Supply chain disruptions and high demand have put a premium on new vehicles, as auto dealers teeming with inventory prior to the pandemic now sit mostly empty.
The scarcity has affected the city's ability to replenish its fleet. Nineteen vehicles budgeted in 2020 and 2021 have yet to be acquired. The city usually buys new vehicles off the contract the state has with dealerships. The state's buying power, coupled with cities and counties that also purchase vehicles listed on the state contract, allows it to negotiate lower prices, but the city said no vehicles are available under the contract.
"We know the problems everybody is having purchasing vehicles," Finance Director Dorethea Yates said. "It's the same thing with the state. We passed a resolution earlier this year to purchase off the state contract, but the problem is these vehicles are not available on the state contract."
A resolution on the consent agenda of the Hot Springs Board of Directors Oct. 6 agenda authorized the city to buy vehicles off contracts the Arkansas Department of Transportation has with dealerships.
"Staff has visited with ArDOT, and they have contracts they let with select dealers," Yates told the board. "We feel like we can still purchase the vehicles off those contracts. We went to the Arkansas Department of Procurement and received permission to do that.
"They are in some cases slightly higher than the 2021 prices and 2020 prices that were authorized through the state contract. The aggregate of that is probably about $60,000. Some departments may be able to absorb that in their budgets, but there may be some departments where we have to increase the budget a little bit in order to do that."
Yates said police vehicles budgeted for 2020 and 2021 were available on the state contract. The 19 vehicles the city was unable to procure through the contract total more than $500,000, according to information presented to the board.
The board authorized $779,620 in spending for new vehicles this year. Short-term financing available to local governments will provide most of the funding.
Amendment 78 of the Arkansas Constitution lets local governments finance purchases with a useful life of more than one year for up to five years. The city is financing $2.94 million in capital expenses this year, including $2.24 million for a tilled aerial ladder truck for the fire department.
The board adopted an ordinance earlier this year approving U.S. Bancorp Government Leasing and Finance to carry the five-year note at an interest rate of 1.13%, or 68 basis points above the five-year treasury rate on the date the city opened bids for the loan.
It will cost $614,982 to service the debt in 2021.