Letters to the Editor for the week of July 12th, 2012 

The Magic Within

click to enlarge JOERN ROHDE PHOTO   WWW.JOERNROHDE.COM
  • Joern Rohde Photo www.joernrohde.com

Page 5 of 8

The minimum auction price for the three trucks combined was $22,200, while the replacement value is approximately $160,000 for the three.

The replacement standard for federal (like retired RCMP cruisers) vehicles is ten years, or 160,000km. I've seen municipal vehicles from the Vancouver area municipalities go to auction that were over 20 years old.

I brought this up at the last council meeting, and the general manager of Infrastructure, Joe Paul, explained that there is a complicated (and apparently mysterious) formula that basically works out the ratio between the vehicle's amortization, and what it costs in extra maintenance to keep an older vehicle on the road.

It seemed to be a pretty vague answer.

Not wanting to get into an argument about vehicle amortization in the middle of a council meeting, I let it slide. However, I have a lot of experience with company vehicles, and with the auction process of retired government vehicles, and thought I would expand my thoughts a little.

Taking the 2005 F-450 diesel truck with 101,000km on it, the replacement cost is approximately $70,000, while the minimum auction price was about $6,500. Since it's an auction, assume that the truck will sell for $10,000, and that it has depreciated $60,000 in seven years. If the RMOW were to keep that truck on the road for another seven years, and it depreciated to zero (unlikely, a quick scan through the classified ads and I couldn't find a similar truck of any year in any condition for less than $5000), then it would cost $10,000 in amortization for the same time period that a new truck would depreciate from $70,000 to $10,000. At the end of the day, that's about a $50,000 difference.

As for the maintenance costs, now there's $50,000 in amortization savings to put towards that. The RMOW has a fully equipped mechanical shop with a full time mechanic, so it's not like they have to take it to Canadian Tire every time the oil needs changing. Still, older vehicles are prone to mechanical failures, so I checked into the repair costs on a worst-case (and very unlikely) scenario, blown engine, transmission, and differential. All of that would probably run about $12,000 to repair, at a commercial shop.

Three trucks in the utilities department are barely a blip on the municipal budget. However, the municipality has a huge fleet of vehicles, and the budget for them ranges from $800,000 to $1,000,000 (excluding fire truck replacements) per year. Keeping that fleet on the road for longer will save a lot of money.

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