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HomeMy WebLinkAboutCOM 0041.003 2010-2012 Mtv.OF it Phone: (808)326-5684 BRENDA J. FORD `• Fax: (808)329 -4786 Council Member '. - E -Mail: bford@co.hawaii.hi.us District 7 - Central Kona �'' >: of HAWAII COUNTY COUNCIL County of Hawai `i Kailua Trade Center 75 -5706 Hanama Place, Suite 109 Kailua -Kona, Hawai'i 96740 DATE: January 12, 2011 , TO: Dominic Yagong, Chairperson, and Members of the Hawaii County Council -W FROM: Brenda J. Ford, Council Member SUBJECT: Questions and Answers regarding the bulldozer for the Hilo Landfill on Resolution 24 -11. Attached please see the questions and answers provided by Frank DeMarco, Director of Environmental Management. Several members of the committee requested answers which were provided by Mr. DeMarco. Please provide this document to the council for January 20, 2011 for our discussion. Mahalo. BJF /dkr Comm. No. ` ��• 3 Serving the Interests of the People of Our Island Ref. To: 1eieK wu i j Ref. Date JAN 2 0 2011 Hawaii Countv Is An Eaual Opportunity Provider And Emplover Finance Committee Meeting January 3, 2011 Communication No. 41 Resolution No. 411 -10 Multi -Year Lease (D8 Waste - Handler Series Bulldozer) Responses to Questions From Councilmember Brenda Ford County of Hawaii Department of Environmental Management By: Frank DeMarco, P.E., Director and Terin Gloor, P.E. January 1, 2011 County of Hawaii Finance Committee Comm. No. 41 (Res. No. 411 -10) January 1, 2011 Page 2 of 6 The following are responses to questions posed by Councilmember Brenda Ford. 1. Has DEM evaluated the breakeven point between a price term agreement (PTA) bulldozer and purchasing (lease option to buy) a new bulldozer? Answer: New dozer $796,000 divided by PTA dozer $12,695 /month = 63 months ($796,000 = $725,000 new dozer sale price + $15,000 for 3 -yr warranty + $56,000 for 5- yrs of interest. 2. Has DEM prepared a chart/graph graphically indicating the breakeven point for the council? Answer: Not necessary, simple division of total price for new dozer divided by monthly PTA payments. 3. Is DEM proposing to purchase a new or used bulldozer? What advantages are there to each option? Answer: New bull dozer is preferred; however, DEM would consider a used dozer that is in good condition. New: • Less likely to have problems /less maintenance • Comes with a warranty and ability to buy an extended warranty. • Will include the latest safety and equipment features. • Higher salvage value at the end of the equipment's useful life. Used: ■ If in good condition, a year -old used bulldozer can save up to $200,000 or more compared to buying a new bulldozer. Not likely to have warranty 4. Has DEM fully considered its basis for purchasing a new bulldozer? Answer: Yes. Basis: • Hilo Landfill's DOH permit requires: o All solid waste to be compacted and covered by the end of each working day. • Maintaining adequate equipment and personnel to operate the landfill site. • A written Operations Plan that includes a list of necessary equipment and personnel. • Hilo LF's 1/25/00 Operation Manual (i.e., Operation Plan) requires at least one Caterpillar D8N bulldozer and indicates the County has two bulldozers, one of which is a spare. • The Hilo Landfill currently has three bulldozers: 1991 DBN, 2003 D8R and 2007 D6N. The D6N is used to dress the outer landfill slopes. • The County's landfill bulldozers are frequently down for repair and maintenance. • Currently, all three of the Hilo LF bulldozers are down for repairs. The PTA bulldozer is being used. • Part of the difficulty in maintaining the equipment relates to the State and County procurement laws and the time demands on County staff to create and process procurement documents. The other difficulty is using County Automotive Maintenance mechanics that are responsible for more than just DEM's 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? County of Hawaii Finance Committee Comm. No. 41 (Res. No. 411 -10) January 1, 2011 Page 4 of 6 Answer: Five year lease /buy with no balloon payment and a 60 -day warranty. Estimated interest is 2.925 %. 9. How soon can DEM obtain the bulldozer (e.g., is the bulldozer available locally or will it be assembled and shipped from the mainland)? Answer: Earliest is about nine month to about 16 months. The bulldozer needs to be landfill configured (e.g., landfill U- blade, deep tracks, radiator trash guards, etc), which is not available locally. 10. Is there an equipment maintenance agreement included in the purchase, and if not, why? Answer: The bulldozer comes with a 6 month warranty. Caterpillar offers a 3 -yr or 5 -yr extended power train warranty for $15,000 and $25,000 respectively. 11. If the county personnel cannot maintain the bulldozer in a timely manner, what business can do it in a timely manner and how much will that cost if there is no maintenance agreement? Answer: Hawthorne Caterpillar can timely maintain the bulldozer under a maintenance contract. Absent a maintenance contract, timely equipment maintenance is problematic. Caterpillar offers a 3 -yr of 5 -yr extended power train warranty for $15,000 and $25,000 respectively. The County plans to purchase the 3 -yr warranty. 12. How will the new D8 bulldozer be hauled between the two landfills? Do we own the trailer, have the CDL driver? If not, how much to hire and transport? Answer: Usually, a contractor is hired to haul the equipment at a round trip cost of approximately $4,000. When available, the DPW lowboy is used along with a County CDL driver. 13. What is the expected useful life of a landfill equipped D8 bulldozer? Answer: Twenty plus years — with maintenance including major rebuilds. Example: the County's D8N was purchased in 1991 for $276,000. In 2008, $151,000 was spent reconditioning the engine. It is currently undergoing $160,000 worth of various repairs and maintenance. The PTA bulldozer is also a 1991 D8N. 14. How many bulldozers are at each location, what type, how old, owned by county, leased from private vendor, etc.? Is only one dozer operating at a time with a back up dozer on standby at each facility? Answer: Hilo has three bulldozers: ■ 1991 Cat D8N — County owned ■ 2003 Cat D8R — County owned ■ 2007 Cat D6N — Lease ends 4/1/2013 and will be County owned ■ PTA D -8 Puuanahulu has two bulldozers: • 2001 Cat D8R — County owned ■ 2007 Cat D7R II — Lease ends 4/1/2013 and will be County owned At both Hilo and Puuanahulu, one bulldozer is typically operated at one time while the other is on standby. During the Hilo LF sliver fill construction, three bulldozers are County of Hawaii Finance Committee Comm. No. 41 (Res. No. 411 -10) January 1, 2011 Page 5 of 6 operated, one is used at the active /operating /working face and two are used to construct the sliver fill. The D6N at the Hilo LF is used to work the outer slopes. 15. Why is a landfill bulldozer different from any other bulldozer? Please explain why the extra plating is required since there are individuals who state that it is not needed. Answer: Plating is typically included on all bulldozers to protect vulnerable components (e.g., moving parts in the undercarriage). Yes, standard bulldozers could be used as waste - handlers, but is not advisable. Current modifications to waste - handler bulldozers have evolved over years of collaboration between bulldozer manufactures and large waste management companies. These modifications have became so extensive that specialized waste - handling configurations have emerged which can save landfill owners /operators the expense of acquiring these modification separately. The current bulldozer waste - handler configurations are the result of years of `hard lessons learned,' which should not be ignored. Some of the waste - hauler configurations include: trash guards to protect the bearings and seals; specially designed track shoes, modified cooling systems to assure that rubbish does not limit the airflow; hydraulic and fuel tanks guards, landfill U -blade to facilitate moving trash and keeping trash off the bulldozer. 16. What is the salvage value of the new bulldozer? Answer: After 5- years, the bulldozer salvage value is estimated to be between $400,000 and $500,000 (today's dollars). After 20 -years the salvage value is estimated to be between $50,000 and $80,000 (today's dollars). 17. What is the typical maintenance cycle for a bulldozer? Answer: 250 hours (about monthly) 18. Is it necessary to have a lease term agreement bulldozer available if DEM purchases a new bulldozer? Answer: No. 19. How much has DEM spent over the last several years on lease term agreement bulldozers? Answer: About $800,000 between April 2005 and December 2010 20. Why does DEM lack the means to adequately /timely maintain its equipment? Answer: DEM does not have the repair staff or a repair facility, fixed asset management program or staff to timely /adequately address the State /County procurement process /procedure. See question 4 above for discussion of costs to implement County maintenance capability. 21. If it so important, why has DEM not purchased this extra bulldozer sooner? Answer: Based on Lono's D -8 memo, the SHSL was planned to close by 2004, and trucking to begin to Puuanahulu. Hence, no need to invest in a new dozer. However, trucking was put off, and sliver fill began in 2006, stressful for dozers. County of Hawaii Finance Committee Comm. No. 41 (Res. No. 411 -10) January 1, 2011 Page 6 of 6 PTA dozers were used on as- needed basis. Ideally, the track record of PTA use (justifying purchase) might have been perceived earlier. Asset management program would have been helpful. But the past couple years have also been times of spending restraint, so large equipment purchases were disfavored. It now seems apparent that the purchase is financially prudent given the frequency of breakdowns. Asset Management 22. Why did the resolution reference an asset management program and DEM equipment maintenance facility, and why are they important? What is an asset management program? (We have new council members) Answer: Fixed Asset Management Program • A fixed asset management program can be pre - package software or self created on a spreadsheet or database program. The program can help: • Detect early signs of equipment and vehicle fatigue. ✓ Monitors performance based on fuel and /or oil consumption. Fuel per mile /hour and oil per mile /hour reports help spot potential problems. ✓ Monitor maintenance by odometer, hours, days, calendar dates, days of the week. • Track sub - systems of heavy equipment: blades, wheel /tires, tracks, engines, hydraulics or any other sub - system and schedule, track and maintain a history of routine maintenance for each sub - system. • Equipment inventory. • Scheduling maintenance and repairs and track repair histories. • Fuel /Oil tracking. • Tool tracking. • Parts inventory. • Depreciation schedules. • Warranty Tracking. • Automated purchase orders and work orders. DEM Maintenance Facility • Facilitate timely repairs. • Have trained employees to fix heavy equipment. • Employees could be cross - trained to work on other vehicles and equipment to maximize their efficiency. • Scheduled maintenance for equipment and not remain in queue for long periods of time or being forced to transport dozers to cover the downtimes.