Fleet Management Drives Savings in NYC
When the City of New York announced savings of $368 million in fleet costs, equipment financing professionals and other municipal governments took notice. Consolidation of operations was key to increasing efficiency in the nation’s largest fleet.
The City of New York established its Fleet Federation to consolidate operations and reduce fleet expense. The comprehensive approach delivered on the promise of increased cost efficiency, with savings including $82 million in fleet costs, $187 million in capital costs and $99 million in operating expenses. Government institutions and finance professionals can consider this example and appreciate the many benefits of fleet management.
Learning From the Largest Fleet
In 2010, the expense of New York’s fleet stood at an all-time high. The City operates the nation’s largest fleet— more than 25,000 vehicles that deliver needed services like securing streets, collecting garbage and maintaining parks. Fleet operations cost more than $600 million annually, and 10 departments—Police, Fire, Correction, Sanitation, Transportation, Environmental Protection, Parks and Recreation, Education, Health and Human Services, and Citywide Administrative Services—operate more than 90 percent of the vehicles.
The City created an action team, the Fleet Federation, to determine how to generate cost savings without impacting services. The Fleet Federation teamed with the Mayor’s Office of Operations and the 10 departments to review operations and implement changes over the span of five years.
The Fleet Federation was tasked with increasing reporting of metrics on all aspects of the fleet, centralizing fleet management decisions within the Citywide Services Department and decreasing expenses by improving overall cost efficiency.
By treating the fleet as one common resource rather than a dozen operations associated with separate municipal agencies, the Fleet Federation significantly improved the use of City resources. Initiatives included:
- Consolidating city repair facilities and creating space-sharing arrangements
- Auctioning decommissioned vehicles online, which helped increase average sale prices by over 20 percent and freed up six acres at the Brooklyn Navy Yard—space that is now generating rental revenue
- Establishing partnerships with third-party companies to provide employees with access to vehicles on an as-needed basis, allowing the city to eliminate aging, infrequently used equipment
- Replacing the fleet on a rolling five-year basis, which increased its overall size while decreasing maintenance by over $2,000 per vehicle per year
- Increasing the acquisition of fuel-efficient vehicles—which save over $2,000 per vehicle per year—and becoming the nation’s largest green fleet with more than 6,000 hybrid and electric vehicles, or 60 percent of its total fleet
New York City’s outcomes represent the kind of efficiencies that can result from fleet management. This example, while achieved by the government’s own finance team, can help any organization consider potential options for reducing fleet costs.
At J.P. Morgan, our equipment financing team offers access to expertise and guidance. We serve thousands of corporations, government entities and not-for-profit organizations with flexible, cost-effective financing structures. Contact us today to find out how we can tailor our end-to-end solutions to your organization’s strategic business initiatives.