Everything Fleet Does Revolves Around Money: The Problem is the Lack of It

By Mike Antich

Every function of a fleet operation is centered on money: acquisition of vehicles/equipment, fuel, maintenance, facilities, salaries, parts inventory, shop supplies, tools, etc. As we all know, the No. 1 problem today (and for the foreseeable future) is the lack of money due to depressed sales and property tax revenues.

Realistically, fleet managers must operate under the assumption that tax revenues will continue to remain depressed, as most tax bases are forecast to remain stagnant. In today’s weak fiscal environment, all capital expenditures are intensely scrutinized by management, politicians, and taxpayer groups. In general, public sector fleet inventory has gone from stability during the pre-recession years to inventory declines (and asset deterioration through extended service) during the post-recession years.

In addition, tight budgets have caused vacant positions to remain unfilled, wages to be frozen, and employee contributions to health care costs to increase. This has resulted in increased employee apathy (cynicism) and burnout concerns as remaining employees pick up the additional workload from vacant positions.

The economic downturn has caused major reorganizations and downsizing within many political subdivisions for the past two to three budget cycles. The management at many political subdivisions has balanced budgets by consolidating services, reducing staffing levels, and deferring equipment replacement. Consequently, fleet operations are scrutinized for every dollar spent. For some fleet managers, budget reduction is not a once-a-year issue; some have faced up to three reductions within one budget cycle. The challenge for fleet managers is to adjust core services to correspond to the new budget realities. The ever-tightening budgets have unfairly caused some user departments to become hyper-critical and extremely vocal when they do not receive the same level of service they were accustomed to during the pre-recession period. On the flip side, some fleet managers grumble that user departments have not made sacrifices proportionate to the sacrifices made by fleet operations. User departments expect fleet to provide the same level of service with less funding, but are unwilling to make any quid pro quo adjustments on their part.

One shortsighted tactic used by some financially strapped government agencies has been to “raid” the vehicle replacement fund. As finance departments struggle to balance competing needs of different departments for limited funds, oftentimes the fleet replacement fund becomes an attractive source of revenue to solve budget problems elsewhere. Replacement reserves, built up for vehicle/equipment replacements, are a quick fix to help reduce deficits within the general fund.

Public misperception is another intangible factor that discourages scheduled vehicle replacements. As public awareness intensifies, especially among taxpayer watchdog groups, even entities that have cash-rich vehicle replacement programs are finding it hard to justify new-vehicle purchases in the wake of staff layoffs and decreased public services.

The decrease in capital expenditures by deferring procurement of vehicles scheduled for replacement complicates fleet management. Operating older assets, especially units such as aging refuse trucks, significantly increases operating costs and adds additional pressure on the maintenance staff.

Unintended Results

There are a number of unintended consequences of efforts to stem budgetary shortfalls. One unintended consequence of contracted budgets and hiring freezes is that it jeopardizes disaster preparedness. Reduced staffing will make it difficult to provide continuity of operations services during emergencies.

Another unintended consequence is that the reduction in capital replacement funding runs contrary to government sustainability initiatives. Aging vehicles are an obstacle to achieving carbon emission reduction goals. An additional consequence is the decrease in vehicle residual values caused by age and higher miles/engine hours. It is difficult to recoup the same percentage of funds at resale as in the past. One anecdotal silver lining is that several fleets have noticed that drivers/operators seem to be taking better care of equipment because they know it will not be replaced as scheduled in the past.
In the final analysis, until there is an increase in tax revenues, the fleet manager’s job will remain incredibly hard. The prognosis is that this dismal fiscal situation will worsen next year, or in a best case scenario, will remain at today’s level. In fact, tax bases could decline further if the threat of a double-dip recession proves true.

The psyche of public sector employees has been shaken by this recession. There once was the perception that economic recessions only affect jobs in the private sector. However, this perception has been shattered by the layoffs resulting from this recession and extremely sluggish recovery. For some long-time fleet managers, the idea of early retirement is becoming an attractive option.

However, fleet managers are a tough breed. Most have worked their way up through the ranks and know their operations from top to bottom. They are resilient and are at their best when the times are tough. Unfortunately, management and politicians are often oblivious to this. To all the public sector fleet managers reading this blog post, I would like to say that you deserve utmost respect and admiration for being able to accomplish all that you do under the worst of circumstances.

Let me know what you think.
mike.antich@bobit.com