Tully: Why I Changed My Vote
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PITTSFIELD, Mass. - On Tuesday, Ward 1 Councilor Lisa Tully changed her vote on a $2.7 million bond, allowing it to move forward.
Following the meeting, she released a detailed response on why she change her vote. The full text of her e-mail is available below.
Dear Friends and Constituents,
When we last voted on this proposal 2 weeks ago, I voted against it. I voted against it not because I am against replacing buses, but because I thought a replacement plan would make more economic sense than borrowing $2.8M to purchase an entire new fleet. I also thought that we had enough time to replace all the buses over 5 years as the National Association of State Directors of Pupil Transportation Services recommended 12 to 15 years average replacement.
I assumed that alternatives to this proposal were not investigated seriously by the school department. If they had been, I would have expected this information to have been included in our packet. I believe the public needs to know this information and they shouldn’t have to specifically request it. It should be on-line entitled “Business Case for Borrowing to Buy Buses”. If the analysis had been on-line for public scrutiny, I doubt I would have received so many emails thanking me for my vote against this proposal.
Now, here we are again tonight, with the same proposal as 2 weeks ago. There is nothing added and nothing has changed in it. I don’t see a “Business Case for Borrowing to Buy Buses” included. So now, it is up to me to provide the business case because I have changed my vote on this item and I cannot simply change my vote without a detailed explanation why.
Since the last council meeting, I sat down with Mrs. Benke to review the alternatives. The school department did indeed evaluate bus fleet renewal options, initially in April 2012 and again in June 2013, when leasing was analyzed. I’ve updated my spreadsheet and calculated that, on average, we could expect to pay over $615,000 per year for 5 years to replace the fleet.
I also sat down with Mrs. Carmel to learn about the City’s bonding process. The City sells bonds all the time. The interest rates vary, but the last 2 were at 1 % and 1.25%. I wish I could get a mortgage for that.
I calculated that if the City sold the bond $2.8M bond at 2%, for 5 years, the payments would be approximately $582k annually.
At a minimum, the City will save $30k annually by borrowing to buy all the buses at once. In addition, Mrs. Benke said at the last meeting that the maintenance budget would be reduced by $90k with a new fleet.
Therefore, I have concluded that it is more cost effective to replace the fleet all at once with a bond, including the advantageous bus prices from a volume purchase.
Another concern I had was the age of our fleet. If the recommended replacement age is 12 to 15 years, I thought we are trading them in too soon.
I called around to other Massachusetts communities and obtained information from Needham, Worcester and Northampton, a good mix. All 3 districts contract out most of their fleet, but own some buses. Worcester’s contract calls for a 10 year maximum bus age with an overall fleet age of 6 years. Needham’s buses are replaced every 3 to 5 years, but their contract calls for 7 years. Northampton’s has a maximum of 10 years. In addition, Supt McCandless stated at the last meeting that the average replacement age for contracts in Berkshire County is 7 years.
Therefore, our 9 year old buses are within the Massachusetts range for replacement. We could hold on to the buses another year, but there is a cost of $265,800 to keeping the existing fleet another year; the $90k in additional maintenance and the $175,800 of lost trade-in value. After 10 years, as confirmed by Worcester and Northampton, the trade in value is very low.
Another concern I have to address is the $1.2M we are still paying on the existing fleet. This is unfortunate, but it is part of a larger $22M bond that was sold in 2008 to group many other debts at a lower interest rate. In that respect, it is similar to refinancing your home with a higher principle at a lower interest rate to pay off credit cards. At first, understanding that we still owe on the existing fleet was surprising, but after learning that it was part of a debt consolidation, it made more sense. Realistically, we cannot wait to replace our buses until 2020 when this bond is paid off.
The option to contract out the student transportation was last reviewed for a period of 2005 to 2010. I would like to see our cost to own the buses updated and compared to a new competitive bid. I am not in favor of contracting out our fleet, but would change my mind if it made sense. Contracting out is not the panacea everyone says it is. Last summer, Northampton voters approved a Proposition 2 ½ override because their renewed contract from Durham School services came in $225k higher for FY14 than they budgeted. If the override failed, they would not have offered high school busing. That district is now paying $333.63 per bus per day, over $60k per year per bus. Needham purchased 3 buses to provide transport for their athletics program and saved $85k per year. While the contract option is not on the table this time around, it will be for the future, so that a true cost comparison can be made.
Below is my analysis of the renewal plan, showing that at the very least, we will have to pay $615,000 on average for 5 years by staggering our bus purchases. Our bond, however, will be at the most $582,000 for 5 years. Add this savings to the 90,000 savings in maintenance costs and we are better off replacing the fleet now.
