Staff Report #2
November 25, 2020
To All Commissioners
Re: 2021 Replacement Bus Order
Recommendation
That the Commission APPROVE the early purchase of the 2021 replacement bus requirements (17 – 40’ buses) from New Flyer Industries Canada, ULC at a total cost of $9,824,496, exclusive of applicable taxes.
Background
At the November 27, 2019 meeting, the Commission approved a contract with New Flyer Industries Canada, ULC for the supply of both 40’ and 60’ replacement and expansion buses for the period of 2020 through 2022. The contract includes an annual escalation clause that is used to determine the pricing for each type of bus. The confirmed pricing for the 40’ buses for 2021 is $577,911.51, represents an approximate 2.6% increase over 2020 pricing. The increase in cost over the previous year relates to the standard price escalation in the contract (approx. 1% increase) and an increased cost for the new EPA 2021 certified engine (approx. 1.6% increase).
Replacement Buses
The tables below set out the variance from budget to projected actual for the 2021 Bus Replacement Program based on the actual 2021 unit pricing. As indicated in the table, the variance in unit price is being reflected with a slight decrease in Provincial Gas Tax funding, and as such, no modifications in City of London funding is required. The budget numbers in the table below include ancillary and preparation costs associated with preparing the buses for service, and as such, are higher than the costs in the report recommendation, which covers the bus purchase only.
2021 Bus Replacement Program
| Description | Units | 2021 Budget Amount | Amended Cost | Variance |
| Bus Replacement (40’) | 17 | $ 10,081,000 | $ 10,065,896 | $ (15,104) |
| Funding | ||||
| Provincial Gas Tax | $ 2,011,800 | $ 1,996,696 | $ (15,104) | |
| City of London | 5,203,200 | 5,203,200 | ||
| Federal Gas Tax – C/L | 2,866,000 | 2,866,000 | ||
| Total | $ 10,081,000 | $ 10,065,896 | $ (15,104) |
Over the past number of years, the Commission has approved ordering buses in November for the following year, notwithstanding the capital budget program has not been approved by Municipal Council at that time. As set out in the report recommendation, the same process is being recommended this year for the replacement bus program only. Ensuring buses arrive within the year they are required has been critical in managing the transition process as well as the costs associated with keeping buses on the road longer than anticipated. New Flyer has advised that an order confirmation by December 1, 2020 would see the 2021 replacement buses arriving between July and early September of 2021.
Given the bus replacement program is a long-standing program that has been included in the City of London capital budget with allocated funding for many years, it is not anticipated this program will be the subject of debate during budget deliberations. Should the confirmation of the bus order be pushed to be subsequent to the final approval of the budget programs by Municipal Council, there is little chance that buses would be delivered in 2021.
Expansion Buses
The Bus Expansion program, covering the period of 2020-2028, was one of the projects submitted and approved for funding under the Investing in Canada Infrastructure Program – Transit Stream. Given the uncertainty with respect to the type of bus (40’ vs 60’) that would be required in each year of the program, the budget for expansion buses was arrived at by using a weighted average price between a 40’ and 60’ bus. Given the expansion buses being recommended for purchase in 2021 are all 40’ buses, the budget variance will be quite significant; however, this is anticipated to balance out over the eight-year period as more 60’ articulated buses are purchased.
The 2020 service growth for the conventional transit service was deferred for consideration in 2021 given the onset of the pandemic and resulting impacts on ridership and operating budget. As a result, there were no expansion buses ordered in 2020.
The table below sets out the variance from budget to projected actual for the 2021 Bus Expansion Program based on the actual 2021 unit pricing.
2021 Bus Expansion Program
| Description | Units | 2021 Budget Amount | Amended Cost | Variance |
| Bus Expansion | 5 | $ 4,064,500 | $ 3,113,058 | $ (951,442) |
| Funding | ||||
| ICIP – Provincial | $ 1,354,70 | $ 1,037,584 | $ (317,116) | |
| ICIP – Federal | 1,625,800 | 1,245,223 | (380,577) | |
| City of London | 650,400 | 498,151 | (152,249) | |
| City of London DC’s | 433,600 | 332,100 | (101,500) | |
| Total | $ 4,064,500 | $ 3,113,058 | $ (951,442) |
Notwithstanding the need for the five expansion buses in order to implement the planned service improvements scheduled to take effect September 2021, the confirmation of the order for the expansion buses is not being recommended at this time given the uncertainty with respect to the 2021 operating budget. As set out in Staff Report #1, dated October 28, 2020, administration will bring back final recommendations with respect to the 2021 Service Plan at the January 2021 meeting, which is scheduled subsequent to 2021 budget confirmation by Municipal Council. Should the recommendation in January be to proceed with service improvements for 2021, an additional recommendation calling for the purchase of the required expansion buses will be included in that report.
Recommended by:
Mike Gregor, Director of Finance
Craig Morneau, Director of Fleet & Facilities
Concurred in by:
Kelly S. Paleczny, General Manager