Questions and Answers About Proposition 3: The Proposed Lease of Buses
Updated April 20, 2017 with additional information
What does the lease consist of?
The proposed lease agreement replaces 14 large school buses and two mini-buses (one of which is equipped with wheelchair access) with new, energy-efficient buses. The agreement also includes a bumper-to-bumper warranty, all replacement parts, and summer service. This includes inspection of the bus and thorough cleaning of the bus undercarriages.
Why are we replacing the buses?
Age, high mileage, and the current condition of the fleet drove the decision to replace the existing buses. Ten buses are 2007 or 2008 models. Nine have over 90,000 miles, with one clocking in at 143,739 miles. Half of the fleet is rated in fair or poor condition, with two buses currently out of service and another experiencing daily mechanical issues. It is anticipated that several buses will not meet operational standards when the Department of Transportation conducts its inspections in July.
Why are we considering a lease instead of purchasing?
A lease is proposed because buses are expensive, and big ticket purchases create spikes in the tax levy. The lease proposal would not require borrowing and would minimize the impact on the annual budget.
What is the cost of the lease and its impact on the budget?
The total cost of the lease agreement is $1,405,000, or approximately $282,000 per year for five years. Transportation Aid will reimburse approximately 43 percent of the lease cost. Reimbursement will begin in the second year of the lease and continue annually for an additional four years. Budget line reductions related to repairs, fuel, parts, tires, and lubricants, as well as revenue earned by selling the existing District-owned vehicles at a public auction, covers the balance of the cost. This funding strategy results in a cost-neutral proposal and requires no borrowing.
Will the lease change our staffing levels?
This proposal does not change the staffing needs in our transportation department. Responsibilities of our current drivers, monitors, mechanics, and other transportation staff will not change. Our own mechanics will continue to conduct all bus maintenance. The vehicle supplier will also provide the proprietary software necessary to diagnose and repair certain warranty work, and will reimburse the district for any time and materials required to complete this work in house.
How will the lease price be determined?
The vehicles are on New York State Contract and have been through the competitive bidding process. A competitive request for proposal (RFP) process will be initiated and qualifying vendors will submit terms, conditions, and interest rates for our evaluation for awarding of a lease agreement.
What is the interest rate of leasing versus purchasing?
The interest rate for the lease agreement will be determined through a competitive process. If the District were to purchase the vehicles, bonding at the current market interest rates would occur, increasing our debt service.
How does mileage on the lease work? (Updated April 20, 2017)
The lease will contain an annual suggested mileage level of 15,000 miles per bus, and there is no financial penalty for exceeding this level. Our average in-district bus run is approximately 10,000 miles per year/per bus, although special runs may result in higher mileage. In good faith –and as good fleet management practice– the district intends to monitor vehicle usage and rotate buses to maintain a consistent level of mileage among the vehicles. (Note, initial discussions estimated 12,000 miles as the suggested annual level; however, after speaking with potential vendors, it was agreed that 15,000 would be a more comfortable level to provide assurances about the proposed vehicle usage).
What happens if a school bus becomes irreparable due to an accident or mechanical failure?
In the event of an accident, our automobile insurance would cover the repair or replacement of the leased vehicle. The lease includes a five-year bumper-to-bumper warranty to cover any mechanical failures.
What is the long-range plan for after the lease?
The development of a Strategic Transportation Plan will begin during year two of the lease and will include a cost benefit analysis of leasing versus owning, as well as define future transportation priorities and predict the number of vehicles needed to maintain a safe and effective bus fleet in the future. If owning the fleet presents the best advantages, we will develop a plan to phase in future bus replacements on an economical cycle. This schedule replaces vehicles as they become obsolete and/or irreparable, before becoming a financial burden for the District.
What happens to the buses after the five-year lease terms end?
Vehicles are returned to the supplier at the end of the lease. If the district wanted to purchase buses, a competitive bid would be conducted. Any qualifying supplier would be eligible to submit bid proposals, and the sale awarded to the lowest responsible bidder. This means there is no guarantee these particular vehicles would be the ones sold to the district.
Why is there a separate referendum for the lease of the buses?
New York State Education Law requires a separate referendum requesting voter approval to enter into the lease.
What happens if the bus lease proposition is not approved?
The current fleet will not support the current transportation levels. Since buses will be necessary for the opening of school in September, the New York State Education Department could authorize an emergency one-year lease agreement, or the district could contract with another transportation company to provide the service related to the lack of district-owned vehicles. Either of these options has the potential to be more expensive than the proposed lease.