City hall plans to spend almost $2.4 million this year through its equipment reserve budget to purchase items for the public works and transit departments, with most of the money to come from accumulated depreciation and the equipment control account.
During its Feb. 26 regular meeting, city council voted unanimously to approve the departments’ 2024 to 2028 equipment reserve budget and to authorize city administration to tender and award the purchases while following the city’s purchasing policy and city administration bylaw.
Council also approved a request from the Moose Jaw Police Service (MJPS) to use a carry-forward amount of $390,139 to support renovations at its headquarters. Due to an “oversight in the budget process,” officials missed including this carry-forward item in the 2024-28 capital budget request.
These new items will not affect the 2024 operating budget because city administration accounted for deprecation and rental increases in the original budget document, a council report said.
This updated request is coming forward now because the operations department experienced major staff changes in 2023 —the new supervisors required more time to review the city’s fleet — and the regular budget process did not give them enough time to make appropriate requests, the report continued.
Project purchases
The report showed public works has 15 major and minor equipment purchases this year worth $1,421,815 and transit has five major and minor purchases worth $966,525, totalling $2,388,340.
Public works’ largest purchases include an automated sanitation truck at $387,256, a rubber tire backhoe for $220,000, a self-propelled line-painting machine for $150,000 and a three-quarter-ton truck for $135,000.
Transit’s largest purchases include a conventional 30-foot bus for $625,000 — to replace one written off in a collision last year — and two paratransit buses, each worth $143,000, to replace existing ones that have rotten frames and floors.
Replacement values
This equipment reserve account comprises “a very significant portion” of the city’s total equipment reserve budget, specifically, about $30 million of the $60 million total, said finance director Brian Acker.
One issue city administration is seeing is pressure on the replacement cost of equipment because a review shows the total replacement value of all items last year was $55.6 million, while this year it has jumped over 11 per cent to $62.8 million, he continued.
An important aspect of the equipment reserve is its ability to generate investment earnings, with half of the $62.8 million in a portfolio, Acker said. Last year, the reserves generated $2.6 million in earnings for equipment replacement, which would have equalled a 7.4-per-cent municipal tax hike.
“The other benefit is we don’t have to borrow money. It would be significantly more than 7.4 per cent, so it’s a huge benefit to having an equipment reserve system,” he added.
Expensive equipment
Inflation has skyrocketed since the pandemic, and not only have new purchases risen in cost — over 35 per cent — but parts and repair services have also substantially increased, said Krysti Johre, manager of transportation and procurement.
“While we have been carefully setting aside funds for the replacement of our equipment, those funds have lost their purchasing power in many cases,” she remarked.
The department’s efforts over the years to extend equipment lifespans to meet budget requirements have resulted in an aging fleet with increased costs, more downtime and frequent service interruptions, Johre said.
Also problematic is the department’s need to find money to replace its equipment after a past decision led to the stoppage of accumulating depreciation on items “imperative to operations,” she continued.
“We have had to consider alternative funding sources and largely balance probabilities of incidents or catastrophic failures across our fleet to determine the most important priorities of our funds,” Johre stated, before listing some “creative solutions” staff have pursued to acquire new machines.
Possible new machines
The department will purchase a new automated sanitation truck because one unit — out of four total — has experienced consistent breakdowns since 2020 and is facing “catastrophic failure.”
Staff have sometimes provided services with an old manual collection machine, but that’s time-consuming and results in additional labour hours and overtime, said Johre. Moreover, if no employees are available — usually temporary labourers — then there is no garbage pickup.
“Replacement of unit 134 is necessary to ensure the provision of an essential service to the public … that is on the forefront of the public’s radar in which nearly every citizen has an interest,” she stated.
While the depreciation account is significantly short of funds, the department found a used machine in good condition that’s within budget and that it can buy, she continued.
Another machine facing a catastrophic failure is a grader — one of four total — used for snow removal and gravel road maintenance, Johre said. Since the deprecation fund is short of revenue, the department will replace this machine in 2025 to reduce the effect on this year’s operating budget.
The department is also considering purchasing an attachment to allow the grader to recover gravel from ditches — reducing the cost of new gravel by 80 per cent — and giving it a mid-life refurbishment to extend its life.
“The recovery of the state of our equipment reserve is not an exercise that can be completed in one fiscal year. Rather, it will take our perseverance for years ahead of us to bring it back into full health,” Johre added.
Council comments
Coun. Heather Eby appreciated Johre’s comprehensive report since she thought the new supervisor brought fresh eyes to this topic. She also appreciated the reminder that pushing replacement projects into the future to save money now and reduce tax hikes only leads to higher expenses later and reduced services.
“And I think that’s more important than anything, especially given things talked about with waterworks and garbage collection,” she added.
While it’s disappointing that equipment replacement costs have increased 11 per cent, Coun. Jamey Logan thought it was refreshing that Johre and fleet services supervisor Perry Lanville are being creative and flexible in finding ways to save money.
The next regular council meeting is Monday, March 11.
