HomeMy WebLinkAbout01/20/2004, C3 - CONTRACT AMENDMENT NO. 2 - CITY OF SAN LUIS OBISPO TRANSIT SERVICE CONTRACT WITH FIRST TRANSIT, INC council Mai.,Da.
j acEnda REpoat D®N .c3
CITYOF SAN LUIS O B I S P O
FROM: Michael D. McCluskey, Public Works Director ADP%_
Prepared by: Austin O'Dell, Transit Manager
SUBJECT: CONTRACT AMENDMENT NO. 2—CITY OF SAN LUIS OBISPO
TRANSIT SERVICE CONTRACT WITH FIRST TRANSIT,INC.
CAO RECOMMENDATION:
Approve contract Amendment No. 2 to the First Transit Inc. FY 2002-04 transit service contract.
DISCUSSION
Background
On April 13, 2001, the Council awarded a contract to First Transit, Incorporated, to provide SLO
Transit bus and trolley operations for the three-year period from July 2001 — June 2004. City
Council approved Amendment No. 1 to the transit services contract on October 15, 2002.
Amendment No. 1 restructured the compensation method by separating fixed costs and variable
costs to provide a mechanism for First Transit to better recover their fixed costs. The City
benefited by paying a lower revenue vehicle mileage rate. The amendment also extended the
First Transit contract for an additional year, ending June 30, 2005.
The current contract contains a provision for fuel price adjustments. Fuel price adjustments
(FPA) are triggered when the actual fuel cost paid by First Transit differs by a set amount from
the fuel price established in the contract. The intent of the FPA provision is to protect both the
City and contractor from losses due to major swings in fuel costs. This was a problem in the
former Laidlaw contract and it was hoped that the provision in the First Transit contract would
resolve the issue. Unfortunately, the FPA did not resolve the problem and they have continued to
be problematic. In addition,recent changes to State law have complicated the picture further.
Why is There a Need for Amendment No. 2?
In the past, contractors paid full price for gasoline, including sales tax and federal tax and
subsequently requested reimbursement from the State Controller for the tax expenses. In 2002,
changes to State law made sales and federal taxes on transit fuel no longer chargable to a transit
contractor (note: the fuel must be designated for transit use which is known in the market as
"Red Dye" diesel). The intent of the new law was to remove the "middleman" from the process
of reimbursement. While it has done that, it also has caused complications for our operations.
First of all, the City's contract was written before the new law, and therefore does not
compensate First Transit for these reimbursable costs (as stated above, this has been the
responsibility of the State). Secondly,because of San Luis Obispo's remote location, Red Dye
C3-1
Council Agenda Report—SLO Transit Service Contract—Amendment No. 2
Page 2
diesel fuel is difficult to obtain with any regularity. Thus, when supplies are unavailable, the
Contractor must purchase fuel at a price that includes all taxes. Because the State no longer
reimburses for these costs (and neither does the City), the contractor has been absorbing the costs
and has requested remediation.
Amendment No. 2 ,
Amendment No. 2 eliminates the fuel price adjustment provision in the current contract to fairly
compensate First Transit for fuel costs. A modified provision that directly compensates First
Transit for actual fuel costs is being recommended. Staff worked with the contractor to
determine the fuel cost assumptions in the current contract (based upon Revenue Vehicle Miles
(RVM) performed) and remove these costs from the basic compensation rate. The City will
monitor these costs to insure that appropriate rates are being paid for the fuel. Finally, because
the fuel tax exemption went into effect on July 1, 2002, First Transit has requested that the new
fuel provisions be retroactive to the start of Fiscal Year 02/03. Staff concurs with this request
because the cause of the inequity was outside the purview of the contractor.
Amendment No. 2 simplifies the billing process. Currently; First Transit budgets $18,574 per
month for fuel. First Transit's fuel cost is compensated as part of the revenue vehicle mileage
rate. In contrast, First Transit's actual fuel cost ranges from $10,000 to $12,000 per month. This
represents a surplus to First Transit. However, via the current contract, the City "netted" out the
difference in the fuel costs during this period, so no overpayment was made to the contractor. If
Amendment No. 2 is approved, the City will only pay for fuel that it uses without the current
cumbersome set of calculations.
Detailed conditions of Amendment No. 2 are provided in Attachment 1. The following is a brief
outline of the contract changes:
1. Reduce the revenue vehicle mileage rate, retroactive to July 1, 2002. The associated
fuel cost in the revenue vehicle mileage rate will be removed. The new lower revenue
vehicle mileage rate will be retroactive.to July 1, 2002, the date changes to the law went
into effect.
2. Delete fuel price adjustment provision in the Contract. The benefit is simplicity and
First Transit will be fairly compensated for fuel.
3. City will pay the cost of fuel and the supplier's mark-up fee as part of the monthly
bill. The City and First Transit will coordinate in the selection of the fuel vendors to
insure the best price available to the City. First Transit will pass through the actual raw
fuel cost to the City as part of the monthly invoice. The City will pay the actual raw fuel
cost plus the supplier's markup. First Transit will be responsible to pay all taxes. First
Transit will also continue to provide all backup documentation from fuel suppliers.
4. City and Contractor will reconcile fuel costs retroactive to July 1, 2002. The City
and Contractor agree to reconcile the fuel price adjustment provision retroactive to the
date of the law change or July 1, 2002.
e3-Z
Council Agenda Report—SLO Transit Service Contract—Amendment No. 2
Page 3
5. First Transit will pay to install an epoxy finish in the bus maintenance area.
Currently, First Transit is required to finish the maintenance floor area in the bus yard.
First Transit has offered to upgrade the finish from a paint finish to an epoxy finish if
Amendment No. 2 is approved. This upgrade represents a benefit of six thousand dollars
in long-term savings to the City because of the longer life expectancy of the epoxy finish.
(The epoxy finish has a ten-year life and is non-slip, while the paint finish must be
painted each year.)
Changes requested by First Transit but not recommended by Staff
The current contract does not allow the contractor to perform other "outside" services from the
SLO Transit facility or with personnel assigned to the City contract. During 2003, First Transit
extended resources from their City-assigned workforce to provide maintenance services for
South County Area Transit(SCAT) as part of assisting SLORTA with maintenance efforts. Staff
found First Transit was in violation of the contract. As part of the request for Amendment No. 2,
they requested we consider allowing them to perform similar services in the future. Staff does not
concur with this request because the RVM rate has been determined based upon a certain number
of employees designated to the SLO Transit operation.
FISCAL IMPACT
Amendment No. 2 will not impact the general fund and will assist in stabilizing the Transit Fund.
Referring to Attachment 2, the projected monthly savings to the Transit Fund is anticipated to be
$3,021 per month or $36,257 annually. Retroactive payment of fuel costs already spent by First
Transit will come from the current FY 03-04 budget.
Reconciling retroactive to July 1, 2002, the City will reimburse First Transit for the refunds that
we collected via the current FPA. The City is agreeable to this only if First Transit agrees to a
maximum reimbursement amount to resolve the FPA issue. As calculated from the Contract
reimbursement rates and actual fuel prices paid by the Contractor, the maximum reimbursement
amount the City will pay First Transit for these costs will be $45,233.36 for the period of July 1,
2002 to the present.
CONCURRENCES
The terms and conditions of Amendment No. 2 are consistent with the financial assumptions in
the adopted Short Range Transit Plan.
ALTERNATIVES
Alternative 1. The Council could not approve Amendment No. 2. The consequence of this
action would be that First Transit would continue to lose money on fuels costs and they have
indicated they would not be able to complete the contract with the City. First Transit provides a
superior service to the community and desires to be a partner in the community. Good business
relations translate into quality service and satisfied passengers.
Another consequence is the City's ability to provide the new service changes effective January 4,
C3-3
Council Agenda Report—SLO Transit Service Contract—Amendment No. 2
Page 4
2004. The service change budget estimates assumed the lower revenue vehicle mileage rates in
Amendment No. 2. If the current RVM rate continues, some service levels may be endangered
as we approach the end of the Fiscal Year.
ATTACIIMENTS:
1. City of San Luis—First Transit, Inc. Service Contract, Amendment No. 2
2. Contract Cost Comparison
L\ Council Agenda Reports\2003 agenda reports\Transportation and Development Review (Bochum)\Transit\Transit CAR First Transit
Amendment No.2-DRAFT.doc
ATTACHMENT i
AMENDMENT#2
TO THE AGREEMENT BETWEEN CITY OF SAN LUIS OBISPO AND
FIRST TRANSIT INCORPORTED
WHEREAS, on May 15, 2001, an agreement was made and entered by and between the
City of San Luis Obispo (hereinafter referred to as "City"), and First Transit Incorporated
(hereinafter referred as"Contractor") for the provision of transit operations and maintenance of
public transit fixed route services in the City of San Luis Obispo, California; and
WHEREAS, on November 12, 2002, the City and Contractor executed Amendment No.
1; and
WHEREAS,is desirous of amending the aforementioned Agreement and the revenue
vehicle mileage rates in Amendment No. 1, and City is agreeable to such amendment.
NOW THEREFORE, in consideration of the mutual covenants and promises herein,
City and the Contractor agree to amend the aforementioned Agreement and/or Amendment No.I
as follows:
1. Modify Revenue Vehicle Mileage Rate to Exclude Fuel Cost.
a City shall pay Contractor a revenue vehicle mileage rate, retroactive to July 1, 2002, in
accordance to the following schedule:
• FY 2003 $1.864
• FY 2004 $1.904
• FY 2005 $1.961
The above schedule modifies the revenue vehicle mileage rate in Amendment No. 1, and
excludes fuel costs. Please refer to the example billing in Exhibit A.
b. Contractor shall reduce the revenue vehicle mileage rate by $0.034 upon completion and
implementation of the bus wash facility. City shall pay Contractor the following revenue
vehicle mileage rate upon the day of completion and implementation of the bus washer,
in accordance to the following schedule:
• FY 2003 $1.830
• FY 2004 $1.870
• FY 2005 $1.927
�?-S
MAORI
2. Fuel Cost Reimbursement
a. City and Contractor will coordinate in the selection of the fuel vendor. Contractor will
provide City with three quotes from fuel vendors. Separate vendors for different fuels are
acceptable.
b. Contractor will bill the City for the fuel expenses as part of the monthly invoice. City
will reimburse Contractor for the following:
i the cost of fuel, and
ii a mutually agreed upon supplier's mark-up fee (OPIS plus service fee/supplier's
mark-up) for fuel purchased in FY 2003/04 and FY 2004/05.
c. Contractor will continue to be responsible for paying all taxes, including state and federal
excise taxes, local taxes, and state sales tax where applicable.
d. The City will not require the Contractor to use ultra low sulphur fuel unless mandated by
the California Air Resources Board.
3. Fuel Reconciliation for FY 2002/2003
a. City shall pay Contractor the revenue vehicle mileage rate in Paragraph 1 of this
Amendment retroactive to July 1, 2002.
b. Contractor will refund City the difference in revenue vehicle mileage rate retroactive to
July 1, 2002.
c. City will reimburse Contractor for fuel costs withheld in FY 2002/03 retroactive to July
1, 2002. City shall not reimburse Contractor for an amount not to exceed $45,263.36.
Refer to Exhibit B.
4. Delete Fuel Price Provision in Agreement.
City and Contractor agree to delete the Fuel Price provision in Paragraph 3.24.2 of Exhibit A
in the Agreement between the City of San Luis Obispo and First Transit.
5. Total Monthly Compensation.
City and Contractor agree to calculate the total monthly compensation based on the
following method:
a. Monthly Revenue Vehicle Mileage Reimbursement=(Revenue Vehicle Miles)
(Revenue Vehicle Mileage Rate)
b. Total Monthly Compensation to Contractor shall be calculated as follows:
(Monthly Revenue Vehicle Mileage Reimbursement) + (Monthly Fixed Rate)+
(Monthly Utility Allowance per Contract Amendment No. 1) + (GFI
Reimbursement per Contract Amendment No. 1)+ (Fuel Cost per Contract
Amendment No.2)+(Incentives-Penalties). "
c. Refer to example in Exhibit A.
6. Floor Treatment for Shop Floor at 29 Prado Road
As recommended by the Contractor's,the Contractor agrees to pay for the epoxy finish of the
shop floor rather than simple paint treatment.
ARACHU I
7. SCAT MAINTENANCE
In accordance to the Paragraph 10 and 42 of the Agreement, First Transit agrees not to
extend maintenance resources to service SCAT vehicles, effective August 1, 2003.
8. All other terns and conditions of the Agreement remain in full force and effect.
IN WITNESS WHEREOF, CITY and CONTRACTOR have caused the Amendment No. 2 to
the Agreement dated May 15, 2001, to be executed on this day of 2004.
ATTEST: CITY OF SAN LUIS OBISPO
Lee Price, City Clerk David F. Romero, Mayor
APPROVED AS TO FORM: FIRST TRANSIT
Joriathan . owel , City Attorney President
e-3-7
l I
ATTACHMENT,L.
EXHIBIT A
REVENUE VEHICLE MILEAGE RATE
FOR AMENDMENT NO. 2
PROPOSED VARIABLE COST
Item FY 2002/03 FY 2003/04 FY 2004/05
Current Revenue Vehicle Mileage Rate $2.313 $2.370 $2.441
Less Fuel Cost per Revenue Vehicle Mile ($0.449) ($0.466 ($0.480
Proposed Revenue Vehicle Mileage Rate $1.864 $1.904 $1.961
EXAMPLE OF MONTHLY BILLING
Revenue Vehicle Miles for the Month' 39,858 39,858 39,858
Revenue Vehicle Mileage Rate $1.864 $1.904 $1.961
Monthly Revenue Vehicle Mileage Cost $74,280 $75,890 $78,167
Fixed Fee $60,402 $61,516 $63,361
Utilities Allowance $1,407 $1,440 $1,440
Electronic Fare Reimbursement S9,086 $9,086 $0
Fuel Cost2 $10,000 $10,000 $10,000
Total Fixed Costs $809895 $82,042 $74,802
Total for Mont63 $155175 $157,932 $152,969
Assumptions
1. Equals the current revenue vehicle mileage rate less the cost of fuel per revenue vehicle mile.
Footnotes
1. Base on revenue vehicle miles in Contractor's original proposal.
2. Based from actual fuel invoices
3. Total costs will reduce in FY 2004/05 because City will no longer be reimbursing
Contractor for electronic fare boxes.
C3-�'
ATTACHMENT
ca
00 V N M
!i+Sy oNo- v,
% rM cr� ri
W �" 69 fin M 0 a IV
.�.i d9 6R fin fin
O
7
A
N � O O
C M O� In
O z N fin
O O fin
c aQ
0
N o0 O N
M M 00
r4 6s
.
U �
O � z
F
O 'O Nfin r ~o. C N ° M
F o 6 `�' �
W c d
r N ^ in
a e M r�
O N N h
CQ N 3 M O�
� z
� F
U z ¢ R rz
O U z.. = L '� L � a c
d Ci U U O O C $ .''.� 1�'. $ '-' c. —
fr. ai a o v EE 9 �
a d0o
u F 3^i 3 o V u N a
U $
z � iV„ d — 3 o z w w ° c V , iE a E u
DO W ,.a � 0 oUU oU Q ° � u 2 m
FF> W c u y W $ V > 0 a' pz '° a
I-ItczC'j
W > ey> > > A (7 0 W0u¢uC
es-5
N
O O
N z
C
T d N
� � O
, = z
E c
� ¢ d
O C
d
V .h,
N 7
a
d w �
op c E�
_ s
E •o tz.
= c a
� � C
=
j O. V
N
Z s 3 C h
•p � a � o
o o Or 3
a m u O
L y N
O u C
7
d u > v E E
w E a E
o lu 0 .0
= p
E >
E e O
d
iQ L G
= 3 � E •o
h L ; m y S C
L � p � � •o m
N
Oy
$ � ,E E L
d R O a R a
•p•- O O p � �
ttFFLFFri U m
o
E 3-/O
ATTACHMENT 2
Comparison with January 4,2004 Service Changes
Current
FY Amendment
Item 2003/04 FY 2003/04 Difference
Revenue Miles 35,400 35,400
Rate/Revenue Mile $2.370 $1.904
Transit Service Cost $83,898 $67,402 ($16;496)
Actual Fuel Cost& Suppliers' Markup
$13,475 _ $13,475
First Transitt(City) ($3,021)
L\_ m)\T
Council Agenda Reports\2003 agenda reports\Transportation and Development Review(Bochuransit\Transit
CAR First Transit Amendment No.2-DRAFr.doc
3-1I