01-26-2015 Council Minutes - Laserfiche WebLink

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MINUTES OF THE ORONO CITY COUNCIL MEETING Monday, January 26, 2015 7:00 o’clock p.m. ____________________________________________________________________________________ Page 10 of 14 PUBLIC WORKS DIRECTOR/CITY ENGINEER’S REPORT 8. BULK FUEL CONTRACT Edwards stated before the City Council is the City’s bulk fuel proposal for 2015. Prior to 2014, the City did not do an advanced fixed price purchase of fuel for the City’s fleet. Last year the City explored and entered into a fixed price contract for approximately 90 percent of the overall fuel purchases for the City. Edwards noted that did result in some fairly considerable savings for the City last year. The savings amounted to almost $10,000 in gasoline and about $7,700 in diesel. Edwards stated the City’s bulk fuel contract is up at the end of the month and that it is time to determine whether the City should enter into a similar agreement for 2015. As of last week, the fixed price being quoted for 87 percent octane gasoline was $2.22 a gallon before tax and diesel was $2.51 a gallon before tax. Edwards noted those prices are above what someone can currently purchase at the pump if the state gas taxes are removed. Edwards stated the Council could enter into a fixed price contract at those approximate numbers. The risk with entering into that contract is that prices may stay below the fixed price offered, which would result in the City losing an opportunity to save additional money. The advantage to entering into the contract is that the City would know what the budgeted numbers for the year will be. Edwards stated at the current rate, there will still be some savings over last year. Edwards stated the way the fixed pricing works is the City has to enter into a contract with a bulk fuel provider. The City provides them with a price range, a low and a high, at which the City is willing to enter into a contract with the provider. Once the contract is entered into, at that point the City is committed to purchasing a certain amount of fuel at that price for the rest of the year. Edwards stated the City would never want to enter into an agreement to purchase 100 percent of the City’s fuel since the demand changes on the conditions, such as the number of patrols the police are on and the amount of snowplowing that is required. Edwards stated that way the City is not purchasing fuel that they do not need. Edwards indicated he included in his report what he feels are the acceptable low and high costs as well as the quantity. The proposed quantity is the same as last year’s contract. Edwards stated gasoline is currently $2.00 a gallon, and if the state gas tax is removed, that would amount to approximately $1.70 a gallon. Edwards noted the summer blend of fuel will increase in price between 30 and 40 cents per gallon. In addition, prices for the Midwest region will increase a little higher than the rest of the country given some refinery and maintenance issues that are projected for this year. Levang noted the City is not using their snow equipment as much as last year, and asked whether those numbers should be adjusted. Edwards stated the majority of the gasoline is used by the Police Department and the majority of the diesel is used by the Public Works Department. Currently the Public Works Department uses around 600 to 700 gallons of diesel a month, with more being used in the winter. Edwards stated he feels comfortable with those quantity numbers. Edwards noted the police chief does anticipate some decrease in their fuel consumption given the indoor squad car parking.