will consider this report at its meeting of July 27, 2000.
- 9 - Contact: Jerry Shaubel, Director, Audit Services Telephone: (416) 392-8462; Fax: (416) 392-3754 E-mail: JShaubel@city.toronto.on.ca Jeffrey Griffiths City Auditor List of Attachments: Norm Gardner Chairman, Toronto Police Services Board Appendix 1 Fleet Replacement Policies/Guidelines
- 10 - APPENDIX I FLEET REPLACEMENT POLICIES/GUIDELINES SELECTED NORTH AMERICAN POLICE FLEETS Fleet Marked Cars Unmarked Cars (in kilometres) (in kilometres) Boston, MA 217,000 217,000 Calgary, AB 135,000 135,000 Charlotte, NC 160,000 160,000 Chicago, IL 150,000 150,000 Durham Region, ON 160,000 160,000 Edmonton, AB 240,000 125,000 Halifax, NS 155,000 155,000 Los Angeles, CA 145,000 145,000 Montreal, PQ 125,000 96,000 New York City, NY 160,000 160,000 Ottawa/Carleton, ON 160,000 180,000 Peel Region, ON 175,000 115,000 Quebec City, PQ 200,000 200,000 Thunder Bay, ON 160,000 160,000 Vancouver, BC 180,000 180,000 Winnipeg, MB 170,000 190,000 York Region, ON 145,000 130,000 Total 2,837,000 2,658,000 Average (Total 17) 167,000 156,000 Toronto proposed 150,000 135,000 Toronto Average Actual 96-99 207,000 178,000