Memorandum

City of Lawrence

City Manager’s Office

DATE:	4/23/2009
TO:	David L. Corliss, City Manager
FROM:	Casey Toomay, Budget Manager / Interim Transit Administrator
CC:	Cynthia Boecker, Assistant City Manager Diane Stoddard, Assistant City Manager Jonathan Douglass, Assistant to the City Manager
RE:	Recommendations of fuel task force

Please place the following item on the agenda for consideration by the City Commission at their meeting on April 28, 2009:

Receive recommendations from the Fuels Task Force regarding incorporating alternative fuels into the City’s transit fleet and if appropriate, authorize staff to proceed with the purchase of transit vehicles pursuant to those recommendations. 

Background

The City’s fixed route transit fleet is in need of repair.  All twelve vehicles have exceeded their useful life and the cost of maintaining these vehicles continues to increase.  Due to the uncertain future of the transit system, no vehicles were purchased in 2008.

With the adoption of the two transit sales tax provisions, the need to replace the fleet is the division’s top priority.  The City is committed to exploring alternative fuels in order to make the City’s transit fleet more environmentally friendly.  In fact, the 0.05% sales tax ballot language included alternative fueled vehicles as possible expenditures for the proceeds. 

In March, Olsson Associates provided recommendations for the first phase of route and schedule design for coordinated transit services with the University of Kansas.  Additional recommendations will be provided in January of 2010.  It is anticipated that the City will no longer need twelve heavy-duty fixed route vehicles.  Instead, it is likely that Olsson will recommend a mixed, fixed route fleet, made up of vehicles of various sizes. 

In order to address the City’s need to replace the fixed route fleet, the City Manager worked with the University of Kansas to form a staff task force to explore how to incorporate alternative fuel technology into the City’s transit fleet.  The task force members include people with technical and operational expertise related to alternative fuels, transit, and sustainability.    

The task force, which began meeting in early April, had one month to research and review data in order to develop recommendations on how to incorporate alternative fuel technology into the City’s transit fleet in the short term and the long term.

Resources Available

The City has $5,363,297 of federal and local dollars available for the purchase of transit vehicles.  The various sources are detailed below. 

• Stimulus Funds.  The City was allocated $1.9 million of American Recovery and Reinvestment Act funds to spend on fleet replacement.  These funds, which do not require a local match, must be obligated by September of 2009.  In order to meet this deadline, the City must have contract options for bus procurement in place by June 1, 2009.  The City plans to piggyback onto a procurement of another public transit agency, provided that agency can certify their procurement process complies with FTA requirements.  The process to find an appropriate contract can take time, so it is important that the City make decisions on how to spend these dollars quickly. 
• Federal Appropriations.  In addition, the City has obtained almost $2.9 in dedicated federal appropriations for fleet replacement:

FY03 FTA Section 5309	$491,839
FY04 Section 115	400,000
FY05 FTA Section 5309	388711
FY08 FTA Section 5309	147000
FY08 JARC	496,818
FY09 FTA Section 5309  (included in FY09 Omnibus Bill)	950,000
TOTAL	$2,864,368
17% local match	$486,943

These funds require a 17% match, providing the vehicles purchased are ADA accessible.

• Reserve Funds.  The transit system has $568,000 in the City’s Equipment Reserve Fund for the replacement of transit vehicles.  These funds will be adequate to provide the 17% local match required for the funds mentioned above. 

Analysis

The task force focused its analysis on heavy-duty vehicles and the three alternative fuel technologies readily available for this type of vehicle – biodiesel (a diesel engine that, under warranty, can run on diesel fuel blended with up to 20% bio-fuel), hybrid electric/biodiesel, and compressed natural gas (CNG).  The task force established a set of criteria and using those criteria, conducted the attached analysis.  A summary is provided below. 

• Compressed Natural Gas. CNG would reduce NO_x EPA-regulated pollutants slightly more than the other options.  However, CO/HC emissions would be the same, if not slightly higher than the other technologies considered.  In addition, fuel economy is the lowest of the three technologies considered and will require vehicles to fill-up more frequently.  There were significantly more operational issues with this technology.  For instance, there is currently no CNG fueling station in Lawrence.  Without a CNG fueling station (public or privately owned) in place, the City would run the risk of having vehicles that they could not operate.  A fast fill, CNG fueling station would cost approximately one million dollars.  A private vendor could establish a CNG fueling station; however, it is unlikely that the City’s transit fleet is a large enough client to make private investment in this infrastructure feasible.  This would also put the City in a position of having to rely on a single vendor for fuel.  In addition, other resources and infrastructure (trained CNG mechanics, an appropriately equipped maintenance facility, etc.) needed to support this technology are not in place at this time. 

• Hybrid Electric / Biodiesel.  Hybrid electric/biodiesel vehicles would still provide environmental benefits through significant carbon emission reduction and the reduction of EPA regulated pollutants.  The fuel economy is the best of the three options.  Hybrids provide more flexibility than CNG because they can run on biodiesel, and much of the support for the technology is already in place.  There will be operational issues (need to train mechanics on hybrid technologies) as well as additional maintenance costs (batteries require replacement after 6 years at a cost of approximately $36,000.)  The upfront cost of the vehicle is also roughly 60% more than a non-hybrid biodiesel vehicle.

• Non-Hybrid Biodiesel.  Non-hybrid biodiesel vehicles will also reduce carbon emissions, greenhouse gases, and EPA-regulated pollutants, although not to the same extent.  However, this technology provides the City with the most flexibility to respond to technology improvements over the useful life of these vehicles.  Currently engine manufacturers only honor engine warranties on fuel blended with up to 20% bio-fuel.  However, it is likely that higher blends of biodiesel (up to B80) will become more reliable in the very near future, which will further decrease emissions.  The engine is a diesel engine, so training of mechanics is less of an operational issue than with other technologies.  There is no additional up front cost for these vehicles and the City has the infrastructure needed to support the technology, provided the City buys B20 fuel to put in one of the City’s existing fuel tanks. 

Recommendations

Based on their initial analysis of the technology, resources, infrastructure, cost, and environmental impact of the three technologies available for heavy-duty vehicles, the task force developed the following recommendations for the short term:

· Replace four of the existing fixed route vehicles with four heavy-duty, biodiesel vehicles.  At a cost of $350,000- $370,000 each depending on length, total cost = $1.40M to $1.48M.

· Replace two of the existing fixed route vehicles with two heavy duty, forty-foot hybrid electric / biodiesel vehicles.  At a cost of $580,000 each, total cost = $1.16M.

· Replace five of the existing fixed route vehicles with five medium duty, advanced body-on-chassis vehicles.  Initial indications from Olsson are that six to eight heavy-duty vehicles should be sufficient for the City’s fleet.  However, due to the limited time to develop recommendations, the task force has not completed their research related to medium duty, body-on-chassis vehicles. A recommendation will be made by June 15 on what vehicle will work from an operational standpoint and maximize fuel economy while minimizing environmental impact.  Cost estimates are not available at this time; however, initial research has indicated substantially lower cost than the heavy-duty transit vehicles.      

· Retain resources for an additional fixed route vehicle to respond to 2010 recommendations.  It is possible that in January of 2010, Olsson will recommend the City operate seven or eight heavy-duty vehicles.  Therefore, the task force recommends retaining resources until Olsson Associates conclude their work.  At that time, if appropriate, the task force would recommend the purchase of one or two additional heavy-duty hybrid vehicles.  Alternatively, if Olsson recommends operating six body-on chassis vehicles on the fixed route, the task force would recommend purchasing additional medium duty vehicle. 

In addition, the task force makes the following long-term recommendations:

• Incorporate alternative fuel technology into replacement schedule for Paratransit fleet.  Once the task force has gathered information and developed a recommendation on the medium duty vehicles, the task force recommends incorporating the same technology into the City’s Paratransit fleet.  Typically, three Paratransit vehicles are replaced each year (although no vehicles were replaced in 2008 due to the sales tax election.)  Depending on the cost of the advanced body-on-chassis vehicle, resources may only cover the replacement cost of two vehicles each year.
• Implement a fleet replacement plan for the fixed route fleet.  In order to avoid a situation where the City must replacement its entire fixed route fleet at once, the task force recommends the City develop and implement a fleet replacement plan.
• Get older vehicles off the road.  As the City and University continue to coordinate transit services, the task force would recommend trying to replace older vehicles as soon as possible.  The University has some older transit vehicles.  Removing these vehicles, which operated under different emission standards, with new low emission vehicles would have a significant impact on the environment. 
• Continue to explore CNG as an option and explore partnerships with Douglas County, USD #497, and other large fleet users in Lawrence.  By collaborating with other large fleet users, a compressed natural gas fueling station may be more attractive to a private vendor.  The task force recommends the City continue to explore that option so that when the City begins to consider replacing the fixed route vehicles in ten years, the infrastructure costs could be shared and not the sole responsibility of the transit system.
• Continue to explore other technologies.  The task force would recommend the City continue to use this task force or a similar group to explore other infrastructure/alternative fuel technologies (liquefied petroleum gas, liquefied natural gas, propane, ethanol, etc.) over the next ten years in order to prepare for the next round of transit fleet replacement.       

Action Requested

Staff hereby requests the City Commission receive recommendations from the Fuels Task Force regarding incorporating alternative fuels into the City’s transit fleet and, if appropriate, authorize staff to proceed with the purchase of transit vehicles pursuant to those recommendations.