Table Of Contents Chapter 9: Vehicle, Facility and Other Equipment Inventory and Disposition

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1 Table Of Contents Chapter 9: Vehicle, Facility and Other Equipment Inventory and Disposition 9-1 Equipment Definition 9-1 Inventory Control Requirements 9-1 Equipment Disposition 9-2 Bus and Rail Vehicles 9-2

2 Chapter 9 Vehicle, Facility and Other Equipment Inventory and Disposition Equipment Definition FTA Circular C defines grantee equipment requirements. FTA defines equipment as all tangible, personal property that has a service life of more than one (1) year and an acquisition cost that exceeds $5,000 per unit. This definition includes vehicles, equipment, facilities and other real property and supplies. Equipment records must be maintained as written or computerized property records and provide information on description, identification number, acquisition date, cost, federal and state percentage, grant number(s), location, use and condition, disposition action, and vested title. In addition, the Ohio Public Transportation Facilities and Equipment Management System (PTMS) requires maintenance of information on vehicle and equipment costing more than $100,000. This information must be updated and reported to ODOT Office of Transit on an annual basis. PTMS information on transit facilities must be updated every three (3) years (see Chapter 4 for more detailed information on Ohio PTMS requirements). Inventory Control Requirements FTA requires grantees to conduct a physical inventory of equipment and to reconcile the results with the equipment records every two (2) years. In addition, a grantee must have safeguards in place to prevent loss, damage, or theft of property. Typically, grantees tag all FTA funded equipment with a property control number although tags are not required as long as some adequate system is used (e.g., serial numbers, vehicle identification numbers, etc.). The biennial physical inventory and other control measures are also required for equipment that is leased or provided to a service operator. As a consequence, the grantee s procedures, leases, and/or service agreements should provide for property use and control. In addition, the Ohio PTMS requires maintenance of inventory and condition records on vehicles, equipment, and facilities (see Chapter 4 for more detailed information on PTMS requirements). Excess Real Property Inventory and Utilization Plan Excess property is property that the grantee determines is no longer required for its needs or fulfillment of its responsibility under an FTA/state-assisted grant. 1

3 Property no longer needed should be used for other purposes or removed from service. Grantees are required to notify FTA/state when property is removed from service originally intended for grant approval and put to additional or substitute use. If a grantee has excess property then the grantee must prepare or update an excess real property utilization plan. This plan lists each real estate parcel acquired with participation of federal/state funds that is no longer needed for approved FTA/state project purposes and which states how the grantee plans to use or dispose of the excess real property. FTA will review these plans during the FTA Triennial Review to assure grantees are taking the disposition or other actions identified in the plan. Equipment Disposition FTA Circular C and the Master Agreement require that grantees use competitive sales procedures to ensure the highest possible return when FTA/state-funded assets are removed from service. There are several alternatives for disposing of assets. A grantee may acquire clear title to real property by compensating FTA/state for their share, may market and competitively sell the real property (reimbursing FTA and the state for their respective shares), or may transfer the property to another FTA grantee or public agency. In addition, a grantee may seek FTA/state approval to sell, transfer, or lease real property, equipment, or supplies acquired with FTA/state assistance and no longer needed for transit purposes. In this case, the net proceeds may then be used to reduce the gross project cost of other federal/state assisted capital transit projects. A grantee may retain or dispose of equipment that is no longer needed for FTA/state-supported projects or programs. FTA/state must be notified of any equipment removed prematurely from service, and FTA will establish or approve the item s useful life for purpose of calculating the federal/state interest. Removal of equipment that has reached the end of its service life requires reimbursement to FTA/state of the proportionate proceeds of the sale or like-kind exchange if the value exceeds $5,000. Equipment sold for $5,000 or less after its service life requires no FTA/state reimbursement. Removal of equipment before the end of its service life, however, requires a proportionate reimbursement to FTA/state of the straight line depreciated value, regardless of the value or sale amount. Buses and Rail Vehicles FTA Circular C details FTA policies that are meant to ensure that buses purchased or leased with federal/state funds are maintained and remain in transit 2

4 use for a minimum normal service life and to ensure that the buses acquired are necessary for regularly scheduled transit revenue service (i.e., to meet peak service requirements with a reasonable allowance for spares). During an FTA Triennial Review, FTA will review whether or not a grantee has one or more vehicles that are within the FTA's definition of useful life and appear to be permanently parked in an inoperable condition. If a grantee retires vehicles early without notifying FTA, then FTA will consider the grantee deficient in their assurance of Satisfactory Continuing Control (see Chapter 10, Grantee Self- Certifications). In addition, when a grantee removes a vehicle financed by FTA and/or the State of Ohio from service before expiration of its minimum normal service life (except for reasons of fire, collision, or natural disaster), the grantee is legally obligated to FTA and the State of Ohio for an amount equal to the federal/state share of the vehicle's remaining value, as explained further below. The value of a vehicle prior to the end of its minimum normal service life is calculated on the basis of straight-line depreciation (see the example below of a straight line depreciation calculation). Service Life Policy Service life of rolling stock begins on the date the vehicle is placed in revenue service and continues until it is removed from service. The service life in years refers to total time in normal transit service, not time spent stockpiled or otherwise unavailable for regular transit use. A grantee that regularly measures lifespan by hours of operations, or by any other measure, may develop an appropriate methodology for converting its system to years of service. The reasonableness of such methodologies will be subject to examination, particularly if the grantee proposes to retire a vehicle before FTA's service life requirement has expired Minimum normal service lives for buses and vans are: Large, heavy-duty transit buses (approximately 35 foot 40 foot, and articulated buses): at least 12 years of service or an accumulation of at least 500,000 miles. Medium-size, heavy-duty transit buses (approximately 30 foot): 10 years or 350,000 miles. Medium-size, medium-duty transit buses (approximately 30 foot): 7 years or 200,000 miles. Medium-size, light-duty transit buses (approximately 25 foot 35 foot): 5 years or 150,000 miles. Other light-duty vehicles such as small buses and regular and specialized vans: 4 years or 100,000 miles. In the case of rail vehicles acquired with FTA assistance, FTA has established a minimum normal service life of 25 years. 3

5 It is recommended that grant applicants specify the expected service life category in requests for bids when acquiring new vehicles. FTA calculates the value of vehicles prior to the end of their minimum normal service life on the basis of a formula using straight-line depreciation (e.g., if a vehicle has a minimum normal service life of 12 years, the vehicle s value will decrease each year by 1/12 of its original purchase price. Similarly, the federal and state interest in the vehicle decreases each year by 1/12 of the amount of the federal grant/state grant that was awarded for its purchase). Removal of an FTA/state-funded vehicle from revenue service before the end of its minimum normal service life, except for reasons of fire, collision, or natural disaster, leaves the grantee liable to FTA and the State of Ohio for the federal/state share of the vehicle's remaining value. Consistent with this policy, the suggested vehicle service life standards stated above in years refer to time in normal service, not time spent stockpiled or otherwise unavailable for regular transit duty. Replacement Policies Replacement at End of Minimum Normal Service Life Vehicles proposed to be replaced must have achieved at least the minimum normal service life. For purposes of vehicle replacement grant applications, the age of the vehicle to be replaced is its years of service or mileage at the time the proposed new vehicle is introduced into service. A fleet roster must accompany a grant application for which funds are requested to replace vehicles. Early Disposition Policy If a vehicle is replaced before it has achieved its minimum normal service life, the grantee has the option of returning to FTA and the state, an amount equal to the remaining federal/state interest in the vehicle or applying the "Like-Kind Exchange" policy (discussed below) and placing an amount equal to the remaining federal/state interest in the vehicle into a newly purchased vehicle. To determine the federal/state interest in a federally funded vehicle during its minimum normal service life, a straight-line depreciation formula is used: for example, for a bus with a 12-year minimum normal service life, the bus's value decreases each year by 1/12 of its original purchase price. Similarly, the federal/state interest in the bus decreases each year by 1/12 of the amount of the federal grant that was awarded for its purchase. Use of Like-Kind Exchange Policy A vehicle may be traded-in or sold before the end of its minimum normal service life, if a grantee so chooses. Moreover, a grantee may elect to use the trade-in value or the sales proceeds from the vehicle to acquire a replacement vehicle of like kind. "Like-kind" means a bus for a bus with a similar service life and a rail vehicle for a rail vehicle. Under the Like-Kind Exchange Policy, proceeds from the vehicle sales are not returned to the FTA/State of Ohio; instead, all proceeds must be invested in acquisition of the like-kind replacement vehicles. If sales proceeds are less than the amount of 4

6 the federal/state interest in the vehicle to be replaced, the grantee is responsible for providing the difference, along with the grantee's local share of the cost of the replacement vehicle. If sales proceeds are greater than the amount of the federal/state interest, the investment of all the proceeds in acquisition of the likekind replacement vehicle results in reduction of the gross project cost. Grant applicants interested in buying a replacement vehicle before the end of the minimum normal service life of the vehicle to be replaced should refer to the FTA Notice, "Change in Policy on Sale and Replacement of Transit Vehicles," published in the Federal Register on August 28, Rebuilding Policies Vehicles to be rebuilt should be at the end of the minimum normal service life, as previously described, and in need of major structural and/or mechanical rebuilding. The age of the vehicle to be rebuilt is its years of service at the time the rebuilding begins. Any rail vehicle that will be rebuilt must have an accumulated service life of at least 12 years (mid-life rebuild) or must have reached the end of its minimum normal service life (end-of-life rebuild). The eligibility of this major capital bus/rail rebuild work is in addition to the eligibility for vehicle overhauls. Alternatively, a grantee can choose to capture all maintenance costs under preventive ( capitalized ) maintenance (see Chapter 5). Depending upon the extent of rebuilding planned; it may be subject to Americans with Disabilities Act requirements. (See 49 CFR for remanufacture of nonrail vehicles.) Vehicle Overhauls Rolling stock overhaul programs are usually a part of sound maintenance practices to keep vehicles in a state of good repair and in some instances to extend the service life of vehicles. Such overhauls are an eligible capital expense. A grant applicant may apply for FTA capital assistance for vehicle overhauls in an amount up to 20 percent of its annual vehicle maintenance costs. This eligibility for capital assistance applies also to leasing and to contracted service, and is in addition to eligibility of rebuilding discussed above. Alternatively, a grantee can choose to capture all maintenance costs under preventive ( capitalized ) maintenance (see Chapter 5). Spare Ratio Policies Spare ratio is defined as the number of spare vehicles divided by the vehicles required for annual maximum service. For purposes of the spare ratio calculation, "vehicles operated in maximum service" are defined as the total number of revenue vehicles operated to meet the annual maximum service requirement. This is the revenue vehicle count during the peak season of the year; on the week and day that maximum service is provided. It excludes 5

7 atypical days and one-time special events. Scheduled standby vehicles are permitted to be included as "vehicles operated in maximum service." Spare ratio is usually expressed as a percentage, e.g., 100 vehicles required and 20 spare vehicles is a 20 percent spare ratio. Spare ratios will be taken into account in the review of projects proposed to replace, rebuild, or add vehicles. The basis for determining a reasonable spare bus ratio takes local circumstances into account. For a grantee to acquire vehicles, a grant applicant must address the subject of the current spare ratio, the spare ratio anticipated at the time the new vehicles are introduced into service, disposition of vehicles to be replaced, and the applicant's conformance with the FTA spare ratio guidelines. An applicant is required to notify FTA if the spare ratio computation on which the grant application is based is significantly altered prior to the grant award. A fleet status report must be submitted with each grant application to acquire rolling stock. Buses The number of spare buses in the active fleet for grantees operating 50 or more revenue vehicles should not exceed 20 percent of the number of vehicles operated in maximum service. If the grantee has fewer than 50 buses, a judgment call needs to be made based on the age of the fleet and operating conditions. However, FTA advises that a peak fleet of 40 buses with more than eight spares will probably be considered deficient. Rail Vehicles Because rail transit operations tend to be highly individualized, FTA has not established a specific number to serve as an acceptable spare ratio for rail transit operations. Nevertheless, rail operators should be aware that the grant applicant's rail vehicle spare ratio and the rationale underlying that spare ratio will be examined as part of the grant application review whenever FTA assistance is requested to purchase rail vehicles, and during the triennial review. A fleet status report must be submitted with any grant application for assistance to acquire rolling stock. As in the calculation of spare ratio for bus fleets, scheduled standby fixed guideway vehicles are permitted to be included as "vehicles operated in maximum service. The following guidance should be used to support an operator's proposed spare ratio when the spare ratio is under review by FTA: An operator of a rail system must have in its file available upon request by FTA a fleet management plan that addresses operating policies (level of service requirements, train failure definitions and actions); peak vehicle requirements (service period and make-up, e.g., standby trains); maintenance and overhaul program (scheduled, unscheduled, and overhaul); system and service expansions; rail car procurements and related schedules; and spare ratio justification. Spare ratio justification should consider: average number of cars out of service for scheduled maintenance; unscheduled maintenance and overhaul program; allowance for ridership variation (historical data); 6

8 ridership changes that affect car needs caused by expansion of system or services; contingency for destroyed cars; and car procurements for replacements and system expansions. Cars delivered for future expansion and cars that have been replaced, but are in the process of being disposed of, should be identified and separated from other spares because they unfairly inflate the spare ratio. Peak Vehicle Requirement includes "standby" trains that are scheduled, ready for service, and have a designated crew. Factors that may influence spare ratio are: equipment make-up (locomotive- hauled trains, married pair units or single cars, equipment design, reliability and age); environmental conditions (weather, aboveground or underground operation, loading and track layout); operational policies (standby trains, load factors, headways); maintenance policies (conditions for removing cars from service, maintenance during nights and weekends, and labor agreement conditions); maintenance facilities and staff capabilities. Contingency Fleet Vehicles may be placed in an inactive contingency fleet (i.e., stockpiled) in preparation for emergencies. No vehicle may be stockpiled before the vehicle has reached the end of its minimum normal service life. Vehicles held in a contingency fleet must be properly stored, maintained, and documented in a contingency plan, updated as necessary, to support the continuation of a contingency fleet. A contingency plan is not an application requirement, although FTA may request information about the contingency fleet during application review. Contingency plans are subject to review during FTA Triennial Reviews required for the Urbanized Area Formula Program. Any rolling stock not supported by a contingency plan will be considered part of the active fleet. Since vehicles in the contingency fleet are not part of the active fleet, they do not count in the calculation of spare ratio. 7