10-24-2016 Council Packet - Laserfiche WebLink

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REQUEST FOR COUNCIL ACTION DATE: October 24, 2016 ITEM NO: 6 Department Approval: Administrator Reviewed: Agenda Section: Name Adam T. Edwards YmJ� Public Works Director/ Title Public Works Director City Engineer's Report Item Description: Bulk Fuel Contract List of Exhibits A- Fuel Program Overview for 2017 B- Fixed Fuel Price Fuel Order Form 1. Purpose. The purpose of this request is to gain Council approval for the purchase of bulk fuel for 2017 (February 2017 -January 2018). 2. Background. The City consumes approximately 36,000 gallons of gasoline and 9,000 gallons of diesel per year. Prior to 2014, the City purchased fuel on an as needed basis. This resulted in varying fuel prices throughout the year. In 2014 the City aligned itself with the State fixed price fuel contract. In 2016 the City did enter in to the fixed price. For 2016 the Gasoline price was fixed at $1.89 and Diesel at $1.59. Retail rates fluctuated between $2.00 and $2.32 for gasoline and $2.40-2.48 for Diesel in 2016'. 3. State of Minnesota's Fuel Consortium. The purpose of the Fuel Consortium Purchase Program is to develop a consistent fuel budget for each budget year (see Exhibit A). In addition historically the fixed fuel prices have been lower than the average spot/rack price. Municipalities and other governmental organizations within the seven county metro area are eligible to participate. The Fixed Price Fuel Program requires participating cities to agree to a certain volume of fuel to be purchased. Cities need to submit requests by October 25, 2016. The State of Minnesota will go out for bids before January. Staff has reviewed the information and recommends that City Council authorize Staff to enter a contract committing to purchase an amount of fuel similar to that of the 2016 - 2017 program. 4. Recommendation. The City of Orono participates in the State of Minnesota's Fuel Consortium Purchase Program for 2017. The City will commit up to 70% of our annual volume of fuel to be purchased through the program (See Exhibit B). The remainder will be purchased through the spot/rack price for that particular day. Staff does not recommend purchasing 100% of our budgeted fuel, since the consumption of fuel can vary from month to month based on how many miles driven and it is possible that the spot/rack price could go below the fixed price making it more advantageous to purchase fuel at a lower cost when possible. COUNCIL ACTION REQUESTED: City Council authorize Staff to enter a contract with the State of Minnesota Fuel Consortium. 1. U.S. Energy Information Administration Website.