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County of Hawaii Finance Committee Comm. No. 41 (Res. No. 411 -10) January 1, 2011 Page 3 of 6 equipment. So, the mechanics are not always available to provide timely or consistent service. ■ The optimum solution to keeping $16 million worth of equipment operational is for DEM to implement a fixed asset management program and have its own equipment maintenance facility. DEM -SWD will be investigating and implementing a fixed asset management program. However, an equipment maintenance facility requires a significant capital expenditure and high operational costs. Based on a 2005 -06 estimate, about $500,000 /year is needed for employee expenses, $500,000 for equipment and supplies and $9.5 million for an equipment maintenance facility. So, not a viable option at this time. ■ Between April 2005 and December 2010, the County spent over $800,000 on a PTA 1991 Caterpillar D8N bulldozer, plus another $42,000 (approximate) in repairs. ■ The basis for needing the PTA bulldozer includes emergency backup to County equipment and helping with the Hilo landfill sliver fill construction. ■ The remaining useful life of the Hilo Landfill is between 3 to 5 years. If proven cost effective to expand the Hilo landfill, the life of the landfill could be 50 -years or longer. A purchased bulldozer could also be used at the Kona LF or sold. ■ The current PTA for the 1991 Caterpillar D8N is $12,695 per month. At this lease rate, the County will pay out about $762,000 over the landfill's estimated 5- year remaining life. ■ Buying a new bulldozer will eliminate the need for a PTA bulldozer and will provide the County with a needed D8 bulldozer and an asset at the end of the new dozer's lease /buy payments. 5. Are there funds available to lease /purchase the new bulldozer, and if so, has it been fully explained? Answer: There is about $13,000 in the current fiscal year to make the first payment. However, the County will likely not need to make any payment this fiscal year. It generally takes about four months to go out to bid and award a contract. Also, the vendor is normally allowed up to a year to deliver; however, this timeframe can be shortened. DEM will, however, have to request additional funds for the lease /buy in next fiscal year's budget. 6. How much if anything will DEM save by buying a new, unused bulldozer? Answer: Depends on the remaining life /airspace of the Hilo landfill. Currently, the estimate is between 3 to 5 years. If the remaining life is 5- years, the cost between a PTA bulldozer and new bulldozer are about even. However, by purchasing a new bulldozer the County would have an asset with salvage worth between $400,000 and $500,000. If the Hilo landfill is expanded, and assuming the remaining life of the new bulldozer is about 20 years, the cost savings would be about $2 million dollars (15 yrs x 12 months /yr x $12,695 /months for the PTA) 7. What is the actual cost for a new D8 bulldozer? Answer: About $796,000 ($725,000 for bulldozer, plus about $56,000 for 5 -yrs of interest, plus $15,000 for 3 -yrs power train warranty). 8. What are the terms for the lease with option to buy? What interest rate, if any, will be paid on the lease?