The city's older vehicles are costing it money, according to a recently completed third-party review of Prince George's fleet management.
"You're keeping a lot of vehicles in the fleet for too long," said Mercury Associates president Paul Lauria, during a presentation of his company's review to council members Monday night.
The U.S.-based fleet management experts conducted an analysis between May and July focusing on utilization, acquisition and disposal, operations management, information management and customer relationship management.
"It's important for decision-makers in the city to understand that there really is an economic rationale for having an effective replacement program - we don't want you to just take it as an article of faith that good replacement practices are better than bad ones - that there's actually a cost associated with keeping certain types of assets in the fleet too long and that you can actually quantify those costs," Lauria said.
Out of 315 vehicles and pieces of equipment analyzed, the city's fleet has an average age of almost 10 years, putting the age at which items get replaced at closer to 20 years, according to Mercury's calculations.
"This is nearly double what we would expect it to be," said their report.
If the city were to replace their entire fleet today, it would cost $35.4 million, according to Mercury.
Over the previous four years, the city spent an average of $1.7 million annually in fleet replacement, when it should be spending closer to $4 million per year. That leaves a $13 million overall current fleet replacement backlog with a fleet that has more than half of its assets exceeding the recommended age.
Mercury identified the way the city pays for new vehicles as a major contributor to the city's replacement backlog.
"You have an old fleet because the capital financing approach that you've been using has not served the city well," said Lauria. "Yes, we had a big recession, that's part of it. But part of the problem is you have a capital financing approach that creates certain incentives to defer the replacement of vehicles as long as possible."
Since 2010, the city has primarily financed vehicle replacement by entering into five-year loans with Municipal Finance Authority and pays off the balance at the end of the fifth year out of a reserve fund.
"Replacements have been significantly curtailed over the last several years, most likely due to concerns that the [reserve] balance would not be sufficient to fund additional loan payoffs if new approvals were acquired using the current approach," said the Mercury report.
The city should continue to use debt financing to pay for replacements, but the loan terms should be better aligned with the expected useful life of the asset, Mercury recommended.
"You can have a well-designed repair and maintenance program, you can have a state-of-the-art fleet management information system, you can have a brand-new maintenance facility, [but] if you're not replacing your vehicles and equipment in a reasonably timely manner that will undermine a whole lot of good things you can do to manage and operate your fleet on a day-to-day basis," said Lauria.
