CITY COUNCIL AGENDA ITEM
Meeting Date: September 13, 2005
Subject/Title: Accept an Informational Report on Fueling Expenditures
Prepared by: Kerry Breen, Financial Services Manager
Submitted by: Pamela Ehler, Director of Finance and Information Services
Councilman Taylor asked if and how the City has budgeted for the escalating
We began the budgeting process back in January 2005. In February 2005, after
analyzing rising fuel prices, Finance asked all departments to evaluate
their fuel needs. We asked everyone to budget accordingly, and they did. We
do have the option of amending the budget every six months which may prove
to be necessary given the recent surge of prices beyond our expectations.
In reviewing our purchases of fuel from May – July 2005 and comparing that
to the same timeframe in 2004, the City’s total cost of fuel purchased has
increased by 25%. While some of this cost increase may be attributable to
having 22 more vehicles in our fleet and more roads that our employees must
travel, gas prices during this timeframe have also increased an average of
10%. The City has not felt the financial effects or been billed for the
staggering increases of the past few weeks yet, during which time prices
have increased another 20%.
Currently we are able to buy gas at lower rate than the general public can
because the City is exempt from paying $.2565 of the Federal and State taxes
per gallon. For example, on August 15th, gas at the pump was $2.69. The City
wound up paying $2.43 per gallon for this gas.
In our 2005/06-2006/07 Operating Budget, we budgeted approximately $338,000
for fuel purchases. Due to the recent price surges, we now anticipate that
we may have to spend approximately $360,000 in fuel costs this fiscal year.
In comparison, we budgeted approximately $302,000 for the 2004/05 fiscal
year and finished the year with slightly under $300,000 in fuel costs.
In an additional effort to help lower fuel costs, Council approved the Fuel
Dispensing System in the 2005/06 – 2009/10 Capital Improvement Program
budget. Currently our fuel needs are met through an independent contractor.
Installation of an on-site fueling system will allow virtually all City
vehicles to be fueled at the Public Works Corp Yard at a significant cost
savings. Continuing the example above, the City would have been able to
purchase fuel from the State for approximately $2.10 on August 15th, which
equates to a 14% savings. We anticipate that the City will save
approximately $45,000 per year in fuel purchases through the new fueling
station if fuel prices remain at current levels.
Since there is no way we could have anticipated the hurricane in the East
which shut down eight refineries that refine 30% of the nation’s gas supply
and the associated substantial increases in gas prices, we will likely
request a budget amendment in January 2006. The City has spent approximately
$300,000 on fuel costs over the past 12 months, and given the recent pricing
pressure, we anticipate that fuel costs will be approximately $360,000 over
the next 12 months.